Appendix C

Sample Audit

he following sample audit was developed to demonstrate the PDCA

T approach and its outcome. In the following audit, an observation was

reported to top management that not all purchase orders are managed
as described in work instructions and process control documents within the
Purchasing department. The situation was not considered a finding, as the
issue was found to be more of an appearance than an actual break in the process.
However, the audit team did recommend that process documentation be
updated to include individual releases of contract and blanket purchase orders.
You will notice that a table or spreadsheet system was employed for
multiple evidence sampling where each process required the same sort of
information to be recorded. It’s a good method for quickly entering the
yes/no status of each component you’re expecting to find in each sample.
Auditors often find themselves overwhelmed by the amount of detail they
must record during the audit. This is one of several methods to capture
repeated entries of information similar to each sample.
Sample quantity is always a concern. There are many who insist on six
to eight samples of each record. Others are of the mind to check several and
dig deeper only if anomalies are found as they investigate. Still others
employ a more scientific approach and insist on specific sample quantities,
determined statistically, based on the total number of reports, forms, or
records they are investigating. Choose whatever approach makes the most
sense to you and stick with it. Make that choice based on value and the return
on the investment in time that all these checks require. If you choose too few,
sooner or later the results of a thin scan will make themselves known. If you

111
112 Appendix C

choose too many, the audit becomes an exercise in compliance to format,

rather than an examination of process effectiveness. Revise when necessary
along with the benefit of experience to guide the improvement.
In this audit, an entry in bold type represents a copied record (not
included) that was later attached to the Audit Master as evidence. Suppliers’
names, dates, and quantities are fictitious. And to everyone at Northern Pipe
Products, Inc. of Fargo, North Dakota, thank you for serving as audit sub-
jects and for openly sharing this information.
Please remember that the degree of detail, questioning technique, and
writing style are subject to each individual auditor’s skills, attitude, and
experience. Some audits might appear quite similar to this example, others
might be much simpler, and others might be far more complex. But if you
use the Audit Master to direct the flow of events, the depth of your first audit
will be just as comprehensive as your hundredth.
 Sample Audit 113

Process Driven Comprehensive Audit

P D C A
The following four-part audit report separates elements of ISO 9001:2008
into the following categories: Planning, Implementation, Evaluation, and
Actions based on performance results. These four sections refer directly to
Deming’s “PDCA” methodology for effective process management and
are foundational to ISO 9001:2008.
Throughout this audit, sections 4.1 and 7.1 recur many times.
Because 4.1 is a global planning element, while 7.1 is directed to specific
processes, both are in effect at any one time within the QMS. Both also
require PDCA to be effective at their respective levels and for the system of
processes to work most effectively. This audit structure takes advantage of
both the local and the global perspective simultaneously to create maximum
value and relevance.
Development of this checklist involved placement of elements specific
to this audit into their respective PDCA sections, in turn adding them to the
generic 4.1 and 7.1 inquiry format provided. Therefore, all audits share a
common process-driven format based on use of PDCA regardless of the
process or objective under scrutiny.
Auditors are chosen so as not to audit their own work. The results of all
audits are brought to the attention of top management and findings are
addressed through the nonconformance process.
114 Appendix C

Part I: Plan
Audit Subject: Purchasing
March 24-25, 2009

Section 1: Motivation and Risk

(ISO 9001:2008 Sections: 5.1(c), 5.2, 5.4.2(a), 4.1(a), 4.1(d), 7.1(a))
Describe and provide evidence why Purchasing is important. What is
the risk if it’s not done properly? What would be lost or harmed?
Interviewed J Martens: Risks would be over-pay of materials. We
would have production interruptions. We would not be profitable.

What company quality objective(s) would be in jeopardy if Purchasing

had a major failure?
Interviewed J Martens: Reduced Cost of Quality and Customer
Satisfaction.

Please give examples of why Purchasing is important to the

organization and to its customers. Is there any evidence of these
examples?
Interviewed J Martens: Resin contracts XYZ Material 2006, 2007,
and 2008 Resin Contract. Contracts indicate high degree of control
of price annually. Contract per pound expense indicates no spikes or
major increases = stability, control, strong relationship with supplier.
2006, 2007, and 2008 Annual Quality Review indicates XYZ Material
to be one of NPP’s key, or critical suppliers. Report card grade
consistently above average for criteria: price, delivery, service,
and quality.

Customers: J Martens explained that if resin prices were higher, sales

would be severely impacted, as this is a commodity-based business.
What resources are assigned to do Purchasing? (computers, operating
software, tools, machinery, and so on.)
Interviewed J Martens: Visual operating software, NPP computer
network, Keith Lindsey and Purchasing staff of two, Parts room and
warehouse, Parts truck.
 Sample Audit 115

Who is the Purchasing Process owner (the ultimate authority) and to

whom does he/she report?
Interviewed J Martens: I am the owner and I report to Wayne
Voorhees, President.
116 Appendix C

Section 2: Process Plan

(ISO 9001:2008 Sections 4.1(a), 4.1(b), 7.1(b), 7.1(c), 7.1(d), 6.2.2(d))
Please describe how Purchasing works in general terms.
Interviewed J Martens: There is a formal purchasing process, but in
general, a person or department requests that something be bought
and that requisition comes to Keith or me for processing. Appropriate
vendor is investigated and chosen, purchase order is produced, material
is ordered, upon receipt, material is inspected and placed in stores.
Material is green-tagged, if approved. (Martens claims all incoming
material is tagged with green acceptance sticker–investigate later.)

Are the risks mentioned in the first question managed well through
what was just described to me?
Risks appear to be well managed from reports received and evidence
collected: Monthly Purchasing Reports for January through
February, 2008–Reports indicate 24-hour turn-around of requisitions
and no late deliveries.

What other parts of the operation benefit from the success of

Purchasing?
Interviewed J Martens: Virtually all departments do, but especially
Production. Production relies on certain materials to produce pipe
in the expected manner. XYZ Material is known to have certain
extrusion characteristics that are preferred by Production. (Investigate
Production’s desire to use XYZ Material.) Sales department also
benefits because Purchasing can react quickly to new sales demands.
Speed of processing requisitions is only one part of the Purchasing
process ability to react quickly. A strong key supplier base is essential
to maintain our flexibility.

Can you demonstrate how the process and its performance are
understood among the people who use it? Is any of this recorded
in verification, validation, monitoring, and inspection records?
(Get evidence wherever possible.)
 Sample Audit 117

Interviewed J Martens: Monthly Purchasing Reports for January

through February, 2008–This report is produced by Keith Lindsey,
Purchasing Agent, and delivered by Lindsey at Monthly Quality Council/
Managers’ Meetings. (Check with Keith Lindsey to verify that he does
these things.)

7.4.2 Requirements for product approval include–(product, procedure,

processes, equipment):
Interviewed J Martens:
a. Requisition dollar amount maximums, purchasing procedure
ISO Document PURC_100.doc Rev C – Purchasing Process,
previously mentioned resources = equipment.
b. Personnel are qualified according to job descriptions and required
training found in Education Coordinator’s office. J Martens and
K Lindsey (investigate to determine if records are available to
prove competence as required in ISO 9001:2008 Section 6.2.2).
c. Quality Management System requirements: J Martens: The
QMS requires that Purchasing deliver a monthly report, that the
Purchasing manager attends weekly Quality Council Meetings,
that vendors are graded and improvement is expected, and so on.
118 Appendix C

Section 3: Key Players

(ISO 9001:2008 Sections 6.2.2, 4.1(d))
Who is/are Purchasing key players and to whom do they report?
(You’re actually asking for a list of names for the three follow-up
questions below.)

J. Martens, K. Lindsey

At a later time in the audit, when you fully understand the process,
interview several of the above people.

What does each person do? (Do they have a Job Description? Get as
much information as possible to use in the last question of this section.)
Interviewed Kristin Munro, Education Coordinator: Jeff Martens is the
VP of Purchasing and Keith Lindsay’s title is Purchasing Agent. Their
job descriptions appear to match their observed activities. Jeff and
Keith both have job descriptions, located in the HR directory on the
NPP network.

Ask them if they routinely experience any obstacles or reoccurring

problems. Record them here:
Interviewed J Martens: Getting information from Sales department
in a timely manner. Working with all the issues from each division and
department to keep everyone happy. Resin prices are impossible to
predict–constantly fluctuating.
Interviewed K Lindsey: Number one problem is parts taken from the
Part Room and not properly signed out. Finding reliable shippers in
emergency situations. Processing multiple requisitions that could have
been combined into one.

What records indicate that this person is competent to do the work

they described to you above? (Review competence records in the HR
department. Note any big differences as Observations or Findings if
there are no records of competence such as evaluations, certificates,
training records, and so on.)
 Sample Audit 119

Interviewed K Munro: Job descriptions and evaluations indicate skills,

education, and experience minimums as well as training required and
reviewed every six months. Both Jeff and Keith received evaluation
overall grades of 3 or above (on a scale of 1–5). This indicates
competence according to NPP HR process documentation.
120 Appendix C

Section 4: Evaluation Method

(ISO 9001:2008 Sections 8.1, 8.2.3, 4.1(c), 4.1(e), 7.1(c), 6.2.2(d))
What measurement(s) is/are routinely used to indicate Purchasing
performance? (Get records!)
Interviewed J Martens: Monthly Purchasing Reports provide
ongoing performance information to Top Management. Annual Quality
Review summarizes Purchasing performance and supplier
performance. Measurements include percent of on-time delivery, days
to order fulfillment. Vendors are rated on a scale of 1–5 using
previously described criteria. Unable to “measure” resin prices;
however, they are carefully monitored throughout the year.

How do these measurements indicate if risks described earlier are well

managed? (Get records!)
Interviewed J Martens: Risk (Production impact): “Annual Quality
Review” indicates no lost production hours due to material shortages.
Overpayment of materials: 2007 and 2008 Financial Statements
(Purchasing Section only) provided by Jeff indicates Purchasing
Department to have been under budget for both years. This includes
all estimated prices for purchased materials. Profitability: Both years
showed a profit that would not have been possible with Purchasing
mismanagement (verify profitability with CFO at a later time).

How are these measurements related to the quality objectives of the

company? (Get records!)
Objectives: Customer Satisfaction and Reduced Cost of Quality are
directly affected by the success or failure of the Purchasing process,
as shown by all evidence thus far collected. 2008 Cost or Quality
Reports (monthly)

Are measurements performed at planned intervals and reported to

management? (Get records!)
Interviewed J Martens: Yes, as indicated above–weekly, monthly, and
annual reports. Monthly Purchasing Reports
 Sample Audit 121

Are measurements shared with the Purchasing workers for

improvement? (Get records!)
Interviewed J Martens: Records are obviously shared, because
Keith generates the reports!
122 Appendix C

Part II: Do

Section 1: Process Inputs

(ISO 9001:2008 Sections 4.1(b), 4.1(d), 7.5.1(a)–7.5.1(f))
What is/are the output(s) of previous process(es) that are brought to
Purchasing? (What serves as input to this department or function that
causes them to start working on it? Get evidence wherever possible!)
Interviewed J Martens: Sales brings its orders to my attention, which,
in turn, are discussed at Scheduling Meetings. Normally, orders are
placed six weeks in advance (this makes it difficult to be as flexible as
I would like).
Input is also received from the Maintenance department. Most
purchase requests are maintenance related. The MP2 system
manages the bulk of these orders.

At a later time in the audit, go to the department(s) or function(s)

whose output became input to this department as discovered above.
Ask this department if what they send is well received, or is
improvement/revision desired?
Interviewed Warren Etches, VP Sales and Marketing: Confirmed that
he and his department provide Purchasing with upcoming order
information and stated that there are few, if any, problems within the
normal course of events. He stated that his output (Sales orders and
revised schedules) is generally well received with occasional problems
when a rush order is placed. However, this is to be expected.
Interviewed Randy Kennedy, Maintenance Manager: Says that he
works closely with Keith Lindsey (shares the same office as Keith) and
that while there were initial transition issues concerning MP2, today
things are flowing smoothly.

Is this input (or material) analyzed upon arrival to Purchasing? Are

there records of this activity? (Get copies or write down names, dates,
PO #’s, and so on, as objective proof.)
Interviewed J Martens: Sales upcoming orders are brought to my
attention as they come in and my job is to compare material quantities
on order with the expected demand. Martens says he uses the Railcar
 Sample Audit 123

Tracking Form to place and monitor all resin shipments from key
suppliers.
Customer Sales Order # 09987 dated Jan 24, 2009. Reviewed
Jan 15, 2009. Resin Purchase Order # 7822104 placed Jan 16, 2009.
Wood Purchase Order # 234471-10 placed Jan 16, 2009 (Sideboards
for pallets). Review dates noted by initials on tracking form and
purchase orders. (Check with Paul Tupa, Inventory Control, to verify
that Customer Sales Order #09987 was shipped on time.)

What controls are applied to Purchasing?

Interviewed J Martens: Many have been noted thus far in this audit.
They include budget, annual contracts, vendor criteria (also based on
product offerings as a control), QMS itself, receiving inspection, stated
requisition maximum amounts per positions of authority.

Are inputs received properly and well managed? (Are there problems
getting the things you need to do your job?)
Interviewed J Martens: There were no reported incidents, other than
“hot orders.”
124 Appendix C

Section 2: Work Plan

(ISO 9001:2008 Sections 7.1(b), 7.5.1(a)–7.5.1(c), 8.5.1)
In Purchasing, what tools do you typically use and how are they
working?
Interviewed J Martens: MP2, Visual, calibrated tape measures and
micrometers. They are working as planned.

Are there work instructions? (Get evidence, if possible.)

Interviewed J Martens: Purchasing Work Instructions are available
online for all Purchasing activities in compliance with ISO 9001:2008
and Sarbanes-Oxley legislation.

What improvements are anticipated if everything operates just as

described?
Interviewed J Martens: Vendor corrective actions and vendor report
cards are expected to produce improvement in vendor performance
annually.

7.4.1 Purchasing Process

Interviewed J Martens: Selection of suppliers is based on one of two
methods:
1. Evidence of Registration to ISO 9001:2008
2. Successfully pass a Supplier Audit (this includes transportation
companies as well)

Key Vendor Registered to 9001:2008 Successful Audit

Vendor XYZ x
Vendor ABC x
Vendor 123 x
Vendor 890 x
Cover sheets for Audits and ISO Registration are attached to this
report.
Criteria already defined as price, delivery, quality, and service.
Evaluations already mentioned previously in this audit are contained in
past year’s “Annual Quality Review.” Each year’s average total scores
show overall improvement from one year to the next.
 Sample Audit 125

Section 3: Process Outputs

(ISO 9001:2008 Sections 4.1(b), 7.5.2)
Is the output, or what you actually deliver, tested before Purchasing is
completed?
Interviewed J Martens: Incoming Inspection is performed when
ordered goods are received. Orders that pass inspection are issued
green pass stickers, indicating that they are ready for use.

Pass
Sticker PO Inspected
Material Present? Visible? By Date
C-900 12” Gaskets x x KL March 3, 2009
8” Sewer Gaskets x x KL March 10, 2009
34.5” wood side x x DF February 11, 2009
boards
3/4 inch banding x x KL January 2, 2009

Who or what receives Purchasing activities after you’re done? (Ask

their input.)
Interviewed J Martens: Production and Maintenance.

At a later time in the audit, go to the recipient(s) and ask: Is the output
of Purchasing well-received, or is improvement/revision desired?
See previous interviews.
126 Appendix C

Part III: Check

Performance
(ISO 9001:2008 Sections 4.1(e), 8.4, 8.2.1)
Is performance of Purchasing analyzed from the perspective of both
internal and external customer satisfaction? (Remember to get evidence
for each question whenever possible!)
Interviewed J Martens: Internal customers (Employees) are surveyed
annually. There have been no reports of Purchasing representing a negative
influence through its work. Audit team checked 2007 and 2008 Employee
Satisfaction Surveys and found no Purchasing issues noted.
Interviewed P Tupa, Inventory Control: Order #09987 due to Ajax Water
Works Company June 27, 2009. Shipped June 26, 2009, with Bill of
Lading # 97258 dated June 26, 2009.

7.4.1 Ensuring that purchased product conforms to specified requirements

Interviewed J Martens: All incoming material goes through the
Purchase Order process. We only order things that have been clearly
defined, first on the Requisition Form, secondly on the Purchase Order
itself. Many times, Keith is ordering something from a catalogue and
the catalogue item number defines the specifics of the desired item.
Overall, the amount of detail on the Purchase Order depends on the
complexity of the order.

Purchase Item Complete Approvals

Order # Description Description? Noted?
#1009987 Prime Resin Yes No
#652287 Extruder Control Yes!!!! Yes
Panel
#2587754 Office Supplies– Yes No
General Supplies
#644275 Wax (micro ingredient) CAT # Yes
(After noting missing approvals above, six other PO’s were
subsequently reviewed from the past six months. All were found to be
“complete.”)
OBSERVATION: Lack of authorizations on two of the four Purchase
Order line items were explained by Keith Lindsey as standard
operating procedure. Prime Resin, as a railcar item, is covered by a
blanket purchase order with full description when the contract is
 Sample Audit 127

signed. From that point on, it’s considered a “re-order.” Office Supplies
are loosely managed, where anyone can enter item descriptions
when we run out of that item. All office supplies are supplied by one
contractor, who also has an agreement with us to replenish the supply
room using this system.

Do the Purchasing performance data indicate that the risks mentioned

in the first question are effectively controlled?
Auditors believe that, given all evidence collected and interviews
performed, Purchasing has controlled all risks mentioned.

Do the data indicate a potential opportunity for telling others about your
success or problems elsewhere in the system? Has this been done?
Interviewed J Martens: All purchasing data are shared with everyone
in the company through Quality Council and Monthly Managers’
Meetings. Open Book Management Meetings are also used to tell
others the current status of the Purchasing process. Anyone in any of
these meetings should see that it doesn’t matter where the Requisition
Order comes from, I treat it the same. Since all this is done in the open,
anyone can suggest an improvement if they think of it! Meeting
minutes for May 2009 are attached to this report.

Are inspections and reviews proceeding as planned? Are you using the
originally chosen performance criteria, or has the situation required a
different approach?
Interviewed J Martens: Incoming inspections and supplier reviews
have not changed since we started using them in 2004. Performance
criteria also are the same since 2004.

Is the performance analysis you’ve shown to me presented to top

management in a timely manner and are records available of their
review/evaluation?
Interviewed J Martens: As stated earlier in this audit, all reports and
results are shared at weekly and monthly meetings.
128 Appendix C

Part IV: Act

Improvement Plan
(ISO 9001:2008 Sections 4.1(f), 5.4.2(b), 7.1(d), 7.2.3, 8.5.1)
What evidence is available of action(s) for improvement or revision of
the original Purchasing plan?
Interviewed J Martens: Visual operating software was upgraded last
year and in the process, streamlined the Purchasing process by linking
the Railcar Tracking Form with Inventory Management within Visual.
We added Sarbanes-Oxley specifics in Q2 2009, which further controls
and defines Purchasing from a financial point of view.

Based on performance analysis, what resources were redistributed to

better manage risk or to achieve the desired outcome?
Interviewed J Martens: None. No changes were made based on
performance analysis. We can see that things are just getting better.

What has been the customer’s reaction to these revisions?

Interviewed J Martens: The “Annual Quality Review 2007 and
2008–Sales Survey” shows no delivery issues. Therefore, no material
availability issues.

Did top management review any of these revisions before they were
implemented? Did they consider (discuss or ask about) operational
issues in relation to other processes in the system? Are there records
of the decision to revise the process?
Interviewed J Martens: All revisions for all operations and process
changes are reviewed and/or approved by the Quality Council (top
management at NPP). Process Change Notice for Sarbanes-Oxley
Process additions, approved by Quality Council on 03/15/09, is
attached.

7.4.3 Verification of Purchased Product

Interviewed J Martens: We’ve already discussed this several times in
this audit.
 Sample Audit 129

Part V: Supporting Audit Processes

Corrective and Preventive Action Influence

(ISO 9001:2008 Sections 8.5.2, 8.5.3)
List and briefly describe any prior nonconformance and/or corrective
actions to determine effectiveness (within the audited process).

Non- VCA
Conformance # Vendor Situation Completed OK ?
#1157 ABC Vendor Broken Yes
railcar seal
#1775 XYZ Vendor Split wood Yes–in
received process
#1823 123 Vendor Contaminated Yes–
resin received material replaced
by vendor

List and describe any preventive actions to investigate during the audit.
Railcar fall protection for processing/inspecting railcars found to be in
place and working effectively. See Preventive Action # 4665.
NOTE: During the audit process, the audit team noticed that all
members of Production Department were wearing their safety glasses.
Preventive Action # 4972.

Prior Audit(s) Influence

(ISO 9001:2008 Sections 5.6, 8.2.2)
How did prior audits or Management Review contribute to this audit?
Interviewed J Martens: Annual Purchasing Audits for 2007 and
2008 showed no findings. Management Review for past two years
shows no specific Purchasing Initiatives for follow-up.

Written Processes Supporting the Audit Itself:

Purchasing Process–Online
NPP Quality Policy Manual–Revision E
RECS 100.doc–Quality Records
130 Appendix C

Part VI: Audit Summary

Audit of: Purchasing

Closing Comments, Insights and Suggestions, Findings, and
Recommendations:

General:
The Purchasing Process was found to be in excellent shape. V.P. of
Purchasing and staff members knew their system thoroughly and were
able to answer all questions easily. The system has many methods for
reporting its progress and performance. As such, Purchasing is very
much an open activity within NPP. The fact that Keith Lindsay writes
and reports Purchasing information at Monthly Managers’ Meetings
indicates a high degree of trust and responsibility between Jeff
Martens and his staff.

Observations:
Approvals and full descriptions for some purchased items are managed
in nonstandard ways. This practice is at odds with documented
Purchasing procedures (7.4.2(a)). Solution may be as simple as adding
a comment to the form or minor modification to the Purchasing procedures.

Findings:
None

Audit Team Signatures:

Jerry Delaine, Marcy Edwards, Juan Gonzales,
Production Office Shipping

Opening Meeting Date: June 23, 2009

Closing Meeting Date: June 29, 2009

Attendees Sign-in Sheet(s) Attached

Evidence indicated by items underlined and in bold.