Question

You have recently joined the international audit team at a large company responsible for janitorial work at many different local businesses. Because of the significant number of consumables used in janitorial work, your company has a large purchasing department. You have been asked to analyze the purchases data set for potential frauds.

Steps/Questions

2. Find any vendors who are charging too much for their product compared with other vendors. In addition to average prices for each product and vendor, do you see any increasing trends that might indicate kickbacks?

Answer 1

Here in this case as the purchasing department of the company is larger in size there are chances for potential frauds.

1) If a single person is handling the inventories and book keeping he can manipulate the books.

2)If a single person is issuing the purchase order and payment for the purchases done, then also there is great chance of employee committing a fraud.

3) Supplier and the purchasing department can tie up if they are constantly communicating, to sell products to the company at a higher price, and paying little commission to the purchasing employee for doing the higher transaction.

To avoid this company should keep on changing the employees, not only at purchase department, but also at book keeping department.

4) Inefficient employee or a less bargaining employee can also make the company purchase a product at a higher purchase.