A 2014 study reported that on average, 5% of a company’s revenue is lost to fraud each year, globally. This can prove to be very costly for your company! Here are a few things to be cautious of to detect fraudulent accounting practices.

Rounded-Amount Invoices

Invoices without cents, i.e. rounded-amount invoices are definitely a cause of concern. If you notice that a particular vendor has a high percentage of such invoices, it is best to further investigate this. A high frequency of rounded-amount invoices is an indication of suspicious activity and needs to be examined up close.

Invoices Just Below Approval Amounts  

Another form of suspicious invoices is one which falls just short of the approval amount. Different levels of management exist in a company, and within that hierarchy, each supervisor has a certain approval limit. For instance, a department head may only be allowed to endorse invoices that are up to $5,000 and any further amount would need to be approved by someone at an upper management level.

Now if an employee is aware of the dollar threshold of each level and tries to pass of invoices at $4,995—just a few dollars short of the approval amount—then they’re probably up to no good. It is likely that they created such an invoice to ensure it does not reach the upper management. It is also quite likely that they have someone within the lower management aiding them in this activity.

Look closely at invoices that show an amount 3% less than the set amount for approval. If these appear to be drafted at a continuously and frequently by a certain department, then there is a potential for fraudulent activities. In any case, have such invoices flagged and investigate further if there is any suspicious activity you notice.

Missing Documents

Did some of the crucial documents suddenly go missing right when you needed to view them? Disappearance of files and paperwork is a pretty big red flag and reason enough to suspect fraud. Although accidents happen and sometimes documents get misplaced, what you need to look out for is what explanations were provided for their absence, and what steps were taken to recover those documents.

If you notice an unusually long delay in locating the missing files or any hesitance to recover them, it can be a cause of auditing concern.

Have our professional bookkeeping services handle all of your auditing, and avoid the occurrence of any fraud or theft!

Get in touch with our team in Boca Raton, Florida to learn more about our accounting services. We also specialize in managing financial statements, payroll services, tax services, and issuing verified invoices to customers.