What is the process for developing and implementing a vendor audit program?

2 Select your vendors

The next step is to select the vendors that you want to audit. Depending on your resources and priorities, you may not be able to audit all your vendors at once, so you need to prioritize them based on criteria such as criticality, risk, performance, value, or frequency of transactions. You can use a vendor risk assessment matrix or a vendor scorecard to help you rank your vendors and determine the scope and frequency of the audits.

3 Plan your audits

The third step is to plan your audits in detail. This involves defining the audit criteria, scope, methodology, schedule, and team. The audit criteria are the standards or benchmarks that you will use to measure the vendor's performance, compliance, or risk. They should be based on your objectives, contractual terms, industry best practices, and regulatory requirements. The audit scope is the extent or coverage of the audit, such as the processes, activities, documents, or locations that you will examine. The audit methodology is the approach or technique that you will use to conduct the audit, such as interviews, surveys, inspections, tests, or reviews. The audit schedule is the timeline or frequency of the audit, such as annual, quarterly, or ad hoc. The audit team is the group of people who will perform the audit, such as internal or external auditors, subject matter experts, or representatives from different departments.

4 Conduct your audits

The fourth step is to conduct your audits according to your plan. This involves preparing, executing, and reporting the audit. Preparing the audit means communicating with the vendor, gathering relevant information, and verifying the audit logistics. Executing the audit means applying the audit methodology, collecting and analyzing evidence, and identifying findings and recommendations. Reporting the audit means documenting and presenting the audit results, conclusions, and action plans.

5 Follow up on your audits

The fifth step is to follow up on your audits to ensure that the vendor implements the agreed action plans and resolves the identified issues. This involves monitoring, verifying, and evaluating the vendor's progress and performance. Monitoring the vendor means tracking and reviewing the vendor's actions, deliverables, and milestones. Verifying the vendor means confirming and validating the vendor's compliance, improvement, or risk mitigation. Evaluating the vendor means assessing and rating the vendor's performance, satisfaction, or value.