You are an accounts-payable clerk at a small contractor. A site supervisor submi

Question

You are an accounts-payable clerk at a small contractor. A site supervisor submitted an invoice requesting immediate payment to a new vendor for materials he states were delivered directly to a work site. A note on the invoice asked that the check be delivered directly to him so that he could deliver it personally to the vendor, as payment needed to be made immediately to prevent delays. This request is unusual and outside of the normal process, but you are considering complying, as the purchasing manager is on vacation and not available to consult with. Although you are suspicious of this unusual request, you are tempted to accommodate it. Discuss the potential for fraud given these facts. How can you determine the legitimacy of the transaction given these facts so that payment can be issued?

Explanation / Answer

The accounts-payable clerk shouldn't prepare and handover the check to the site supervisor. It is very much possible that the supervisor has some tie-up/collaboration with the vendor whereby he is submitting a fraudulent invoice for claiming the payment. Further, the supervisor might be trying to claim money for the material which has not been actually supplied. Such a situation can result by opening a bank account in the name of a fictitious vendor (the account belongs to the supervisor only) and claiming that vendor as the beneficary.

One of the most important controls for the accounts payable process is the matching of invoice with the purchase order issued in the name of the vendor. The clerk should verify as to whether any purchase order was issued by the company to this vendor and who was the authorizing executive. Further, the clerk should obtain and verify the delivery note to ensure that the items were actually supplied at the site. This is known as a 3 way match and should be performed before approving/releasing the payment to the vendor. With the use of this approach, the clerk will be able to determine the legitimacy of the transaction and issue the payment if everything is found in place.

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