Case Study: Compliance with contractual obligations |
Abstract
A company wishes to evaluate the performance of a third party against its contractual obligations.
Challenge
We were engaged to audit a software company’s business partners and ensure they were in compliance with their monetary and non-monetary contractual obligations. In addition we examined the integrity of the third party’s controls over contract performance and ensured that these controls could be relied upon.
Approach
- A review of access to the client’s intellectual property (IP) took place.
- We verified that controls were in place regarding the storage of intellectual property.
- An examination of the segregation of our client’s IP from other IP was carried out.
- We tested controls around receipt of intellectual property.
- We examined the cycle count procedures in place and checked that these were in line with contract obligations as set out by our client.
- We performed a reconciliation between the third parties Enterprise Resource Planning (ERP) and clients ERP in order to check the accuracy of shipments reported.
Solution
- Access, storage and segregation of IP were adequately controlled.
- Strong controls in place regarding receipt of IP.
- Cycle Counts were performed quarterly but all IP was not accounted for at the last count.
- The third party was under reporting sales by 10,000 units and selling IP that had not being reported to our client.
