To check whether supplier actually complies with the labour standards set out in the contract, the purchaser should have…?

To check whether supplier actually complies with the labour standards set out in the contract, the purchaser should have…?
A . Right to penalise the supplier
B. Right to terminate the contract
C. Right of audit
D. Right to rescind the contract

View Answer

Answer: C

Explanation:

Many firms have compliance policies for suppliers in place. To ensure that the supplier actually comply with the standards set out, the purchaser can employ the right to audit. The buyer usually obtains the right to examine records of a vendor to determine if a fraud or a violation of company policy has occurred through the following methods:

– Right-to-audit agreement The agreement can be printed on the back of a purchase order, contract, or other procurement form.

– A simple request If the right-to-audit agreement wasn’t included on the procurement form,

and the buyer suspects irregularities, he may have to beg the vendor to allow an audit to be

performed. If the buyer is a major customer of the vendor, the buyer may be able to wield a big enough stick to obtain permission to look at the records.

– Right-to-audit Pitfalls

Reference:

– CIPS study guide page 160

– Reserving the Right to Audit the Suspicious Vendor: Right-to-audit clauses in vendor contracts help control fraud and abuse by affording discovery devices in examinations.

LO 3, AC 3.2