Personal Purchases with Company Funds By Amy Macht

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Personal Purchases with Company FundsBy
Amy Macht
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Types of Personal purchases

• Fraudulently authorizing invoices by an
  appropriate party.
• Falsifying documents to obtain authorization.
• Altering legitimate purchase orders.
• False Purchase Requisitions.
• Misusing company credit cards.

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• Fraudulently authorizing invoices by an
  appropriate party. In many occupational fraud
  cases, the culprits duties include authorizing
  purchases, and his or her conscience is the only
  control in place.
• Example Shell Company Schemes

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• Falsifying documents to obtain authorization. If
  the fraudster is not the authorizer of invoices,
  he or she often will forge a supervisors
  approval signature on purchase requisitions and
  other documents.

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• Altering legitimate purchase orders. In some
  cases, a crooked employee alters a legitimate
  purchase order, increasing the quantity of
  merchandise requested. When the goods arrive, the
  employee takes the excess items or returns them
  for a refund.
• False purchase requisitions is similar to the
  above act but this time instead of
  misrepresenting the amount of supplies ordered A
  crooked employee misrepresents the nature of the
  items they are purchasing.

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• Misusing company credit cards. If a company has
  weak controls over the use of credit cards, some
  employees take advantage and buy everything from
  fuel for their automobiles to furniture for their
  homes.

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• Employee Buys Goods or Services on Company
  Account

• Authorized account user
• Forge authorized signature
• Steal credit card
• Falsely add name as authorized user
• Other

Take Possession of Purchased Item
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• Keep the item

Return for cash
or
Account Statement Sent to Victim Company

• Employee approves the statement
• Employee controls the statement
• Miscode purchases as business necessities
• Destroy Statement
• Produce Counterfeit Statement

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Case Study

• A Midwestern CPA firm with about 50 full-time
  employees needed someone to run office errands.
• Act
• Conversion
• Concealment
• Red Flags

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• How to Prevent and Detect Personal Purchases
• Ensure company policy clearly prohibits all
  personal purchases with company funds.
• Carefully control access to, and purchases that
  are made from, company credit cards.
• Do not permit the same employee to originate
  purchases and approve them.
• Separate the invoice approval function from the
  payment and receiving function.
• Establish maximum purchasing limits for each
  employee.
• Install controls to detect multiple purchases
  just below employees approval limits.
• Check for deliveries of company-ordered goods to
  external addresses.
• Routinely examine individual employees buying
  habits, looking for increases in the amount or
  frequency of purchases.

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Investigating

• Things to check
• Check to see if the company has a purchasing
  department. Is it independent of the accounting,
  receiving, and shipping department?
• Are invoices or receipts checked?
• Credit card statements should be reviewed often
  for irregularities.

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• Questions?