Contract auditing definition
/What is Contract Auditing?
Contract auditing involves an examination of the written arrangements with suppliers. The intent behind a contract audit is to ensure that the amount and quality of goods and services delivered to the customer was correct and that the customer was billed an appropriate amount. A possible result of a contract audit is that the supplier is required to deliver additional goods and services, or that it must rebate a portion of its billings.
A contract audit can also involve a review of the processes used to enter into a contract. The intent is to spot any weaknesses in the process that might result in a poorly-designed or badly-priced contract.
Advantages of Contract Auditing
There are several important advantages associated with contract auditing. They are as follows:
Acts as a deterrent. The threat of a contract audit is a useful deterrent to keep suppliers from overbilling or under-delivering to a customer.
Obtain rebates. Any negative findings resulting from a contract audit can result in possibly substantial rebates being paid by the other party.