The Department of Higher Education (DoHE) in the Ministry of Education awarded a contract for support of 60 computers to My IT Co. Ltd. and the contract conditions required the delivery, commissioning and training to be completed by 10 June 2007.

Forty computers were delivered and commissioned by the company on 9 June 2007 in the DoHE and remaining 10 were delivered and commissioned at its regional offices on July 30 2007. The training was provided on June 10 to the identified staff of DoHE and regional offices.

After completion of delivery, commissioning and training, My IT Co. Ltd. submitted an invoice with the delivery receipt and other supporting documents to the Finance Division for release of payment. The full payment of $80,125 was made to the company within 30 days of receipt of invoice.

On September 8, the Assistant Head of a Division in DoHE encountered some problems with his computer. He asked a technician from IT Division to attend to those problems quickly as he had to prepare an urgent presentation. When the technician opened up the machine and compared various parts with the original specifications, he found that instead of the high quality branded "chip" specified in the contract, the computer was fitted with a "no-name" clone costing only a fourth of the branded chip price. The computer was not functioning properly and was having frequent breakdowns due to the substandard chip in the computer.

The Technician reported the matter to his supervisor and the Head of IT Division who requested his team to conduct a detailed investigation on the computers delivered to the DoHE. The IT Division team, after the investigation reported that 35% of the computer parts in computers supplied by the contractors were not as per the specifications ordered.

REQUIRED

(a) Why audit of procurement is considered important?

(b) Examine the above case scenario carefully and to:

(i) identify the risks associated with the delivery and payments in the given scenario;

(ii) prepare a list of audit checks you would perform on both the delivery of the computers and payments for the computer items.