Fraud occurs all too frequently, whether intentionally or not, but fortunately there are methods available to both identify and prevent it. Vendor fraud, specifically, can be managed through a robust review of your master vendor list.
Examination of current master vendor list
Identifying and mitigating vendor fraud starts with an examination of your master vendor list. This can be a manual or automated process and involves comparing your current vendor list to the previous year’s list. Understanding and comparing such data allows an organization to identify differences and discrepancies and opens the opportunity to detect suspicious activity and identify control vulnerabilities. Identification of any unusual activity should raise the questions:
- What vulnerabilities might exist during vendor set up?
- What controls are in place to address those vulnerabilities?
- What additional controls may be needed?
Ongoing monitoring of master vendor list
Addressing future issues, in addition to any current ones, may require ongoing monitoring. A company must decide:
- What criterion needs to be periodically reviewed?
- How frequently should the master vendor list examinations take place?
- Who will be responsible for conducting those examinations?
Each examination can help uncover potential instances of fraud and highlight mitigation opportunities to strengthen controls. Not only that, but applying routine data-mining techniques can help an entity gain further organizational insight, which can then be used to improve an organization’s current and future operations.
Learn more about the tools and tactics of reviewing your master vendor list in the AICPA Corporate Finance Insider article Review your master vendor list to fight fraud, by Marlon Williams, Weaver IT advisory services partner, data analytics.