What is a price audits?

Answer 1

A price audit is an audit based on a contractual agreement between a customer and supplier. It is most often outlined in the sales contract between the two parties. Once the audit scope is defined, the auditing party can request documentation that ensures pricing accuracy. These audits are most common when a customer has a cost plus sales agreement. In these cases the sales contract states that the supplier will mark up the vendor invoice cost actually paid for the materials by the supplier and apply a markup to arrive at the final sell price. All cost components need to be taken into consideration. When variances in pricing are identified, the scope of the audit can be expanded, and the variances are then returned to the customer in the case they over paid for the materials. I have been and Internal Auditor for the past five years and we are regularly audited by our largest customers. In 5 years I have seen variances resulting in 500-750k returned to our customers. Recently audits that focus on freight charges and deviated vendor contract pricing have exploded. Pricing is often driven by complex software which is rarely perfect. Human error is the major cause of pricing discrepancies, but system design and glitches also play a role. I have recently begun taking on side work and acting as a consultant specializing in price audits so if you or anyone you know needs a consultation or audit completed, please email me at Zahoraj@att.net