vendor red flags - chapters site · vendor red flags check request . finding vendor has numerous...

Vendor Red Flags

Presented by: Greg Taylor, CFE

Senior Vice President Corporate Audit Partners

Introduction

Greg Taylor

27 years of accounting and auditing

Industries

Banking

Aerospace

Advertising

Owned Forensic Accounting Business

17th year in the recovery auditing industry

Published author – Please review Corporate Audit Partners website www.corporateaudits.com to review

some articles. “Why Employees Steal” and “Fraud Basics, The Perils of a Small Business”. White paper –

University of Arizona, Eller College of Management, “How to Lose $1.8 Billion in One Week - Seven Ways

to Protect Your Information from Security Loss” http://iasec.eller.arizona.edu/white_papers/index.asp

Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675

http://www.corporateaudits.com/�

http://iasec.eller.arizona.edu/white_papers/index.asp�

Vendor Red Flags Vendor Red Flags

Incomplete W9 Duplicate Payments

Incomplete Address Round Dollar Invoices

Vendor/Employee Match Invoices Near Approval Levels

Check Requests Cancelled or Return Checks

Benford’s Law Rapid Dollar Increase

Sequential Invoice Numbering High Volume of Activity

Vendor/Employee Relationships Vendor Bidding Process

Abbreviated Vendor Names


Red Flags

Red Flags are identified as a set of circumstances that vary from normal practices.

Airplane Crash Red Flags do not dictate guilt or innocence but are a warning to look

closer. Do not ignore Red Flags. Studies of fraud cases usually show that

Red Flags were present but ignored. Sometimes an error is just that; an error.


Vendor Red Flags Incomplete W9 Finding

Incomplete W9

Concern Pertinent information is not filled out on the W9 The lack of complete information on the W9 inhibits follow up of

the vendor review process Deliberate manipulation of W9 or Vendor Form Tax ID numbers are the same as another vendor

Process Verify that all vendors have completed W9’s and Vendor forms

have been reviewed and verified.


Vendor Red Flags Incomplete Address Finding

Incomplete vendor address or PO Box or mail drop only address

Concern Incomplete vendor addresses missing street, city, state or zip Foreign addresses won’t fit the accounting system form Difficult to mail checks to vendors with missing addresses

Process Run vendor master missing address report Key on missing street, city, state or zip Run vendor address with PO Box only report Run vendor address to mail drop matching report


Vendor Red Flags Incomplete Address Report

VM Report VI Sample Company A VENDORS WITH MISSING ADDRESS FIELDS

VENDOR NUMBER VENDOR NAME VENDO

R TYPE ADDR 1 ADDR 2 CITY STATE

COUNTRY

POSTAL CODE

0000017171 1st. Fighter Wing CCMSgt Fund 1 Langley AFB Langley VA USA

0000006918 7th AF/CCC Fund 1 Unit 2047 Apo Ap KOR 96278-2047

0000019407 89th SPTG Combat 1 Andrews Air Force Base Clinton MD USA

0000048888 A7SOFT.COM 1 81375, An Der Rehwiese, 10 Munich Germany DEU

0000003059 Adam Lowenstein 1 New Hyde Park Memorial High School New Hyde Park NY USA

0000015466 AIG Europe 1 Oberlindau 76-78 Attn: H. Jahnert Postafach 3866; D-6000 60323 Frankfurt, Germany DEU

0000030240 Aiken Office Solutions 2 3838 South Florida Avenue Lakeland FL USA

0000006757 Alea Group Inc 1 60 Granton Drive #122 L4B2N6 Richmond Hill, Ontario ON CAN

0000036010 All Palm Beach Safe & Safe & Lock, Inc. 1 8575 Hall Blvd. Loxahatchee FL USA

0000029272 Alpine Glass Inc. & Charles J. Lloyd, 1

4200 IDS Center 80 South Street Minneapolis MN USA

0000031456 B.K.V. Enterprises Ltd. 1 Box 850 613 Hywy 16 & Govern Burns Lake AB CAN

0000022752 Balboa Municipal Golf Course 1 san Diego CA USA

0000007330 BJ's Wholesale Club 2 3985 Plank Rd. Fredericksburg VA USA

0000006252 Blair Lee & American University 1 Washington DC USA


Vendor Red Flags Vendor/Employee Match Finding

Vendor and employee located at the same address

Concern Employee and vendor are the same Collusion between employee and the vendor Employee approving vendor invoices

Process Run vendor/employee match report Key on stripped address Verify reasons for vendor at employee address Sometimes the reason is the employee was once a vendor


Vendor Red Flags Vendor/Employee Match Report

Address Match

Employee ID

Vendor Number Vendor Name Address 1 Address 2 City State Postal Code

614153317 DOUBLETREE HOTEL SAN JOSE 1050 GATEWAY PLACE SAN JOSE CA 951100000000845 Plotter Pros 1086 The Alameda Suite 100 San Jose CA 95116C11145617 RECOMMENDED RESOURCES 11 AMHERST ROAD AMHERST MA 1001C11145617 RECOMMENDED RESOURCES (INACTIVE) 11 AMHERST ROAD AMHERST MA 1001

MATCH 009985 1336 Hill San Marcos TX 78022MATCH 917150807 S M DESIGNES 1336 HILL St SAN MARCOS TX 78022

711131708 RT CONSTRUCTION 13455 NOEL RD SUITE 430 DALLAS TX 75140615094134 RYDER TRANSPORTATION SERVICES 1481 O'TOOLE AVENUE SAN JOSE CA 95131617143713 MONARCH INSTRUMENT 15 COLUMBIA DRIVE AMHERST NH 03031-1334616094959 MASON WEST INCORPORATED 1840 GRETTO LANE ANAHEIM CA 91806517160003 ADVANCED SYSTEM SOLUTIONS 3115 PERIVALE CT SAN JOSE CA 95148831 Ev ent Connections 3657 El Grande Driv e San Jose CA 95131110 MURAD SALES INCORPORATED 4600 GREENVILLE AVE SU DALLAS TX 75106

MATCH 731143218 G Consulting 5506 CHIMNEY RCK DR IRVING TX 76017MATCH 009511 5506 Chimney Rock Driv e IRVING TX 76017

111 JUNIOR NATIONAL WHEELCHAIR CHAMPIONSHIPS 5730 CHAMBERLIN DRIVE SAN JOSE CA 951180000000510 HANSON PUBLICATIONS 64 CLIFTON AVENUE PO B AN SONIA CT 06401-0514

MATCH 008701 6610 Manzanita Dr. San Marcos TX 78027MATCH A28135104 JS GRAPHICS 6610 MANZANITA DRIVE SAN MARCOS TX 78027

0000000701 INTERNET ASSOCIATION GROUP, INC. 6610 SOUTHPOINT DRIVE SUITE 600 JACKSONVILLE FL 31116MATCH 007901 6701 row Way Laconia CA 05842MATCH 624135327 DYGNETS 6701 ROW WAY LACONIA NH 05842

811 BLACKSTONE - NEY 9 N. MAIN ST JAMESTOWN NY 14701817111810 CAE ULTRACSONICS 9 NORTH MAIN STREET JAMESTOWN NY 14701-0110101090844 LAB SAFETY SUPPLY INCORPORATED DEPT #0000185191 PO BOX 5004 JANESVILLE WI 53547-5004909111811 SPECIALIZED PRODUCTS COMPANY PO BOX 890006 DALLAS TX 75389-0006101090036 LAIRD PLASTICS PO BOX 951111 DALLAS TX 75395516165940 RW/STEARNS RIVER PARK TOWER 333 W. SAN CARLOS S SAN JOSE CA 95110-1711515091707 IEEE VLSI TEST SYMPOSIUM VLSI Test Sy mposium 1001 Attn: Maddie Harw ood Amissv ille VA 10106

Client: xyz Company - Report VIEmployee Address / Vendors Address Comparison


Vendor Red Flags Check Request Finding

Vendor has numerous check request or special check handling request

Concern Checks are hand delivered by an employee Outside of normal payment processes and procedures Lack of documentation such as invoice, bill of lading, etc

Process Review all check requests for special handling Understand the reasons behind the check request


Vendor Red Flags Benford’s Law Benford’s Law

Invoice data has particular sequences which are always followed Anomalies show up when same numbers are used multiple times The number 1 should show up 30% of the time, the number 2

should show up 17% of the time. The number 9 should only show up 4.5% of the time

Concern Fraudsters using the same number or similar numbers over and

over again

Process Run benford’s law on all invoice data to look for anomalies Research anomalies


Vendor Red Flags Benford’s Law Graph

1 2 3 4 5 6 7 8 9

MFG 1 0.301980 0.173300 0.122330 0.091430 0.082010 0.066050 0.057500 0.054620 0.050770

MFG 2 0.310863 0.173561 0.131462 0.086964 0.080502 0.064560 0.055869 0.049351 0.046868

MFG 3 0.303399 0.171330 0.125069 0.098053 0.085215 0.065212 0.055819 0.050058 0.045845

Benford 0.301030 0.176091 0.124939 0.096910 0.079181 0.066947 0.057992 0.051153 0.045758

min 0.300000 0.166000 0.113000 0.087000 0.069000 0.057000 0.048000 0.041000 0.036000

max 0.320000 0.186000 0.133000 0.107000 0.089000 0.077000 0.068000 0.061000 0.056000

0.000000

0.050000

0.100000

0.150000

0.200000

0.250000

0.300000

MFG 1 MFG 2 MFG 3Benford min max


Vendor Red Flags Sequential Invoice Numbering Finding

Vendor invoices are sequential.

Concern Fraudster is using consecutive invoice numbering on fraudulent

invoices Fraudster may be making copies of the same invoice and

changing the invoice number May be a single source vendor

Process Create invoice number test by sequential invoice numbering


Vendor Red Flags Sequential Invoice Numbering

ID

Invoice Number

Invoice Date Invoice Amount PO ID

Vendor Number Vendor Name Address 1 Address 2 City State

Postal Code

Check Number

Check Date

31104 126012607 12/06/03 $11,615.49 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431105 126012608 12/07/03 $154.69 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431106 126012609 12/07/03 $24,012.94 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431107 126012610 12/07/03 $153.93 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431108 126012611 12/05/03 $45,563.01 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431109 126012612 12/05/03 $153.93 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/0431139 126015480 01/16/04 $5,233.59 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431140 126015481 01/16/04 $769.65 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431141 126015482 01/16/04 $3,540.37 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431142 126015483 01/16/04 $1,693.22 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431143 126015484 01/16/04 $3,386.44 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431144 126015485 01/16/04 $593.82 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431145 126015486 01/16/04 $928.17 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431146 126015487 01/16/04 $618.78 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0431147 126015488 01/16/04 $8,662.90 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/0475541 507600 06/29/03 $2,861.43 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375542 507601 06/29/03 $504.60 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375543 507602 06/29/03 $963.09 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375544 507603 06/29/03 $456.75 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375545 507604 06/29/03 $124.41 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375546 507605 06/29/03 $287.10 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375547 507606 06/29/03 $12.92 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0375548 507607 06/29/03 $30.45 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/0382364 602104/0100 01/01/03 $3,384.17 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305826 04/03/0382365 602104/0200 02/01/03 $3,178.06 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305826 04/03/0382366 602104/0300 03/01/03 $2,670.82 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305826 04/03/0382367 602104/0400 04/01/03 $3,404.77 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305826 04/03/0382368 602104/0500 05/01/03 $3,184.09 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305836 07/03/0382369 602104/0600 06/01/03 $3,053.95 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305836 07/03/0382370 602104/0700 07/01/03 $2,996.78 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305836 07/03/0382371 602104/0800 08/01/03 $3,498.83 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305842 09/03/0382372 602104/0900 09/01/03 $3,350.58 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305842 09/03/0382373 602104/1000 10/01/03 $1,986.51 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305856 12/03/03

Client: xyz Company - Report XIIVendors / Consecutive Invoice Numbering

Prepared by: Corporate Audit Partners


Vendor Red Flags Vendor/Employee Relationships Finding

Unusual relationship seems to exist between employee and vendor. Particularly upper level management or purchasing

Concern Employee is colluding with vendor for preferential treatment,

kickbacks, bid rigging, etc.

Process Observe vendor employee relationships Create “conflict of interest” agreements for employees Verify that there is a clear understanding of employee vendor

relationships Review suspect vendors for bid rigging etc. Cross training


Vendor Red Flags Abbreviated Vendor Names Finding

Vendor name is an abbreviation

Concern False vendors may be set up as abbreviations of employee

names or other names ie. ABC Inc., D&G corp. Abbreviation may be similar to actual vendor (ABC Inc. vs. AB&C

Inc)

Process Internal audit should review new vendors on a regular basis and

pay particular attention to vendors with abbreviated names Create new vendor spend report and review abbreviated names


Vendor Red Flags Duplicate Payments Finding

Duplicate payments are being made to vendors

Concern Employ is asking for refund on forced duplicate payment Employee is colluding with vendor and receiving kickbacks

Process Create duplicate payment reports Remember an error may just be an error Verify that money was returned to company Use a variety of duplicate payment reports


Vendor Red Flags Duplicate Payments Business Unit

Vendor Invoice Amount

Invoice Number

Invoice Date

Different Same Same Same Same Same Different Same Same Same Same Same Different Same Same Same Same Same Different Same Same Same Same Same Different

These are some of the duplicate reports that have been successful for Corporate Audit Partners There are a number of variations on the reports such as “Soundex” and “fuzzy matches” or “less than number of days”


Vendor Red Flags Round Dollar Invoices Finding

Vendor has many round dollar invoices

Concern Fraudsters are creatures of habit and use even numbers and

round dollar numbering on invoices

Process Create round number invoice report Use “MOD” function Review vendors with the highest percentage of round numbers


Vendor Red Flags Round Dollar Invoices MOD Function

MOD Function


Vendor Red Flags Invoices Near Approval Levels Finding

Vendor has many invoices just under approval levels

Concern Fraudsters are making fictitious invoices just under approval

levels to circumvent the approval process Invoice splitting to circumvent approval process

Process Create approval amount report Create invoice splitting report Review vendors with the highest percentage of invoices close to

approval levels


Vendor Red Flags Invoices Near Approval Levels


Vendor Red Flags Invoice Splits Query In (SELECT [VendorName] FROM [dbo_Invoice] As Tmp GROUP BY [VendorName],[InvoiceDate] HAVING Count(*)>1 And [InvoiceDate] = [dbo_Invoice].[InvoiceDate])

This is the Microsoft Access Query for invoice splits Where the vendor name is the same and the invoice date is the

same


Vendor Red Flags Invoice Splits Query


Vendor Red Flags Cancelled or Returned Check Finding

Vendor has a large number of cancelled or returned checks

Concern Fraudsters may create a return check situation and then modify

the already signed check. There may be an issue with the vendor

Process Create a vendors with the highest amount of returned checks per

spend report Use criteria to exclude most normal cancellations


Vendor Red Flags Rapid Dollar Increase/High Volume Finding

Vendor has very rapid dollar increases in spend over time period

Concern Fraudsters may be colluding with vendor to create fictitious

invoices Vendor is circumventing the approval process

Process Create vendor histogram or vendor scattergraph report Search by vendors with more than 10 transactions and greater

than $10,000 per year spend Use 300% and greater increase in spend to further isolate

suspect vendors


Vendor Red Flags Rapid Dollar Increase/High Volume Histogram

The histogram is a per vendor comparison on dollar volume and number of transactions over a given period (normally one year)

Vendor Number Vendor Name

Invoices 2006

Invoices 2005

Transactions 2006

Transactions 2005 Inv Amt Diff

Inv Count

Diff

Percent Change Dollars

Percent Change Transact

ions Quadr

ant

0000036202 101 Communications $8,962.00 $30,681.25 2 6 ($21,719.25) (4) -70.79% -66.67%

0000038093 22nd District Agricultural Association $11,000.00 $11,000.00 1 1 $0.00 0 0.00% 0.00%

0000033059 24 Outdoor Com $13,990.00 $14,660.00 11 13 ($670.00) (2) -4.57% -15.38%

0000000375 360 Youth $275,593.74 $446,557.65 24 69 ($170,963.91) (45) -38.28% -65.22%

0000000375 360 Youth, LLC $275,593.74 $300,020.41 24 7 ($24,426.67) 17 -8.14% 242.86%

0000030601 4000 Sherwood Office Associates, L.P. $34,767.88 $57,410.06 10 16 ($22,642.18) (6) -39.44% -37.50%

0000008190 4103 Chain Bridge Road $104,564.62 $83,012.40 16 13 $21,552.22 3 25.96% 23.08%

0000040622 4th Services Squadron $2,000.00 $2,000.00 1 1 $0.00 0 0.00% 0.00%

0000040093 500 Clearlake Plaza $61,955.42 $33,507.84 16 10 $28,447.58 6 84.90% 60.00%

Amount and Count are the same


Vendor Red Flags Rapid Dollar Increase/High Volume Scattergraph

The scattergraph is a graphical analysis of changes in vendor spend and transactions between two periods of equal length

-1000

-800

-600

-400

-200

0

200

400

600

800

1000

($25,000,000.00) ($15,000,000.00) ($5,000,000.00) $5,000,000.00 $15,000,000.00 $25,000,000.00

I

3

3

1 1

2 4 4

2

1 1

1 High dollar change and low count 2 Dollar to count changes that DON'T contradict one another 3 Dollar to count change that contradict one another 4 Inefficiency that may be developing

4 4


Vendor Red Flags Procurement Fraud Finding

Vendors and/or employees are colluding to commit fraud

Concern Procurement fraud is one of the hardest to detect. In many ways it is committed before accounting books cost Payments or other compensation is made off books Company may be overpaying for goods or services

Types of Procurement Fraud Bribes and kickbacks Bid rigging among vendors Collusion between vendor and employee False Claims


Vendor Red Flags Procurement Fraud (cont.) Types of Procurement Fraud

False Claims Performance schemes (material substitution)

Process Set up “tip line” Compare vendor bidding Review vendor bid winning percentage (are they a sole source

vendor) Do procurement employees have unusual relationships with

vendors or potential vendors Review change orders Review final costs (were they over budget)


Vendor Red Flags Data Extraction How do I get the data out so I can analyze it? Accounting Systems

Most common accounting systems QuickBooks, Great Plains, Oracle, SAP, etc have programs to extract data sets as text files

“Business Objects” and “Qubed” are some third party software used for extraction.

IT staff can typically extract data into text form DO NOT USE .cvs file or comma delimited options when

extracting CAP uses proprietary table identifiers. Clients export tables as

text files.


Vendor Red Flags Data Extraction What does Extracted data look like?


Vendor Red Flags Data Extraction Imported to Excel – Text Import Wizard


Vendor Red Flags Data Extraction Imported to Excel – Finished


Case Study Case Study 1

Jewelry Company

$1.5 Billion in Annual Sales

Anderson, SC

Vendor Red Flag

•Number Duplication Report. •High Dollar Volume. •Sequential Invoicing. •Invoices per Month. •Google Earth. •Phone number and Contact. •Common industry practices. •Demographics.


Number Duplication Report Duplicated Number Count of Duplicated Number Vendor Nmber Vendor Name

Total of Duplicated Number

$20.00 94 11853 SOUTH CAROLINA DEPT OF REVENUE $1,880.00$20.00 80 360445 SC CHILD SUPPORT CENTRALIZED COLLECTIO $1,600.00$20.00 22 33223 STATE OF CALIFORNIA FRANCHISE $440.00$20.00 21 359586 UNITED STATES TREASURY $420.00$20.00 8 368331 ARCTIC FALLS $160.00$20.00 7 35953 FEDERAL EXPRESS $140.00$20.00 6 80982 OXFORD $120.00$23.08 207 360445 SC CHILD SUPPORT CENTRALIZED COLLECTIO $4,777.56$23.08 154 365055 COUNTY CLERK OF SUPERIOR COURT $3,554.32$23.08 39 61424 CHAPTER 13 OFFICE $900.12$24.00 156 365325 CONNECTICUT CC $3,744.00$24.00 141 360445 SC CHILD SUPPORT CENTRALIZED COLLECTIO $3,384.00$24.00 19 366393 SHOREWOOD $456.00$24.00 16 368974 COFFEE SERVICE INC $384.00$25.00 181 359586 UNITED STATES TREASURY $4,525.00$25.00 57 243643972 JP WELDING SERVICE $1,425.00$25.00 30 2717 GE CAPITAL $750.00$25.00 25 13203 NEW JERSEY MOTOR VEHICLE COMISSION $625.00$25.00 19 63277 CHAPTER 13 TRUSTEE $475.00$25.00 7 371257 GE FLEET SERVICES $175.00$25.00 7 13828 WORM KIE GALE & JAC $175.00$25.00 6 368974 COFFEE SERVICE INC $150.00$25.00 5 5809 ANALYTICAL LAB INC $125.00$30.00 66 360445 SC CHILD SUPPORT CENTRALIZED COLLECTIO $1,980.00$30.00 5 366958 BDP INC $150.00$30.00 5 359968 IMPACT INC $150.00$35.00 5 360955 WOOD BP $175.00$40.00 137 362975 ADMINISTRATOR $5,480.00$40.00 16 359402 CINTAS $640.00$40.00 9 360955 WOOD BP $360.00$40.00 7 44746 ROADRUNNER $280.00$45.00 14 39547 BUSINESS WIRE $630.00$45.00 8 360955 WOOD BP $360.00$45.00 7 365555 DJ ASSOC $315.00$50.00 139 243643972 JP WELDING SERVICE $6,950.00


Number Duplication (cont.)

Client - Number Duplication - Report X

Years 2005 - 2007

Top 20 Duplicated Numbers by Vendor

Duplicated Number Count of Duplicated

Number Vendor Nmber Vendor Name

Total of Duplicated

Number

$25.00 57 243643972 JP WELDING SERVICE $1,425.00







11_RPT_X_NUMBER_DUP_2.xls


High Dollar Volume

Why is High Dollar Volume Important?

JP Welding Stats $709,190.86 over three years 1,443 invoices submitted over three years $491.47 average invoice amount

What can we learn from these statistics?


Sequential Number Invoices Association of Certified Fraud Examiners

2004 Report to the Nation on Occupational Fraud and Abuse

348587 ANDERSON, SC JP WELDING SERVICE 5694 04/04/05 06/01/05 $200.00 $0.00 4085.07 86022-41--MOVE ITEMS FOR TERESA WIGGINS CHECK 225113 06/02/05 $4,085.07348587 ANDERSON, SC JP WELDING SERVICE 5695 04/04/05 05/02/05 $315.00 $0.00 7991 86022-41--MOVE SINK--S REECE CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5696 04/04/05 05/02/05 $160.00 $0.00 7991 86022-41--CRATE PALLET --SHAWN NUTTER CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5697 04/04/05 05/02/05 $1,265.00 $0.00 7991 86022-41--WORK ON ELEVATOR CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5698 04/04/05 05/02/05 $25.00 $0.00 7991 86022-41--HANG POUCHES--ART WRIGHT CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5699 04/04/05 05/02/05 $25.00 $0.00 7991 86022-41--WORK IN WAREHOUSE--BILLY WIGGINS CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5702 04/04/05 05/02/05 $75.00 $0.00 7991 86022-41--MOVE MOTORS--S REECE CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5703 04/04/05 05/02/05 $175.00 $0.00 7991 86022-41--MOVE LOCKERS--DAMION MITSOCK CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5704 04/04/05 05/02/05 $50.00 $0.00 7991 86022-41--MOUNT SIGNS--S REECE CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5705 04/04/05 05/04/05 $506.00 $0.00 7991 86022-41--INSTALL TOOL BOARDS--WILLIAM MURPHY CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5706 04/25/05 05/04/05 $1,250.00 $0.00 7991 86022-41--ADDITIONAL TOOL BOARDS--WILLIAM MURPHY CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5707 04/11/05 05/04/05 $100.00 $0.00 7991 86022-41--COLOUM HIT BY FORKLIFT--HARVEY HENDRICKSON CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5708 04/11/05 05/06/05 $841.19 $0.00 5491.69 86022-41--MOVE STRETCH WRAPPER--JERRY JACKSON CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5709 04/11/05 05/06/05 $500.00 $0.00 5491.69 86022-41--MOVE PIPING--JERRY JACKSON CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5710 04/11/05 05/05/05 $337.50 $0.00 5491.69 86022-41--SANTIZING ROOM STEWART REECE CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5711 04/11/05 05/04/05 $260.00 $0.00 7991 86022-41--KART --CLARENCE ROYSTER CHECK 221910 05/05/05 $7,991.00348587 ANDERSON, SC JP WELDING SERVICE 5713 04/11/05 05/05/05 $538.00 $0.00 5491.69 86022-41--RUN WATER PIPE--DAMION MITSOCK CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5714 04/18/05 05/06/05 $207.50 $0.00 5491.69 86022-41--LINE 3515 ALEX HENZEL CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5715 04/18/05 05/06/05 $225.00 $0.00 5491.69 86022-41--DOOR JAMB--JIM RUSH CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5716 04/18/05 05/06/05 $100.00 $0.00 5491.69 86022-41--WELD SAFETY BAR--MIKE SPARKS CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5717 04/18/05 05/06/05 $150.00 $0.00 5491.69 86022-41--POWDER ROOM CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5718 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--PATCH HOLES--DENNIS CLAYBOURN CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5719 04/18/05 05/06/05 $375.00 $0.00 5491.69 86022-41--POWDER ROOM CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5720 04/18/05 05/06/05 $37.50 $0.00 5491.69 86022-41--FILL CRACK HOLE--DENNIS CLAYBOURN CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5721 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--PAINT COLUMN--JOHN COGHILL CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5722 04/18/05 05/06/05 $250.00 $0.00 5491.69 86022-41--MAIN CONFERENCE ROOM--SANDY HICKS CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5723 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--CONFERENCE ROOM--ROSE BOYD CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5724 04/18/05 05/06/05 $200.00 $0.00 5491.69 86022-41--WELD REPAIR BEAUTY CARE ASILE--HARVEY HENDRICKSON CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5725 04/18/05 05/25/05 $100.00 $0.00 2840 86022-41--CLEAN UP A FRAME--JERRY JACKSON CHECK 224302 05/26/05 $2,840.00348587 ANDERSON, SC JP WELDING SERVICE 5726 04/18/05 05/10/05 $125.00 $0.00 5491.69 86022-41--R-16 DOOR--CLARENCE ROYSTER CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5727 04/18/05 05/06/05 $100.00 $0.00 5491.69 86022-41--WELD SINK LEGS--STEWART REECE CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5728 04/18/05 05/06/05 $250.00 $0.00 5491.69 86022-41---ASSEMBLE FILE HANGERS--JANET POWELL CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5729 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--BALLARD--DENNIS CLAYBOURNE CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5730 04/18/05 05/06/05 $25.00 $0.00 5491.69 86022-41--ANCHOR BALLARD BACK--BRENDA KOSHADA CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5731 04/18/05 05/06/05 $25.00 $0.00 5491.69 86022-41--BALLARD--JIM BRAZIL CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5732 04/18/05 05/06/05 $37.50 $0.00 5491.69 86022-41--ANCHOR BALLARD--HARVEY HENDERICKSON CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5733 04/18/05 05/06/05 $487.50 $0.00 5491.69 86022-41--CLEAN TRASH ITEMS--STEWART REECE CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5734 04/18/05 05/06/05 $160.00 $0.00 5491.69 86022-41--1425 AREA--ANDY CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5735 04/18/05 05/06/05 $320.00 $0.00 5491.69 86022-41--CONSTRUCT BALLARDS--MILES GOTO CHECK 222678 05/12/05 $5,491.69348587 ANDERSON, SC JP WELDING SERVICE 5737 04/25/05 05/20/05 $865.00 $0.00 2840 86022-41--RUN WATER LINE--S REECE CHECK 224302 05/26/05 $2,840.00


Invoices Per Month

1,433 invoices submitted over three years

How many working days or hours are they in a given year?

One person working, two people working?


GoogleEarth Map Streetview or Satellite

JP WELD


Phone Number and Contact Vendor Search Sites

www.hoovers.com www.manta.com http://www.archive.org/web/web.php Wayback Machine

Review vendor name on Search Engines

Review principles names on search engines

Review vendor website on waybackmachine.

Review IP address on whois.

http://whois.domaintools.com/ to look for owner of account.


http://www.hoovers.com/�

http://www.manta.com/�

http://www.archive.org/web/web.php�

http://whois.domaintools.com/�

Common Industry Practices

Does the vendor fit common industry practices? Did it seem normal to hire an outside welder to do

maintenance?

What business is client in?

Pros and Cons?

Cost Savings?


Demographics


Conclusion Invest in a tip line.

Simple tests to identify suspect vendors.

Search vendor history

Does it make sense?

What is the make up of the community?

Smell test.

Finding vendor fraud is as much and art as a science.


Reference Material

Mark J. Nigrini Ph.D. / Saint Michael's College / http://www.nigrini.com/ Dept of Business and Acctg - Campus box 104 One Winooski Park / Colchester Vermont 05439 Tel: (802) 654-2894 (Saint Michael's office) Association of Certified Fraud Examiners Inc. / www.CFEnet.com The Gregor Building 716 West Avenue / Austin, TX 78701-2727 Tel: (800) 245-3321

Corporate Audit Partners Advanced Software Solutions Phone: 949.488.7648 Ext 829

Email: [email protected] Web: www.corporateaudits.com LinkedIn http://www.linkedin.com/in/gregtaylorcfe


http://www.nigrini.com/�

http://www.cfenet.com/�

mailto:[email protected]�

http://www.corporateaudits.com/�

http://www.linkedin.com/in/gregtaylorcfe�

vendor red flags - chapters site · vendor red flags check request . finding vendor has numerous...

Documents