Indicators – Purchase/recieve

Fraud Risks and Prevention Indicators

Purchase and Accounts Payable


  • Wasteful expenditure
  • Short supply of goods
  • Supply of inferior goods
  • Payment for services and goods not supplied
  • Purchase of goods for private use
  • Kickbacks for biased selection of suppliers
  • Payments to ‘bogus’ vendors for false claims
  • Cheques written for cash only
  • Cheques not properly authorised
  • Cost of tyres, repairs, fuel received and paid for by company funds.


  • Poor supervisory review
  • Systems controls either inadequate or bypassed
  • Exercise of delegation not monitored
  • Inadequate review of claims for payments
  • Inadequate segregation of duties
  • Close relationship between employees and suppliers resulting in bias
  • Inducements from suppliers (eg gifts)
  • Inexperienced purchasing officers inconsistent interpretation
  • Improper delegation of authority to personnel to commit, incur and approved expenditure
  • No supervisory / independent check over processing, receipting and payment function for expenditure
  • Lack of documentation / information supporting expenditure
  • Payments made on photocopies or facsimiles of original invoice

Prevention Measures

  • Acknowledgment for receipt of goods and services promptly forwarded
  • Quarterly and random audits of petty cash purchases be performed
  • At least 10% of daily direct payments (li>Regular follow-up must be maintained by receipting areas of all non-receipted items
  • Employees performing accounts payable and stores functions receive appropriate training to ensure compliance with policies
  • Segregation of duties to exist between purchasing, receipting, and paying functions
  • Exercise of delegations be monitored by supervisory staff
  • Managers to monitor compliance with policy and procedures
  • Ensure expenditure is authorised by a senior officer and is not outside of approved limits / expenditure guidelines
  • Ensure that expenditure is supported by required appropriate documentation, ie: original invoice, order number details, original delivery docket
  • Ensure that accounts have not been previously paid
  • Cheques are not written for cash


Petty Cash, Advance Accounts


  • Use of petty cash for private purposes
  • Submission of fraudulent petty cash claims
  • Theft of cash


  • Claims not adequately reviewed by supervisors
  • Payment of claims without authorisation
  • Payment of claims without receipts
  • Advance accounts not regularly reconciled by independent officers
  • Petty cash claims and receipts not stamped as ‘paid’ following reimbursement
  • Nature or volume of purchases not shown on claims
  • Large volume of small transactions
  • Poor security of cash holdings
  • Excessive cash kept on hand

Prevention Measures

  • Petty cash approval closely reviewed and suspect items challenged
  • All cheques signed by two independent officers
  • Claim payments properly acquitted to avoid multiple payments
  • Complete details of expenditure involved including receipts
  • Adequate security of cash holdings including limiting access to safe, procedures re: regular banking etc.
  • Quarterly and random audits.



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