- Email: [email protected]
Hot to spot a false purchase invoice
SURVEY QUESTIONNAIRE
We continue our report on Geoffrey Horwitz's survey of differing opinions about honesty by asking you to consider the following.
Continued from Zast month
You accept a job as data processing manager in a large creditreport agency, i.e. an agency which collects data relating to individuals' credit-worthiness and disseminates these data to companies which subscribe to your service. Your sources of information are: -bank references -credit references from other companies who subscribe to your -service -credit references from many companies who do not subscribe to your service -court orders All information received is presumed to be correct, but no direct measures are taken to verify its authenticity. How would you rate the above? 0
OKAY
0 DISHONEST
0
UNETHICAL
cl ILLEGAL
q CAN'T DECIDE
(In Horwitz's initial sample group of 226 people, 36% rated it as OKAY, 12% as ILLEGAL, 34% as either DISHONEST or UNETHICAL, and 18% COULDN'T DECIDE.)
HOT TO SPOT A FALSE PURCHASE INVOICE
Most computer frauds so far discovered have involved the falsification of input by users. Figures produced by Brandt Allen and Wayne Hopkins in the USA indicate that fraudulent purchasing is now one of the most common methods. Unlike the suppression of sales, which can be achieved by the omission of an entry or the destruction of a document, false purchasing normally calls for the positive creation of a false document or accounting entry.
Examine personal and nominal accounts
Creation of false credit
AI-I auditos seeking to expose this kind of fiddle should always start with an examination of personal and nominal accounts, tracIn order to ing entries back to source. The reason is simple. gain from inflated purchase values, a thief must usually create a false credit in a personal ledger which he can then convert into This credit can be posted either before or after the paycash. out; but either way, if the books are to balance, it must be there. The thief can create a false credit of this type in several ways:
-by altering purchase invoices -by re-entering an invoice that has already been paid -by coding a genuine invoice to the wrong account -by amending the master file so that it increases the value of -a genuine credit -by journal adjustment -by lapping between accounts There are other methods too.
10
LOOK OUT FOR: Unusual printing style Printing style common to apparently unconnected suppliers Typing style common to apparently unconnected suppliers Unusual form of invoice: - Letter heading - Photocopy - Despatch note Goods described only by code number Unfolded invoice in PAID file (i.e. not received through post)
Home address of employee or relative False address PO Box address No postal code or telephone number
No Value Added Tax Registration Number (UK)
Alterations to final totals
Consecutive invoice numbers
* Delivery address omitted or blanked out * Batched invoices
Audit from Zedgers to source
* Personal expenses
* Small, high value goods
While the thief may succeed in establishing his credit in a personal account (for example by journal voucher) he may not be able to alter the supporting purchase invoices or warehouse recIf we are auditing from source documents back to personal ords. ledgers, we will miss the fraud - as all the invoices can be matIf however, we audit ched to entries in one account or other. the othex way, from personal ledgers back to source, we will find that the thief's credit entry is not backed up by the documents, This is the best method for detection. and discover the fiddle.
COPPUTLB~~Q~~&SECUEWTYB~
Vol.1
No.4
11
In most accounting systems, purchase Fnvoices are posted to a stock account, or subjected to some type of budgetary control. A thief has to be careful that the debit which matches his false credit ends up in an account where it will escape detection.
Vuherable parts of budget
The parts of your budget where fraudulent purchases are most likely are: -intangible services such as advertising, maintenance and consultancy -goods where inventories are poorly controlled and there are many suppliers; for example stationery, office equipment, nuts and bolts goods inventoried abroad or by third parties -goods measured by weighbridges, scales and other easily falsified machinery --'cost plus' contracts -capital purchases authorised by junior management - single, expensive capital projects (especially land) - company or employees' expenses (meals, airline tickets, fuel etc.)
Check registration number
Intersesting surprises
SEMINAR
-
LONDON
In checking batches of purchase invoices, either for authorisation or during an audit, the following information may help detect fraud. In the UK all invoices should bear the Value Added Tax sales registration number of the supplier. This is made up of a three digit area code followed by a four digit sequence number and two check digits (for example 234 4456 CC). If you believe a supplier's VAT number is false, please contact our editorial offices, and we will advise you how to calculate if the check digits are correct. One idea for spotting fictitious purchase entries is to input the home addresses of your employees and the addresses of their relations (obtained from personnel records), and run them against the addresses of your suppliers. Government departments have found this method full of interesting surprises.
COMPUTER FRAUD & SECURITY BULLETIN are organising a one day seminar to be held in London on 3rd May 1979. Full details will be sent with the March issue of the Bulletin. If you would like to receive advance information, please write to the publisher.
All reasonable care is taken in the compilation of information for this bulletin. However, the Editor consequential loss, or loss of and Publisher do not accept responsibility for any claim for damages, profit, arising from the use of the information.
Elsevier International Bulletins Editorial Mayfield Orders,
Office: House, payments
PO Box 851, USA:
1001
52 Vanderbilt
256
Banbuty
Road,
and fulfilment Lausanne Avenue,
Oxford
enquiries
OX2 7DH.
England
to:
1, Switzerland. New
York,
New
York
Have you ordered your binder? A specially designed of COMPUTER FRAUD & SECURITY BULLETIN $9.50
10017
binder
f3.50
is available (UK only)
for your personal
copies
We continue our report on Geoffrey Horwitz's survey of differing opinions about honesty by asking you to consider the following.
Continued from Zast month
You accept a job as data processing manager in a large creditreport agency, i.e. an agency which collects data relating to individuals' credit-worthiness and disseminates these data to companies which subscribe to your service. Your sources of information are: -bank references -credit references from other companies who subscribe to your -service -credit references from many companies who do not subscribe to your service -court orders All information received is presumed to be correct, but no direct measures are taken to verify its authenticity. How would you rate the above? 0
OKAY
0 DISHONEST
0
UNETHICAL
cl ILLEGAL
q CAN'T DECIDE
(In Horwitz's initial sample group of 226 people, 36% rated it as OKAY, 12% as ILLEGAL, 34% as either DISHONEST or UNETHICAL, and 18% COULDN'T DECIDE.)
HOT TO SPOT A FALSE PURCHASE INVOICE
Most computer frauds so far discovered have involved the falsification of input by users. Figures produced by Brandt Allen and Wayne Hopkins in the USA indicate that fraudulent purchasing is now one of the most common methods. Unlike the suppression of sales, which can be achieved by the omission of an entry or the destruction of a document, false purchasing normally calls for the positive creation of a false document or accounting entry.
Examine personal and nominal accounts
Creation of false credit
AI-I auditos seeking to expose this kind of fiddle should always start with an examination of personal and nominal accounts, tracIn order to ing entries back to source. The reason is simple. gain from inflated purchase values, a thief must usually create a false credit in a personal ledger which he can then convert into This credit can be posted either before or after the paycash. out; but either way, if the books are to balance, it must be there. The thief can create a false credit of this type in several ways:
-by altering purchase invoices -by re-entering an invoice that has already been paid -by coding a genuine invoice to the wrong account -by amending the master file so that it increases the value of -a genuine credit -by journal adjustment -by lapping between accounts There are other methods too.
10
LOOK OUT FOR: Unusual printing style Printing style common to apparently unconnected suppliers Typing style common to apparently unconnected suppliers Unusual form of invoice: - Letter heading - Photocopy - Despatch note Goods described only by code number Unfolded invoice in PAID file (i.e. not received through post)
Home address of employee or relative False address PO Box address No postal code or telephone number
No Value Added Tax Registration Number (UK)
Alterations to final totals
Consecutive invoice numbers
* Delivery address omitted or blanked out * Batched invoices
Audit from Zedgers to source
* Personal expenses
* Small, high value goods
While the thief may succeed in establishing his credit in a personal account (for example by journal voucher) he may not be able to alter the supporting purchase invoices or warehouse recIf we are auditing from source documents back to personal ords. ledgers, we will miss the fraud - as all the invoices can be matIf however, we audit ched to entries in one account or other. the othex way, from personal ledgers back to source, we will find that the thief's credit entry is not backed up by the documents, This is the best method for detection. and discover the fiddle.
COPPUTLB~~Q~~&SECUEWTYB~
Vol.1
No.4
11
In most accounting systems, purchase Fnvoices are posted to a stock account, or subjected to some type of budgetary control. A thief has to be careful that the debit which matches his false credit ends up in an account where it will escape detection.
Vuherable parts of budget
The parts of your budget where fraudulent purchases are most likely are: -intangible services such as advertising, maintenance and consultancy -goods where inventories are poorly controlled and there are many suppliers; for example stationery, office equipment, nuts and bolts goods inventoried abroad or by third parties -goods measured by weighbridges, scales and other easily falsified machinery --'cost plus' contracts -capital purchases authorised by junior management - single, expensive capital projects (especially land) - company or employees' expenses (meals, airline tickets, fuel etc.)
Check registration number
Intersesting surprises
SEMINAR
-
LONDON
In checking batches of purchase invoices, either for authorisation or during an audit, the following information may help detect fraud. In the UK all invoices should bear the Value Added Tax sales registration number of the supplier. This is made up of a three digit area code followed by a four digit sequence number and two check digits (for example 234 4456 CC). If you believe a supplier's VAT number is false, please contact our editorial offices, and we will advise you how to calculate if the check digits are correct. One idea for spotting fictitious purchase entries is to input the home addresses of your employees and the addresses of their relations (obtained from personnel records), and run them against the addresses of your suppliers. Government departments have found this method full of interesting surprises.
COMPUTER FRAUD & SECURITY BULLETIN are organising a one day seminar to be held in London on 3rd May 1979. Full details will be sent with the March issue of the Bulletin. If you would like to receive advance information, please write to the publisher.
All reasonable care is taken in the compilation of information for this bulletin. However, the Editor consequential loss, or loss of and Publisher do not accept responsibility for any claim for damages, profit, arising from the use of the information.
Elsevier International Bulletins Editorial Mayfield Orders,
Office: House, payments
PO Box 851, USA:
1001
52 Vanderbilt
256
Banbuty
Road,
and fulfilment Lausanne Avenue,
Oxford
enquiries
OX2 7DH.
England
to:
1, Switzerland. New
York,
New
York
Have you ordered your binder? A specially designed of COMPUTER FRAUD & SECURITY BULLETIN $9.50
10017
binder
f3.50
is available (UK only)
for your personal
copies