How to Detect Fraud Quickly

Is your organization facing Frauds threats? Below are quick transactions tests that if executed with precision may unearth these frauds. If not, but continue doing them regularly, you may scare away fraudulent activity in your organization.

There are many frauds test that can be carried out but I will focus on the following 3 major ones that we can do to detect fraud namely:

  1. Purchase Frauds
  2. Payroll Frauds and
  3. Management override of controls review

Below is a description of each of them and how we may execute them.

1. Purchase Frauds

Purchase fraud is probably the most common type of fraud in an organization. It may be the simple submission of a dummy invoice, the re-use of another valid invoice, the withholding of a credit note, or a more complex arrangement. Many frauds involve the manipulation of the payments information on personal accounts within the Accounts Payable system.

 Testing for Purchase Fraud Procedures:  

There are 5 different tests that we can test for purchase frauds. The following are the files we need to perform these tests:

a. Supplier Master File: The supplier master file contains names and addresses and usually additional information such as contact telephone numbers, bank account details, and alternative addresses which we require in this type of test.

b. Employees  Personnel Records: This should show names and addresses and usually additional information such as contact telephone numbers, bank account details etc.


a.) Match supplier names against a list of employee names (primary key) from a payroll or personnel file.

b.) Examine purchase ledger transactions for entries at or just below the approval level of managers. If the computer system captures the approving authority for a transaction, examine the value distribution for each manager.

c.) Examine to see if amounts are being approved at or just below, break points in authority level by a value distribution across the whole ledger. If approval authority is not directly available, perform subsidiary analysis by types of supplier or approving department.

d.) Look for split invoices to enable approval to be kept by an individual. Extract all invoices within 90 percent of an approved limit (preferably for a suspected manager or department) and search for all invoices from that supplier. Index by approving manager, department and date to identify possible split invoices or summarize payments by invoice number to determine how many part-payments have been made for each invoice.

e.) Test for duplicate invoices using value and supplier code as the key fields for one test and purchase order number for another.

2. Payroll Frauds

Payroll frauds are one of the most common types of fraud committed. Often a fictitious or ”ghost” employee is set up on a salary system with payments following automatically. This is particularly true in the case of electronic payments into bank accounts where no checks need to be collected. Other common ways to defraud a payroll system are by not removing leavers (terminations), then channeling their pay into another bank account, or by submitting excessive overtime, expense, or allowance claims.

There are 3 different tests that we can test for payroll frauds. The following are the files we need to perform these tests:

a. Payroll transactions file: This should show  names and addresses and usually additional information such as contact telephone numbers, bank account details etc.

b. Employees  Personnel Records: This should show names, SSN etc


Test for duplicates

a.) Test for duplicate employees on the entire payroll file, using the employees’ Social Security Numbers as a unique employee identifier.

b.) Check for duplicate bank accounts. This test may report family accounts where more than one member of a family is employed by the organization. However, these can be eliminated from the list of duplicates leaving the fraudulent items.


a.) Match master information from the payroll file with the organization’s personnel file to determine whether there are ”ghost” employees on the payroll.

b.) Compare the payroll file at two dates, for example the beginning and the end of a month, to determine whether recorded starters and leavers (hires and terminations) are as expected and if any employees have received unusually large salary increases.


a.) Ensure each employee’s salary is between the minimum and maximum for his/her position or grade. Test also the reasonableness of allowances to position or grade.

b.) Investigate excessive overtime and allowance claims to ensure there has been no over-claim.

c.) Compare holidays and sick leave taken to the limits for a particular grade or position, and if there is a high rate of absenteeism for sickness this could be analyzed by department to identify problem areas.

d.) Evaluate the reasonableness of tax codes and compare changes in tax code over a period.

Below is an additional audit procedure that may be expanded:

3. Management Override of Controls Review

a.) Examine journal entries and other adjustments for evidence of possible material misstatements due to fraud. For example non standard or unusual entries.

b.) Evaluate the business purpose for significant unusual transactions. Such as very complex transactions or those where the accounting does not reflect the underlying substance of the transaction.

This entry was posted in Frauds and Illegal Acts. Bookmark the permalink.

31 Responses to How to Detect Fraud Quickly

  1. Mari Griffen says:

    Maybe you have ever wondered who posts a variety of this stuff that you simply locate? The world wide web never used to be like this, not long ago though it has changed. What’s your opinion?

  2. Appreciate it for helping out, superb information.

  3. My brother recommended I might like this blog. He was entirely right. This post truly made my day. You cann’t imagine just how much time I had spent for this information! Thanks!

  4. You have remarked very interesting points! ps nice website.

  5. Wow! This can be one particular of the most beneficial blogs We have ever arrive across on this subject. Basically Great. I am also an expert in this topic so I can understand your hard work.

  6. I like this post, enjoyed this one regards for posting. “It is well to give when asked but it is better to give unasked, through understanding.” by Kahlil Gibran.

  7. hi!,I really like your writing so much! proportion we communicate extra approximately your article on AOL? I need an expert on this space to unravel my problem. Maybe that’s you! Having a look forward to peer you.

  8. An awesome share, I just passed this onto a fellow worker who was doing a little research on that. And he in fact bought me lunch because I found it for him… smile. So let me reword that: Thankx for the treat! But yeah Thnkx for spending the time to discuss this, I feel strongly about it and love reading more on this topic. If possible, as you become expertise, would you mind updating your blog with more details? It is very helpful for me. Two thumb up for this blogpost!

  9. Thank you for helping out, great information. “Considering how dangerous everything is, nothing is really very frightening.” by Gertrude Stein.

  10. I’ve recently started a website, the information you provide on this website has helped me greatly. Thank you for all of your time & work.

  11. I simply couldn’t go away your website prior to suggesting that I actually loved the standard info a person provide to your guests? Is going to be back continuously to investigate cross-check new posts.

  12. You are not the average blog writer, man. You definitely have something important to add to the World Wide Web. Such a good blog. I will return for more.

  13. You have noted very interesting details ! ps decent site. “The length of a film should be directly related to the endurance of the human bladder.” by Alfred Hitchcock.

  14. That is the best blog for anybody who desires to seek out out about this topic. You understand a lot its virtually onerous to argue with you (not that I truly would need aHa). You definitely put a brand new spin on a subject thats been written about for years. Nice stuff, simply nice!

  15. Some genuinely superb articles on this website, thanks for contribution. “Once, power was considered a masculine attribute. In fact, power has no sex.” by Katharine Graham.

  16. Its superb as your other blog posts : D, thankyou for posting . “Experience is that marvelous thing that enables you to recognize a mistake when you make it again.” by Franklin P. Jones.

  17. I think this internet site has got very superb written content blog posts.

  18. I view something truly special in this internet site.

  19. I got what you intend, thanks for posting .Woh I am pleased to find this website through google. “Food is the most primitive form of comfort.” by Sheila Graham.

  20. You have mentioned very interesting points! ps nice site.

  21. I like what you guys are up also. Such intelligent work and reporting! Carry on the superb works guys I have incorporated you guys to my blogroll. I think it’ll improve the value of my web site :).

  22. Perfect Stuff, though I would be in possession to say that given the number of views this has had it should be worth thinking about trying to cultivate the spelling and the english! Produced a terribly good read though, terrific stuff.

  23. F*ckin’ tremendous things here. I’m very satisfied to see your article. Thank you so much and i’m looking forward to touch you. Will you kindly drop me a mail?

  24. You made some decent points there. I regarded on the internet for the problem and located most individuals will go along with with your website.

  25. I really like your writing style, fantastic info, thank you for posting :D. “Freedom is the emancipation from the arbitrary rule of other men.” by Mortimer Adler.

  26. I must admit that this is one great insight. It surely gives a company the opportunity to get in on the ground floor and really take part in creating something special and tailored to their needs.

  27. dating says:

    Hey, just looking around some blogs, seems a pretty nice platform you are using. I’m currently using WordPress for a few of my sites but looking to change one of them over to a platform similar to yours as a trial run. Anything in particular you would recommend about it?

  28. Dale B Blair says:

    I am often to blogging and i really appreciate your content. The article has really peaks my interest. I am going to bookmark your site and keep checking for new information.

  29. very nice submit, i certainly love this web site, carry on it

  30. Do you have a spam issue on this site; I also am a blogger, and I was wondering your situation; many of us have developed some nice practices and we are looking to swap methods with others, be sure to shoot me an e-mail if interested.

Leave a Reply

Your email address will not be published. Required fields are marked *