The accounts payable function is one of the most common areas for fraud, especially in smaller organizations, where the separation of duties and well-functioning controls is not always present. Usually the accounts payable function is under the domain of a single, capable and trusted employee but ironically, it is this person who may be the most subject to fraud.
A key component of AP is the vendor file, which is usually maintained by the same employee who also processes invoices and payments. This file needs to be reviewed by a supervisor or an employee working outside AP to assure that all the vendors are valid. A review of new vendors should be reviewed regularly, including examining supporting invoices entered into the system and resulting payments. Vendor addresses, emails and bank routing information for payment by check or electronic funds transfer should be externally verified. Another step is to check new vendor addresses against employee addresses in their HR records.
Other basic practices are cross-training another employee to handle AP functions on a rotating basis. It is also important to ensure that the main AP employee takes vacation regularly while the other employee assumes the duties, which is also a prime time to further review the vendor files.