Question

Sara Chung knew the construction contractors in her area well. She was the purchasing manager at the power plant, a business that was the major employer in the region. Whenever a repair or maintenance job came up, Sara’s friends would inflate the invoice by 10%. The invoice would then be passed through the accounts payable department, where the clerk was supposed to review and verify the charges before processing the payment. The accounts payable clerk, Valerie Judson, was happy to have a job and didn’t want anything to jeopardize it. She knew the deal but kept her mouth shut. Sara’s contractor friends would always “kick back” the 10% extra to Sara under the table. One day, Valerie had a heart attack and went into the hospital. The company hired a new accounts payable clerk, Spencer Finn. He had worked construction in his college days and suspected something was fishy, but he couldn’t prove it. He did, however, wish to protect himself in case the fraud came to light.

Requirements

How could an auditor detect fraud of this sort?

What can a business do to prevent this kind of fraudulent activity?

What should the new accounts payable clerk do to protect himself?

Answer 1

1) Proof of the accounts collectible falsehood is also distinguished by associate auditor once the person in question cross checks the repair and maintenance invoices with the supporting documentation, for instance, the agreements or contracts .The auditor is also created responsive to errors between the prices ,terms ,and/or descriptions on the invoices versus those on the agreement itself..

2) This thusrt of falsehood or fraud may well be prevented by requiring accounts collectible hands to cross reference every receipt or invoice with a procurement order so on all the additional probably distinguish invoice inflation . Another strategies for limiting extortion would need 2 signatures on the checks sent to written agreement staff for payment .Thus the businessman wouldn't be the only one watching the checks.

3) So on shield from being thought of answerable for collaborating in accounts collectible falsehood .Mr .F ought to make sure that the accounts collectible procedure is being administered by someone aside from himself and therefore the businessman of the organization .Also he got to get a replica of the acquisition order and agreement and review every before paying a selected receipt or invoice.

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