Contract Audit Checklist

Contract Audit
Checklist
Enhance the effectiveness and accuracy of
contract audits
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2 Contract Audit Checklist
Introduction
In large enterprises that handle a substantial volume of contracts, contract audits may be
necessary for various personas and departments to ensure compliance, mitigate risks, and
optimize contract management processes.
Contract Audit is not the same as Contract Review!
A contract audit is typically only completed on a signed contract, whereas a contract review
occurs on pre- and post-signature contracts. A contract audit is to determine whether both
parties are meeting the terms and conditions of an agreement. Unlike a contract audit, a
contract review is part of the negotiation process: making sure parties agree to terms that fit their
company policies and positions. Contract reviews can be completed on individual or multiple
contracts, whereas a contract audit involves numerous documents as an internal process.
The below-mentioned parameters and sub-bullets offer a comprehensive overview of contract
audit requirements tailored to specific departmental roles and responsibilities.
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The below-mentioned parameters and sub-bullets offer a comprehensive overview of contract audit
requirements tailored to specific departmental roles and responsibilities.
Legal Department
Contract Compliance: Ensure that contracts adhere to legal requirements,
industry regulations, and corporate policies.
(a) Regulatory compliance
(b) Contractual obligations
(c) Terms and conditions
Risk Mitigation: Identify and assess legal risks associated with contracts.
(a) Legal liabilities
(b) Dispute resolution clauses
(c) Indemnities and warranties
Contract Performance: Evaluate whether contracts are being executed as

intended.
(a) Service levels and quality
(b) Performance metrics
(c) Deliverables and milestones
Contract Termination and Renewal: Review contract expiration and renewal

provisions.
(a) Notice periods
(b) Termination rights
(c) Auto-renewal clauses
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Finance Department:
Financial Compliance: Ensure that contracts align with financial regulations and
standards.
(a) Revenue recognition
(b) Expense management
(c) Financial reporting compliance
Cost Management: Audit contracts to optimize costs and expenses.
(a) Pricing terms
(b) Payment terms
(c) Cost-control mechanisms
Billing and Invoicing: Review billing and invoicing accuracy.
(a) Invoicing processes
(b) Payment terms and schedules
(c) Billing disputes
Procurement Department:
Supplier Performance: Assess the performance of suppliers and vendors.
(a) Delivery times
(b) Product or service quality
(c) Supplier compliance with contractual obligations
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Vendor Relationships: Ensure that contracts support positive vendor

relationships.
(a) Communication channels
(b) Dispute resolution procedures
(c) Performance evaluation metrics
Risk Management: Identify and mitigate procurement-related risks.
(a) Supply chain disruptions
(b) Supplier solvency
(c) Compliance with procurement policies
Operations/Contract Management Department:
Contract Administration: Ensure that contracts are properly administered.
(a) Contract tracking and documentation
(b) Change order management
(c) Contract amendments
Compliance Tracking: Monitor ongoing compliance with contract terms.
(a) Key performance indicators (KPIs)
(b) Reporting requirements
(c) Audit rights and processes
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Risk Management Department:
Risk Identification: Identify and assess contract-related risks.
(a) Legal risks
(b) Financial risks
(c) Operational risks
Risk Mitigation: Develop strategies to mitigate identified risks.
(a) Risk mitigation plans
(b) Insurance coverage
(c) Contingency plans
Internal Audit:
Control Assessment: Evaluate the effectiveness of internal controls related to
contracts.
(a) Control weaknesses
(b) Fraud detection
(c) Compliance with internal policies
Data Accuracy: Ensure the accuracy and completeness of contract data and
records.
(a) Contract data integrity
(b) Documentation completeness
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Quality Assurance/Operations:
Quality Standards: Ensure contracts adhere to quality standards.
(a) Product or service quality specifications
(b) Compliance with industry quality standards
(c) Quality control processes
IT/Technology Department:
IT Contract Compliance: Ensure compliance with IT-related contracts, including
software licenses and service-level agreements (SLAs).
(a) Software license compliance
(b) SLA adherence
(c) Data security and privacy compliance
These parameters and sub-bullets provide a comprehensive overview of what various departments and parties
may need to be a part of the contract audit process, depending on their specific roles and responsibilities within
the organization. The exact parameters can vary based on the nature of the contracts, industry, and organizational
priorities.
However, manual contract audit exercise can be time consuming and prone to human error.
Leveraging AI-powered metadata extraction has the potential to significantly enhance the effectiveness and
accuracy of contract audits. By automating the extraction of key contract data, such as dates, obligations, and
compliance metrics, and connecting the contract management process with Vendor Management and Accounts
Payable Automation processes organizations can streamline the audit process, reduce human error, and gain
deeper insights into contract performance.
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Manage your Contracts on ServiceNow

Are you willing to transform the contract process for faster time-to-signature, greater obligations compliance,
and reduced business risks?
Get a custom demo of the Aavenir software and find out how you can manage your contracts for better business
result.
Checklist Blog Webinar Datasheet
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About Aavenir
Aavenir revolutionizes age-old procurement processes with AI-
enabled Source-to-Pay solutions, including RFPflow, Onboardingflow,
Contractflow, Obligationflow, and Invoiceflow. Built on ServiceNow,
Aavenir solutions streamline procurement, legal, and accounts payable
work processes using the latest technologies such as AI, ML, and NLP to
eliminate manual work, accelerate cycle time, and reduce dependency by
offering smart suggestions based on historical data.
For more information, please visit www.aavenir.com
Explore Aavenir Connected Contract Management Solutions on ServiceNow
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Get Started
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Contract Audit

optimize contract management processes.

Contract Audit is not the same as Contract Review!

contracts, whereas a contract audit involves numerous documents as an internal process.

The below-mentioned parameters and sub-bullets offer a comprehensive overview of contract

audit requirements tailored to specific departmental roles and responsibilities.

requirements tailored to specific departmental roles and responsibilities.

(a) Regulatory compliance

(b) Contractual obligations

(c) Terms and conditions

(a) Legal liabilities

(b) Dispute resolution clauses

(c) Indemnities and warranties

Contract Performance: Evaluate whether contracts are being executed as

(a) Service levels and quality

(b) Performance metrics

(c) Deliverables and milestones

Contract Termination and Renewal: Review contract expiration and renewal

(a) Notice periods

(b) Termination rights

(c) Auto-renewal clauses

(a) Revenue recognition

(b) Expense management

(c) Financial reporting compliance

Cost Management: Audit contracts to optimize costs and expenses.

(a) Pricing terms

(b) Payment terms

(c) Cost-control mechanisms

Billing and Invoicing: Review billing and invoicing accuracy.

(a) Invoicing processes

(b) Payment terms and schedules

(c) Billing disputes

Supplier Performance: Assess the performance of suppliers and vendors.

(a) Delivery times

(b) Product or service quality

(c) Supplier compliance with contractual obligations

Vendor Relationships: Ensure that contracts support positive vendor

(a) Communication channels

(b) Dispute resolution procedures

(c) Performance evaluation metrics

Risk Management: Identify and mitigate procurement-related risks.

(a) Supply chain disruptions

(b) Supplier solvency

(c) Compliance with procurement policies

Operations/Contract Management Department:

Contract Administration: Ensure that contracts are properly administered.

(a) Contract tracking and documentation

(b) Change order management

(c) Contract amendments

Compliance Tracking: Monitor ongoing compliance with contract terms.

(a) Key performance indicators (KPIs)

(b) Reporting requirements

(c) Audit rights and processes

Risk Management Department:

Risk Identification: Identify and assess contract-related risks.

(a) Legal risks

(b) Financial risks

(c) Operational risks

Risk Mitigation: Develop strategies to mitigate identified risks.