Accounts Payable: Auditing for Fraud

Is fraud eating away at your bottom-line?  Do you suspect fraud?

Maybe you’ve never considered the possibility of fraud in your organization.

Have you audited your accounts payable?  Read on and consider these facts when you think about your business.

Every other year, the Association of Certified Fraud Examiners publishes the results from its global fraud study in the Report to the Nations on Occupational Fraud and Abuse.   There are a couple of findings worthy of note:

·Participants estimated the typical organization loses 5% of revenue each year to fraud.
·The amount of time from when the fraud commenced until it was detected was 18 months

So you want to protect your company and accounts payable from fraud, but how?  One recommendation is to have an accounts payable (AP) audit performed.  A comprehensive accounts payable audit is designed to help identify common indicators of fraud.

Here are four of the most common indicators of fraud:

1.  Address indicators – Vendors with a PO Box, mail drop, or addressed matching that of an employee should always be investigated further.

2. Phone Indicators – No phone number, unlisted numbers, and non-     business (residential service) numbers, along with other information may  indicate a suspicious vendor

3. Document Indicators – Invoice numbering, number not chronological, even invoices with the exact same number, better check those out too!

4. Behavioral Indicators – Invoice amount just below a review threshold, and numbers always rounded, these could spell trouble.

The best auditors implement various tool to not only save time, but to maximize efficiency.

Here are three common accounts payable audit tools:

1.  Software – With practice and skill, a lot of software can give an auditor the ability to automate processes and carry out complex procedures in regards to cleaning, sorting and analyzing mass amounts of data.

2. Statistical & Non-Statistical Analysis – These two general approaches to sampling are employed.  Non-statistical sampling relies  more on auditor judgement while statistical analysis (Benford’s Law) can expose surprising activity within a data set.

3. Manual Review – It will never fade away… the usefulness of an expert handling raw data such as invoices.  Insights are powerful when it comes to auditing because we all know that history repeats itself.

Many successful AP audits end up with the client asking, “How did you find that?”  This is always an indicator of a strong audit process and a satisfied client.

If you suspect fraud or are interested in a learning more about AP audits, please contact Silverback.  You can also reach us via phone at 317.580.8440. We will tailor your audit to help you achieve your goals and give you peace of mind. We’ll also work to help you recover any discrepancies we find and help you institute solutions to prevent discrepancies moving forward.

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