Detecting Fraud: A close relationship with suppliers

Accountants and bookkeepers generally have contact with the budget managers in a company. The budget manager is the person who will be able to supply all the supporting documentation to the accountant – if it is requested. A budget manager is also one of the people who is in the best position to commit fraud.

One of the ways budget managers commit fraud is to have a close relationship with a supplier, and use that close relationship to gain access to kick-backs, or some other form of payment. This usually occurs when the budget manager asks the supplier to overbill for items. He/She then has the company pay the invoice – a real invoice – and the supplier receives extra money. The supplier then splits that money with the budget manager, and they both end up with more than they had before. The only way to tell if this is going on, for sure, is to track what has been paid for various items over the years and watch for unexplained increases. This is unlikely to be within the power of an outside accountant.

However, one indication that this is occurring is when the budget manager has a close relationship with a supplier. This can mean extra calls, visits, or simply being nicer to them than they are to others. This can be seen by an outside accountant who visits their clients on occasion. If you as a business owner, bookkeeper, or accountant, suspect fraud, or if you are another internal or external resource under whose authority this falls, and you suspect fraud, you should make a few random visits to the budget manager – especially if you can time your visit so that you can watch the budget manager interact with the suppliers. Let your instincts guide you from there.

About the author, Dominic Lambrinos, Anti-fraud Expert, Avanti Partners Pty. Ltd.
Dominic Lambrinos is a recognized specialist in the area of detecting and combating all types of fraud, especially tax fraud and internal corporate fraud. Based of Sydney, Australia, Dominic has over 25 years of experience in the financial industry internationally. His company Avanti Partners Pty. Ltd. has overs in major caital cities around the globe.