Saturday, January 28, 2012

Importance of Suppliers' Evaluation Process

One of the key emphasis of internal audit is to evaluate whether your audit client has appropriate process in place to evaluate the suppliers.

Unfavorable event in any part of the supply chain will causes disruption to the distriubtion of products to end-customers successfully. It is important to evaluate the suppliers to ensure that they have the capability and stability to conduct sustainable business with your audit client on a long term basis.

On an ideal basis, management/ procurement of your audit client should have a formal policy on the entire process of evaluating suppliers. The evaluation has to be developed and documented in a proper format.

For instance, a background check on the suppliers is required (e.g. is the supplier a subsidiary of any congolmerates, is the supplier financially sounds). Another key document is the financial statement of the supplier. This is to ensure that supplier is financially stable to operate on a going concern basis.

Please let us know if you would like a detailed format of Suppliers' Evaluation Form. This is available in our Accounting & Auditing blog. Please drop us an email at

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