Accounting audit or contract audit, two complementary approaches
Both approaches are useful, but they do not look at the same thing. Understanding what each one detects avoids leaving a blind spot.
Two controls, two questions
The accounting audit starts from the ledger entries. It finds duplicate payments, VAT errors, invoices without an order and forgotten credit notes, by checking the consistency between what was ordered, received and billed: the three-way match. It secures the accounts and prevents undue payments. It assumes that the order faithfully represents what was agreed with the supplier, and it does not check that this order, or the invoice that follows from it, respects the contract.
The contract audit starts from the signed contract and its amendments. It checks each invoiced line against the terms in force on its date: price schedule, discounts, tiers, rebate base, indexation, ancillary costs. An invoice can be perfectly consistent with its order and its receipt and still not respect the contract, which the accounting audit does not see.
The first asks: "Did I pay for what I received?" The second: "Did I pay what I negotiated?" The second question is rarely asked systematically, for lack of tools to match a contract against thousands of invoice lines.
The two approaches side by side
| Criterion | Accounting audit | Contract audit |
|---|---|---|
| Starting point | The ledger entries | The contract and its amendments |
| Detects | Duplicates, VAT errors, invoices without an order | Price discrepancies, discounts not applied, rebate bases, indexation, off-contract costs |
| Misses | An invoice that is consistent but does not match the contract | An accounting entry error unrelated to the contract |
| Data needed | General ledger, invoices, orders, receipts | Contracts, amendments, tariff grids, invoices |
| Usual contact | Accounting, internal audit | Procurement, finance department |
A case where they diverge
A company orders 120 metres of cable. The order states €1.84 per metre, the price schedule as modified by amendment no. 2, and the receipt confirms 120 metres. The invoice states €2.07 per metre.
| Check | Result |
|---|---|
| Quantity billed = quantity received | Compliant |
| Item billed = item ordered | Compliant |
| VAT correct, no duplicate | Compliant |
| Price billed = price in the contract in force | €0.23 per metre discrepancy, or €27.60 on the line |
The order was placed at the right price; it is the invoice that diverges, because the supplier's tool did not take the amendment into account. If the order also repeats the old tariff, the three-way match sees nothing. A discrepancy of €27.60 is invisible, but repeated over thousands of lines and several years it weighs on margin, as the article on the 11% of value lost after signature explains.
When to launch a contract audit
Some situations lend themselves particularly well to it: a high-volume framework agreement, where a few percentage points weigh heavily in absolute value; numerous amendments, which multiply the dates on which prices change; complex terms (tiers, rebates, indexation, free shipping); a change of tool at the supplier or on your side; a negotiation coming up, for which having the discrepancies found and the off-contract purchases strengthens your position.
The approach requires the signed framework agreements with all their amendments and effective dates, the successive tariff grids, the invoices and credit notes of the period and the detail of the financial clauses. Between traders, the period covers five years; the steps of an engagement are described in our method.
A contract audit is only reliable if the documents are: a missing amendment or a grid without an effective date makes a discrepancy debatable. Nor does it replace correction at source, since a tariff fixed at the supplier prevents the discrepancy from repeating.
Frequently asked questions
Does the contract audit replace the accounting audit?
No. The accounting audit remains essential for the reliability of the accounts: duplicates, VAT, segregation of duties. The contract audit answers another question, whether the negotiated terms are respected. The two do not have the same purpose.
How often should a contract audit be carried out?
There is no single rule. Two common benchmarks: a systematic check at each contract renewal, then a look-back over the recoverable period when the process is first set up. High-volume contracts or contracts with complex terms justify more regular monitoring.
Are my procurement teams not already doing this?
They often check invoices by sampling, or react to a discrepancy that has been flagged. Checking 100% of the lines against a contract that has gone through several amendments is, in practice, beyond the reach of manual control.
