Detecting fraud can be difficult, especially when trusted employees are suspected. Watching for fraud is made easier with the implementation of strict operational controls. Educating employees is also effective in reducing fraud. The purchasing department of any business is subject to fraudulent behavior.
Instructions
1. Watch for unusual behavior among your employees. Stress or illness can often precipitate criminal behavior. Detect fraud by watching for financial irregularities in your employees personal lives. Deep debt and expensive habits often are red flags when searching for fraud.
2. Watch for excessive turnover among vendors. Switching vendors more frequently then expected in your industry often provides a red flag that fraud may be occurring in the purchasing department. Ask your employees why vendors were replaced; if you suspect fraud contact the vendors personally and ask about their experience with your company.
3. Suspect fraud if purchase orders are consistently missing, altered or if copies are the only records available. Investigate if the cost of routine purchases rises beyond the cost of inflation or without an increase in business activity.
4. Investigate unusual purchases made by the purchasing department. Ask why, when and how the purchase was made and track where in the company the unusual purchase was delivered.
5. Check for fraud if purchasing contracts are awarded to select companies without competitive bidding by other vendors. Inquire why only select vendors are being utilized. Inquire past vendors why they feel they are no longer being utilized.
6. Detect the red flags of fraud by exploring irregular business behavior in your purchasing department. If serious issues of fraud arise, hire an auditor to review the purchasing department's records and business practices.
