AUDIT REPORT

Description of the task:

Imagine you are internal controller in the Danone company and with your Finance Director your received Audit Report.

Now your responsibility to explain to your manager and purchasing department what is the risk of such findings.

What you can advice to your company as a action to take to put this part of processes under control.

Major Finding Suppliers contracts and relevant PO are not always properly formalised

Some agreements with suppliers are not formalised (out of 25 PO checked, we could not find existence of a signed contract with 9 of them)

Out of 16 existing contracts with suppliers, 2 existed only in electronic form (received by e-mail) and 3 as faxes.

Contracts and POs are not processed into an integrated IS system, there is not a Master data management procedure

What is the RISK for the company:

Here, it can be concluded that contracts are not centralized, formalized and stored properly. What is more the lack of a clear management procedure regarding contracts and PO can lead to:

• Risk of unauthorized employees signing contracts

• Risk of higher costs than normal because the suppliers may overcharge the company. Discounts may not be offered because there are no contracts between suppliers and the company

• Risk of non-compliance by suppliers which may affect the company

• Risk to the organization reputation due to poorly management of contracts

What could be the action plan to implement?

First, the company should take legal advices in order to formulate the main points and aspects which should be included in every contract with suppliers.

• Each contract should contain:

• The full name and details of the company and the supplier

• The date when the contract was signed

• Terms and requirements

• The signature of both parties

• Very important, a list prices signed by both parties

• Possible discounts

• Other important or special issues

Second, Danone should implement a clear procedure regarding to contracts and PO where

• A summary form should exist where all contracts are included (there some main details should be presented; for instance the date when the contract was signed, the name of the supplier and other important details)

• Each contract should be stored in two ways: hardcopy(original) and electronic version

• Each contract should have an internal number which should be visible in the summary form, on the hard copy and electronic version

• Each employee involved in this process has to be trained in order to be sure that there is a full understating of the procedures and tasks. There should be set very clear the personnel who supervise all the process, as well