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