Fraud is not an easy task to do. Money can not leave the company without strict controls. Purchasing is the most important area to look fraud. The purchase of fraud in its many forms takes as a source of losses, as payment providers is one of the main ways money leaves a company. Kickbacks, false invoices, false suppliers and conflicts of interest involving employees or officials and business suppliers are some of the most common purchase fraud.
Although many experts say that "The internal control helps to prevent fraud" - if this is the ultimate truth then the big companies that have rigorous internal controls would have never fallen prey to occupational fraud.
Fraud is a whole different ball game and to fight this creature together with the strengthening of internal controls has also need to assess the risk of fraud, on a perpetual basis. Proactive management of risk areas is not easy work. external auditors can do it, but the small and medium enterprises can not afford the sweeping overhaul costs.
According to the Economic Crime Survey PricewaterhouseCoopers smaller organizations revealed rates far greater economic crime through audit processes by other means. Given the respective size of the organizations this is more likely to be by the external auditors - a troubling finding that suggests smaller companies may be putting too little attention on the development of effective controls and alternative checks and balances. Over-reliance on a single annual review to eradicate problems may play into the hands of the fraudster.
Perpetual assessment is the key to the prevention of fraud in all. In addition to Microsoft Access, Excel, ACL and Idea, $ afeGuard can be a useful tool to identify common red flags of accounts payable fraud schemes.
One of the very common systems of accounts payable fraud is fictitious company scheme. employees fraudsters often set up fictitious suppliers to commit fraud-billing scheme. The fictitious seller might be a shell company that provides products or services. Or it could be a pass-through companies in which the crook becomes an unnecessary intermediary between the legitimate company and now the victim of unauthorized earn a profit on the payments to the legitimate seller.
When setting up fictitious suppliers in accounting information systems, fraudsters often leave behind clues that allow auditors to detect their crimes.
common red flags are as follows:
or the home address of an employee corresponds to the address of a supplier.
or initials of an employee match the name of a supplier.
or address of a supplier contains a PO box.
or the provider is missing [data
perpetual assessments done with the help of software will be easy to catch fraudulent schemes above. However there are some other things that pretty much every business owner should know in order to reduce fraud losses.
Rules for the selection of suppliers: Choosing the right supplier for the right material, it is not possible for every organization. Especially small and medium-sized organizations do not formalize their procedures and lose substantial revenue because of wrong selection of the vendors. A company must be uniform in how buy its products and services. This includes the creation and implementation of competitive bidding rules, looking for quotes from genuine suppliers and rules that specify which employees can accept from suppliers in terms of gifts and gratuities. What is considered as a tangent is a legal point of importance in the case of procedure.
Maintaining good internal controls: Keep files on all suppliers, including information from reliable sources regarding the activities and the sellers business reputation. Keep on the rating of based on various predefined criteria suppliers. Keep track of the address of the sellers. How many times did change the communication address, if the PO Box number is mentioned address of the seller?
Concurrent Analysis of supplier payments: Payments must be analyzed as and when they are made. The smaller the gap between the payment date and the date of the most analysis are the chances that the exceptions will be caught. If exceptions are captured in real time, then it becomes easier to recover the proceeds of the fraud if there is. Perpetual analysis tools as $ afeguard helps business owners to monitor suspicious activities of vendors and suppliers. The analysis of Benford is one of the methods for analysis of digitally payments using statistical theorems. The frequency of the particular number that occur more than its probability determines the payments models that may result in the fraud.
, require the provision by employees and suppliers. The employees responsible for the purchase, and all officers, should be asked each year to complete a conflict of interest statement and to disclose the interests of related parties. Suppliers should be asked to disclose their property and financial condition. This helps as a deterrent for employees who seek to collude with suppliers to deceive employers. It remains a moral tension when the employee gives the information.
Check information and reputations. Verify that your organization exists as a legal entity. Discover possible sister companies, companies that are connected with its property dealer or common officers. Also check for multiple companies to an address or phone number, which can be done easily with a city "criss-cross" directory or a similar resource. If two vendors share an address, there is a potential for manipulation of tenders.
small companies often do not exercise sufficient control on suppliers, which do not address monitoring as an organic process, so they do not always look on the flow of transactions and that the sellers are and the procedures to follow when using providers. We still see a lack of due diligence on vendors and even a lack of a risk-based approach in which the company is constantly looking for situations, test weaknesses, analyzing and identifying suppliers suspected suppliers.
Some of the testing techniques include looking for different suppliers in a location or phone number, or sellers who use box numbers or post offices. consecutive or duplicate payments to a supplier also deserve special scrutiny because such payments could be attempts to avoid the terms of licenses.
If some body asks what's in a name? Then there is the possibility that you may be caught on the wrong foot. The vendor names that say it all. Simple analysis of vendor names can raise red flags. One should always be suspicious of companies with names that do not tell you what they do, as ABC Management Co., or company names that are only slightly different from well-known companies such as IBM or chemicals Cesco Inc. Typically, these names are created with the aim of facilitating payments. The names that appear to be brokers or sales or marketing company should be considered, because these are the soft services.
One last word of caution on payments to suppliers is Benchmarking. You should keep on comparing purchases of the company with other companies on a regular basis. This is a test that no software can do for the business. One needs to keep asking whether similar business organizations require these services. If other companies are paying the same rate for the same services?
By analyzing the accounting databases on these lines is not certain that your company is free of fraud, but it will definitely help to provide a peaceful sleep at night.
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