GAP DETECTION OF CHECK NUMBER SEQUENCES

The check-numbering system is alphanumeric rather than the standard numeric-sequencing convention. When we do a gap detection to see if there are any checks missing, the IDEA software recognizes the contents of the selected CHEQUE field and automatically sets a mask before performing the gap detection process, as shown in Figure 8.33.

Preparing for Gap Detection of Check Numbers

FIGURE 8.33 Preparing for Gap Detection of Check Numbers

The result shows that there is one missing check from the sequence in Figure 8.34. Check A52656 should be located to see if it was marked as void. Failing that, bank reconciliations or bank statements should be reviewed to ensure they were not used for a payment that was not recorded in the "Payments" database.

Results of Gap Detection of Check Numbers

FIGURE 8.34 Results of Gap Detection of Check Numbers

If there is a code to distinguish manual checks from automated checks, the manual check payments should be extracted and reviewed. Manual checks are not the norm and manual checks provide more opportunities for errors or fraud. Sometimes, deliberate errors are made, forcing the payment out of the automated system so that the fraudster can take control over that particular payment.

CONCLUSION

Billing schemes are costly. Once the fraudster implements the scheme, it is repetitive and appears in the organization's business systems as a normal business expense. A legitimate payment is made to settle for the services or goods that the organization believes it received. The payment could be paid to a fictitious company that did not provide value for the payment. The payments could be paid to a legitimate company but diverted to the fraudster. Just because a check is written for a vendor and signed, it does not mean it reached the proper vendor.

Due to the large outflow of funds through the accounts payable department, auditors tend to include verifying payments as part of their audit plan. Also included would be a review and testing of the internal controls for payments. Data analytics will help in both the verification and control testing. Anomalies found may expose fraud or weaknesses in the system.

NOTE

1. "State of Oklahoma Vendor Payments Fiscal Year 2013," accessed February 19, 2014, https://data.ok.gov/Finance-and-Administration/State-of-Oklahoma-Vendor-Payments-Fiscal-Year-2013/aykr-xnjm.

 
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