Fraud Prevention & Detection

Fraud is not predictable as to when it will occur but it is fairly straight forward as to how it will occur.

Knowing common fraud schemes will help you better detect and prevent fraud within your company. We can provide the auditor with the most comprehensive listing of fraud risk statements. Our fraud risk registers are designed to allow for the immediate creation of a fraud risk register tailored to your company and assist in developing your fraud audit program, including fraud risk assessment, fraud data analytics and fraud audit procedures.

Auditors have historically used a life experience approach to fraud risk identification. Our approach is a science based methodology using permutation analysis and understanding the five components of a fraud risk statement: person committing; entity type; fraud action; impact statement and the fraud conversion statement. Starting with our fraud risk registers, we will show you how to adapt our risk registers to your organization.

Comprehensive Listing of Fraud Risk Statements for Core Business Systems

No need to brainstorm about what fraud schemes may be lurking in your business system, our fraud risk registers provide you with a comprehensive framework of fraud schemes in your core business systems. Your audit time can be maximized by understanding how the scheme could occur in your company, focusing on the internal control vulnerabilities that would allow the fraud scheme to occur and building your fraud audit program.

Our fraud risk registers are available as a component of a NASBA approved training program or a fraud consulting projectThese are just a few of the resources that are available from Leonard W. Vona that you will have access to with your fraud audit consulting or training session. To learn more about these valuable resources, please fill out the contact form below. 

Fraud in Disbursements & Accounts Payable Risk Statements

Your accounts payable file may have shell companies, pass-through vendors, hidden vendors, temporary vendors, and real vendors that are stealing your money. False billing schemes, pass-through schemes, vendors alone, and vendors in collusion, purchase for theft schemes, intentional duplicate schemes, and conflict of interest can be occurring in your accounts payable. The fraud risk register provides over 100 fraud schemes and over 30 vendor descriptions that are used to commit fraud in your accounts payable system, such as:

  • Senior member of management acting alone or in collusion with a direct report cause a shell company to be set up on the vendor master file, process a purchase order or contract and approve a fake invoice for goods or services not provided causing the diversion of company funds.
  • Budget owner acting alone or in collusion with a direct report cause a shell company to be set up on the vendor master file, process a purchase order or contract and approve a fake invoice for goods or services not received causing the diversion of company funds.
  • Accounts payable function acting alone or in collusion with a direct report cause a shell company to be set up on the vendor master file, process a purchase order or contract and approve a fake invoice for goods or services not received causing the diversion of company funds.
Procurement Corruption Risk Statements

Procurement fraud is difficult to detect. Our approach provides a comprehensive listing of bid avoidance schemes, favoritism schemes and conflict of interest schemes. The fraud risk register provides over 100 fraud schemes confronting the procurement process, such as:

Bid avoidance by circumventing the internal real supplier selection procedures

  • Internal person in collusion with a real supplier creates a false sole source statement to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier creates a false emergency statement or deliberately waits for an emergency situation to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier splits the total dollar value of the contract into smaller dollar contracts with the same real supplier to circumvent the dollar bidding levels and the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier splits the total dollar value of the contract into smaller dollar contracts using the hidden real supplier scheme to circumvent the dollar bidding levels to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier makes a false statement for the reason to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier makes a false statement to extend a contract to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
  • Internal person in collusion with a real supplier intentionally shortens the time period to discourage other real suppliers from submitting bids to circumvent the internal selection process resulting in higher costs and the internal person receiving a bribe
Payroll Fraud Risk Statements

Payroll fraud occurs because of a desire to steal money or associated with a FCPA violation. Our registers provide over 50 payroll fraud schemes for: ghost employees, overtime fraud, false adjustments, payroll calculation and other schemes you may not have thought about, such as:

  • Budget owner or payroll function causes a fictitious person to be set up on the employee master file, the budget owner or payroll submits time and attendance records for the fictitious person causing the diversion of funds.
  • Senior manager causes a fictitious person to be set up on the employee master file, the senior manager submits time and attendance records for the fictitious person causing the diversion of funds. Note could be bribe scheme.
  • Budget owner or payroll function causes a real non-complicit person to be set up on the employee master file, the budget owner or payroll submits time and attendance records for the real non-complicit person for work not performed causing the diversion of funds.
P-Card Fraud Risk Statements

Our program provides three approaches to uncover fraud in your p-card system. The fraud scenario, the concealment or the targeted expenditure approach. We have identified over 50 schemes that occur in p-card systems and we know how to find them.

Asset misappropriation scenarios occur when the employee receives an economic benefit that is concealed through the use of a shell company created by the employee.

This may include scenarios such as:

  • Employee creates a shell company and uses their company p-card for expenses that did not occur.
  • Employee creates a shell company and uses their company p-card for expenses that did occur. The employee purchased the items from a real supplier using his personal credit card and then uses the company p-card at the employee’s shell company at an inflated price.
Fraud Audit Procedures for Shell Companies

There are several fraud auditing steps to establish that shell companies exist in your accounts payable program. We start with covert audit procedures using our legal background, physical address check, telephone verification procedures, business owner background, business capacity and invoice examination to build creditable evidence that a vendor is a shell company. Then we will provide our overt audit program to finish the project and recommend an investigation process. As a result, you will be prepared to recommend internal administrative actions or legal actions.

Sample of legal background procedures:

  • What is the date of incorporation?
  • What is the first invoice date?
  • Do the names at the secretary of state registration match company employee names?
  • Does the TIN # at the secretary match the vendor file?
  • Does the vendor have a UCC filing? Document the date, collateral and other information.
Fraud Data Analytics for Disbursements / Accounts Payable

Fraud data analytics is the key to uncovering fraud in core business systems. Our program provides a fraud risk approach to analyzing your data and provides over 25 reports you need to create, including the:

Max. Min Average Report

Using the invoice table you can use data analytics and Max. Min Average Reports to help identify fraud by:

  • Vendor number and vendor short name
  • Country or state
  • Creation date
  • Aggregate expenditures
  • Number of records
  • Largest invoice
  • Smallest invoice
  • Average invoice amount
  • Largest credit amount, may be optional if credit activity is minimal
  • Smallest credit amount, may be optional if credit activity is minimal

Contact Us on How to Obtain the Fraud Risk Registers

Save time, money and improve efficiency with these tried and true internal fraud audit detection and prevention resources. Fill out the form below and we'll be in touch to discuss how you can access these fraud risk registers.