Contract Compliance Audit - Moody Associates, P. A.

Contract Compliance Audits

In today’s fast paced and tightly regulated business environment, it is imperative to have a process in place that allows you to know whether your suppliers and/or customers are in compliance with the contracts that you have negotiated. Failure to have the proper process in place could result not only in financial loss, but in regulatory non-compliance, and a damaged reputation. Contract compliance audits are a valuable component of any Enterprise Risk Management (ERM) process and offer the opportunity to gain insight into control weaknesses as well as recover lost profits.

Contracts are often tracked manually and many suppliers rely on their customers to let them know when they are not in compliance and conversely, most customers will not notify you when they are undercharged. Most companies have some form of contract management tool, but most of these solutions are basic in nature and lack the ability to effectively notify you when there are compliance issues. Common contract compliance findings for buy and sell agreements include: pricing, footing, early pay discounts, maverick spending, volume discounts, returns, multiple agreements for the same product or service due to M&A activity or being decentralized, charges for costs that were not incurred, most favored nations clauses, duplicate payments, payments for products or services that are no longer used, improper overhead allocations, improper mark-up of costs, etc.

M&A’s contract compliance audit services give our Clients the assurance that their suppliers and/or customers are adhering to the terms and conditions that both parties negotiated. M&A’s Accountants will assess compliance, present you with fully documented claims and notify you of overpayments to suppliers or undercharges to customers promptly. We will provide you with reporting that includes an executive summary, our approach, audit findings and practical recommendations for the contracts audited as well as other agreements that you may have with similar suppliers or customers.

M&A Contract Compliance Auditing Approach

M&A’s methodical and well-planned contract compliance auditing approach is as follows:

Stage 1: Obtain and Analyze Data

Obtain and understand all contracts and addendums to be audited
Obtain and understand the related spend or sales data – invoices, purchase orders, etc.

Stage 2: Planning

Conduct calls with appropriate contacts at both the Client and the company to be audited to understand the relationships, billing and payment methodologies, perceived or known concerns, discuss timing and logistics, and to set expectations and communication timelines for the audit(s)
Perform desk audit procedures to assist in assessing risk areas to focus on

Stage 3: Fieldwork

Interview the company being audited about their policies and procedures as they relate to the contract
Conduct field audit, including all compliance testing
Discuss audit findings and any follow-up questions that arose from the field audit with Client
Follow-up with the company being audited regarding any unanswered questions

Stage 4: Reports and Recommendations

Assemble and present a draft audit report including executive summary, audit methodology, findings and recommendations to Client for review and comment
Submit our final audit report

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