How to Do Financial Improvement Audits of Pharmaceuticals
- 1). Investigate the pharmaceutical company’s internal audit function. This unit is responsible for ensuring internal controls are put in place and that they are working. Check whether proper documentation was put in place during negotiation for contracts with outsourced service providers. Carry out checks on sample transactions for accuracy in entry. Rate the internal audit for effectiveness in helping the company keep its costs to minimal levels.
- 2). Check whether the records have been kept in accordance with accepted accounting standards. Pharmaceutical companies have to mitigate against risks such as harmful effects caused by drugs. Find out if the company has made provisions for such risks in its financial statements. Budgeting and forecasting are critical areas for these companies. Has the company made provisions for the sales and marketing teams?
- 3). Examine whether revenues are correctly matched with expenses. Unpaid balances should match with supplier statements; examine the statements to verify this. Pharmaceutical companies outsource a lot, exposing them to unique risks, check the supply chain and quality assurance of the pharmaceutical to ensure they are meeting the needs of the firm. Costs undertaken in risk management.
- 4). Request audit compliance certificates. These include standardization and quality control certificates from the Food and Drug Administration, an agency of the United States Department of Health and Human Services . If these are not in place, a pharmaceutical company will be at a high risk as a result of legal suits from regulating authorities in the industry. Make a note of the company’s compliance level for presentation in the final report. Supply chain networks play an important role in pharmaceutical companies. Ensure controls have been put in place to regulate the relationship between suppliers and distribution networks.
- 5). Evaluate the software and hardware requirements of the company as pharmaceutical companies rely heavily on modern technology for efficiency. Review this against what is in place, checking for obsolescence. Audit the Enterprise Resource Planning system of the company for efficiency. Note any delays that may arise from its inefficiency.
- 6). Prepare and submit an audit report to the management of the pharmaceutical company. The report should highlight challenges identified and make recommendations for solving these challenges.
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