Vendor Red Flags Presented by: Greg Taylor, CFE Senior Vice President Corporate Audit Partners
Introduction Greg Taylor 30 years of accounting and auditing Industries Banking ✓ Aerospace ✓ Advertising ✓ Owned Forensic Accounting Business 20 th 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 Novelist/Speaker – BLOOD AUDT / A MATTER OF LIFE OR DEBT Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Albert Einstein • On education ‘Education is what remains after you have forgotten everything you learned in school .’ • On intelligence: ‘The difference between genius and stupidity is that genius has its limits.’ • On politics: ‘Insanity is doing the same thing over and over again and expecting different results .’ • On marriage: ‘Men marry women with the hope they will never change. Women marry men with the hope they will change. Invariably they are both disappointed .’ • On money: ‘Not everything that can be counted counts, and not everything that counts can be counted .’ • On music: ‘Death means that one can no longer listen to Mozart.’ • On life in general: ‘Things should be made as simple as possible but not any simpler.’ Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Vendor Red Flags Incomplete W9 Duplicate Payments Incomplete Address/Mail Stops 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 Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
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. Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
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. Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
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 Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Mail Stops Finding Mail Stop only address Concern Difficult to identify mail stop address Normal street address with Suite or Apartment number UPS, Mail Box Etc, United States Postal Service Process Run mail stop only report Verify that supplier has actual physical street address Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Mail Stops (cont.) Finding Mail Stop only address Concern Difficult to identify mail stop address Normal street address with Suite or Apartment number UPS, Mail Box Etc, United States Postal Service Process Run mail stop only report Verify that supplier has actual physical street address Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Mail Stops (cont.) Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Incomplete Address Report VM Report VI Sample Company A VENDORS WITH MISSING ADDRESS FIELDS VENDOR VENDO STAT COUNT POSTAL VENDOR NAME ADDR 1 ADDR 2 CITY NUMBER R TYPE E RY 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 Oberlindau 76-78 Attn: H. 0000015466 AIG Europe 1 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 All Palm Beach Safe & Safe & 0000036010 Lock, Inc. 1 8575 Hall Blvd. Loxahatchee FL USA Alpine Glass Inc. & Charles J. 4200 IDS Center 80 South 0000029272 Lloyd, 1 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 Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
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 Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
Vendor Red Flags Vendor/Employee Match Report Client: xyz Company - Report VI Employee Address / Vendors Address Comparison Address Employee Vendor Match ID Number Vendor Name Address 1 Address 2 City State Postal Code 614153317 DOUBLETREE HOTEL SAN JOSE 1050 GATEWAY PLACE SAN JOSE CA 95110 0000000845 Plotter Pros 1086 The Alameda Suite 100 San Jose CA 95116 C11145617 RECOMMENDED RESOURCES 11 AMHERST ROAD AMHERST MA 1001 C11145617 RECOMMENDED RESOURCES (INACTIVE) 11 AMHERST ROAD AMHERST MA 1001 MATCH 009985 1336 Hill San Marcos TX 78022 MATCH 917150807 S M DESIGNES 1336 HILL St SAN MARCOS TX 78022 711131708 RT CONSTRUCTION 13455 NOEL RD SUITE 430 DALLAS TX 75140 615094134 RYDER TRANSPORTATION SERVICES 1481 O'TOOLE AVENUE SAN JOSE CA 95131 617143713 MONARCH INSTRUMENT 15 COLUMBIA DRIVE AMHERST NH 03031-1334 616094959 MASON WEST INCORPORATED 1840 GRETTO LANE ANAHEIM CA 91806 517160003 ADVANCED SYSTEM SOLUTIONS 3115 PERIVALE CT SAN JOSE CA 95148 831 Ev ent Connections 3657 El Grande Driv e San Jose CA 95131 110 MURAD SALES INCORPORATED 4600 GREENVILLE AVE SUI DALLAS TX 75106 MATCH 731143218 G Consulting 5506 CHIMNEY RCK DR IRVING TX 76017 MATCH 009511 5506 Chimney Rock Driv e IRVING TX 76017 111 JUNIOR NATIONAL WHEELCHAIR CHAMPIONSHIPS 5730 CHAMBERLIN DRIVE SAN JOSE CA 95118 0000000510 HANSON PUBLICATIONS 64 CLIFTON AVENUE PO B AN SONIA CT 06401-0514 MATCH 008701 6610 Manzanita Dr. San Marcos TX 78027 MATCH A28135104 JS GRAPHICS 6610 MANZANITA DRIVE SAN MARCOS TX 78027 0000000701 INTERNET ASSOCIATION GROUP, INC. 6610 SOUTHPOINT DRIVE S SUITE 600 JACKSONVILLE FL 31116 MATCH 007901 6701 row Way Laconia CA 05842 MATCH 624135327 DYGNETS 6701 ROW WAY LACONIA NH 05842 811 BLACKSTONE - NEY 9 N. MAIN ST JAMESTOWN NY 14701 817111810 CAE ULTRACSONICS 9 NORTH MAIN STREET JAMESTOWN NY 14701-0110 101090844 LAB SAFETY SUPPLY INCORPORATED DEPT #0000185191 PO BOX 5004 JANESVILLE WI 53547-5004 909111811 SPECIALIZED PRODUCTS COMPANY PO BOX 890006 DALLAS TX 75389-0006 101090036 LAIRD PLASTICS PO BOX 951111 DALLAS TX 75395 516165940 RW/STEARNS RIVER PARK TOWER 333 W. SAN CARLOS S SAN JOSE CA 95110-1711 515091707 IEEE VLSI TEST SYMPOSIUM VLSI Test Sy mposium 1001 Attn: Maddie Harw ood Amissv ille VA 10106 Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245 San Juan Capistrano, CA 92675
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