Procurement and contracting of goods and services present different opportunities for fraud and corruption at different stages of the procurement and contracting processes. The auditor would be well advised to look out for warning signs corresponding to each stage. These warning signs indicate the increased risk factor in contracts ands serve as red flags for the auditor.

• Requirements defining stage
   

• Inadequate needs analysis
   

• Inadequate information about potential suppliers
   

• Inadequate review of existing and required inventory
   

• Unduly short supply period
   

• Needs analysis is product rather than needs oriented
   

• Someone other than the user defines the user requirements

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• Unwarranted involvement of senior officials
   

• Bidding and selection stage
   

• The specifications are not clearly defined
   

• A very limited number of offers is received
   

• Documentation indicates unusual involvement of an official
   

• Suspicion about conflict of interest
   

• Evidence of early receipt of information by some contractors
   

• Request for proposal is not properly advertised
   

• Unusual handling of the bidding process
   

• Evaluation criteria is not consistent for different offerors
   

• Exceptions to the tender deadlines
   

• Changes in the bids made after their formal receipt
   

• Lowest responsive bidder is not selected
   

• Contractor submits unrealistic bid indicating collusion or bid rotation
   

• Unusual withdrawal of bids
   

• Re-bid results identical to original bids
   

• Successful contractors use competitors as sub-contractors
   

• Justification for single source procurement is inadequate
   

• Contract performance and evaluation stage
   

• Changes in a contract result in the large increase in the cost of goods and services
   

• Changes made without adequate explanations
   

• Unwarranted contract extension
   

• Complaints about the quality of goods and services received
   

• Inadequate inspections and quality assurance of goods and services received
   

• Evidence of over charging and duplicate billings
   

• Dubious invoices
   

• Insufficient pre-audit of contractor payments
   

• Contracts repeatedly awarded to one contractor
   

• Unduly high labor payments