Internal Audit Checklist: Client Relationship Management

Managing Client Relationships

In general, the objective of an internal audit is to assess the risk of material misstatement in financial reporting. Material misstatements can arise from inadequacies in internal controls and from inaccurate management assertions. As such, testing the validity of various implicit managerial assertions is a key objective of an internal auditor.

While this applies to all financial cycles, this article is the fifth in a series focusing on the General Control Activities for the Sales, Invoicing and Credit Management (SICM) cycle. The most important general controls for SICM include:

Managing Client Relations

It goes without saying that all businesses want to have very strong client relationships and most set standards for client relationship management. The standards should include expectations for delivering products and/or services and descriptions on what is expected for innovating client services and adding value.

When conducting an audit of client management look out for the following controls/best practices:

  • Evaluate if there is adequate training in place and experience within sales department to ensure staff have sufficient product knowledge.
  • Validate that sales contract reports are issued with action points and follow up is scheduled.
  • Verify the standardized use of a Customer Relationship Management (CRM) software if appropriate.
  • Evaluate whether a product development program or R&D department is, or should be, engaged.
  • Make sure customer margins are tracked and there are action plans ready if customer margins fall below target.

Incentive Trips/Gifts

Incentive trips are way to enhance customer loyalty and improve the understanding of the business. However, customer loyalty programs that include incentive trips carry risk to the business and should be evaluated and closely monitored.

When conducting the audit look out for the following controls/best practices:

  • Make sure that no incentive trips/gifts to customer are permitted during contract negotiation.
  • Verify that there is a clear policy is in place for organization surrounding gifts and incentive trips.
  • Validate that advice on tax implications is sought prior to incentive trips taking place.
  • Check that compliance with regulatory standards and competition laws are considered as part of gift/incentive trip proposal.
  • Make sure that all gifts/incentive trips is given prior approval.
  • Verify that a register of all gifts and trips is maintained including customer details.

In conclusion, auditing standards require that auditors test basic underlying management assertions implicit in the financial statements. Key objectives to these assertions are; Existence and Completeness, Rights and Obligations, Valuation or Allocation, and Presentation and Disclosure.



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