How to Detect Signs of Fraud Committed by the Accounts Payable Department of a Small Company

One of the most vulnerable departments of a small company to fraud is the accounts payable department. The people who work there have access to checks and are responsible for all the money that leaves your business. It's in your interest to learn the signs that fraud has been committed by your AP department.

Instructions

1. Look for transactions that are out of the ordinary. These would include transactions that take place in the middle of the night, a point of sales transaction in a distant city or an amount that seems excessively high or low.

2. Note any accounting discrepancies. At the end of the month, check for overstated or understated account balances. Examine any out of place entries, such as last minute adjustments to vendor accounts. Finally look for records and transactions that aren't supported with a receipts or an explanation.

3. Uncover suspicious activity in your accounts receivable ledger. Note the number of voids and credits made. Excessive voids can indicate fraud. Also ezamine the check record for gaps in your check registry. Review your bank statement for gaps, duplicate check numbers and other suspicious activity.

4. Evaluate the behavior of your accounts payable employees. Employees quitting suddenly without reason can be a red flag for fraud.

Tips & Warnings

• Internal control systems are the key to preventing accounts payable fraud.

• Happy employees that know that they are appreciated and are satisfied with their jobs are less likely to commit fraud.