Audit on sales agents of a telecommunication company

Company A, a major telecommunications company, had been selling its telecommunication service through approximately 120 sales agents.
Due to the characteristics of the telecommunication service Company A provided and the peculiar business practice within the industry, Company A’s agency commission structure was enormously complex and the unjustified charge of commission by the agents had been a problem for the Company.

Therefore, Company A staffs repeatedly visited the agents and verified the documents to confirm whether the commissions are properly calculated and charged. However, the scheme of improper charge of commission had become more and more subtle every year. At last, Company A found itself incapable to detect the fraud at its agents, and moreover, the relationship with some of the agents became an unfriendly one.
In response to such situation, Company A engaged PFA to carry out periodical audit on its agents.

In consideration of the business relationship that exists between Company A and the agents, PFA designed and implemented the project in the following manner.

① Establishment of the basis of audit on agents

Since the risk of getting into trouble with certain agents had been recognized, PFA suggested the renewal of agency contracts. The renewed contract included a routine audit system on agents by a third party.

② Implementation of audit on agents

PFA implemented audits on agents according to the renewed agency contract.
The first audit focused on understanding the administrative processes and data processing at the agents. In the second audit, PFA detected unjustifiable commission payments of more than 60 million yen.
(However, in view of maintaining the business relationship, the audit result was not reported to the agents)

③ Review of work process

Based on the audit results, PFA designed a plan for the enhancement of internal control such as the internal administration process, and developed work processes or administrative procedures that prevent improper charges of agency commissions.

④ Improvement of IT system

In addition to the enhancement of internal control, both the Company A and agents carried out system improvements that prevent data manipulation.

⑤ Impact evaluation and reporting

PFA calculated the total amount of impact of issues identified in the audit, and assessed the overall cost reduction and improvement of efficiency that the enhancement of internal control and the resulting rectification in commission scheme, which were reported to the client.

Note: This case is an example of the agent audit projects.
Agency schemes may vary depending on the details of agency contracts and business practices. PFA will offer agent audit services tailored for individual client needs so as to ensure the commission payment in accordance with the contract.