Audit anxieties

Keeping track of where product is going and how marketing money is being spent remains an obligation for almost all leading vendors operating a Middle East channel, especially if they hail from the US and are bound by stringent corporate regulations. Welcome to the wonderful world of sales audits.

  • E-Mail
By  Andrew Seymour Published  June 21, 2007

Keeping track of where product is going and how marketing money is being spent remains an obligation for almost all leading vendors operating a Middle East channel, especially if they hail from the US and are bound by stringent corporate regulations. Welcome to the wonderful world of sales audits.

Audits are part and parcel of life in the IT channel, although more so in the Middle East where the market remains inherently transactional and characterised by a dynamic trading environment. Tales of inquisitive third party auditing teams showing up on the doorstep and requesting access to endless piles of accounts and documents are common in reseller circles.

For the most part, these audits pass quietly by without incident and nobody, bar those involved, is privy to the results or conclusions inevitably drawn from them. Every now and again though we are reminded of the complications that can so easily arise.

This week, HP and its UAE reseller partner Seven Seas conceded, via a joint statement, that a recently-concluded audit raised the possibility that work carried out by the reseller more than two years ago might have contravened the terms and conditions of its contract with HP.

"HP and Seven Seas are fully co-operating on this audit, that has highlighted that some misconduct may have occurred regarding sales outside of designated territory, the usage of market development funds and record retention," read the statement.

Make no mistake about it, the term "may have occurred" is absolutely central to this case. Those three words imply a possibility that some wrongdoing took place, but just as significantly they also convey an equally heavy element of doubt.

So what does this suggest? Well, it effectively means that Seven Seas, for whatever reason, was unable to give the auditors access to the material that would completely exonerate it of any alleged wrongdoing in HP's eyes.

At the same time, without access to those materials, HP was unable to gather enough evidence to categorically prove that Seven Seas had, in the timeframe indicated, breached aspects of its contract. Conclusion: misconduct "may have occurred". If ever there was a scenario to truly test the definition of the adage "innocent until proven guilty" then this could easily be it.

All has ended happily, of course, with both parties reaching an amicable settlement and stressing their commitment to ethical business practices and a fulfilling relationship.

More significantly, Seven Seas has agreed to put "dedicated process improvements" in place to ensure its full compliance to HP's terms and conditions in future. That will include extensive investments in its internal systems; a move it expects to further solidify its relationship with HP.

Regardless of whether any misconduct occurred or not, this incident merely reaffirms the point that when it comes to ensuring sound business practices and stringent document retention policies, major vendors these days are in no position to compromise.

HP has revealed that it is conducting more audits than ever before - a consequence of its existence in a post-Sarbanes-Oxley world as much as its global growth, I'm sure - and on the basis of talk among resellers in the region other vendors are following this path too.

Generally speaking, the implications of this trend on the Middle East channel are far-reaching. Resellers and other business partners will find themselves coming under added pressure to not only conform with the policies dictated to them by vendors, but to invest in processes and systems that limit any potential areas of doubt. This is the direction the market has been moving in other territories throughout EMEA and it will continue to take that route in the Middle East.

Does this development acknowledge the local idiosyncrasies and realities of doing business in this region? Not necessarily. As one channel source, recently reflecting on the unauthorised movement of product between markets, summarised: "We are sitting in a region where there are a lot of things that cannot be substantiated or logically explained."

Unfortunately for the channel, that observation carries no weight because vendors require their processes to be followed to the letter. But this is a two-pronged issue: On the one hand, partners must get the processes in place to comply with the smallprint in their contracts, but on the other it is the vendors' responsibility to create transparent policies that leave no room for confusion. And, just as importantly, they must structure their channel programmes in a way that is conducive to the rigorous auditing policies they are endeavouring to enforce.

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code