Testing the integrity of your suppliers

Your organisation’s audit of supplier performance gives an opportunity to find out more about the risk of fraud in your supply chain . Your contract with suppliers should include the right to carry out unannounced audits. This would give you an opportunity to discover whether they are engaged in fraudulent transactions and/or giving or receiving bribery payments.

Some of the fraudulent actions that can be identified through audits are:

• Corrupt links or payments to other suppliers
• Links for foreign public officials
• Evasion of tax payments: this is bad practice and could put your business with the public sector at risk.
• Avoidance of licensing requirements
• The use of agents and the appearance of excessive payments.These should be accounted for.
• Avoiding regulatory requirements, which suggests employees may be treated unreasonably
• Bribery, such as illicit payments to customs officials:
• Product substitution: supplying products that are of inferior quality and cost less.

It will help to build trust between your organisation and your suppliers if you are able to see for yourself their anti-corruption systems and the controls they use to prevent, detect and respond to bribery and corruption.

Buyers must be careful they do not force their suppliers to drive down prices so far that they are unable to afford to look after the welfare of their employees. This is a risk that exists in dealings with the public sector, which must always look to get value for the taxpayer.

To develop these areas a number of activities should be considered: