Vendor fraud continues to be a major threat to organizations. In fact, vendor, supplier and procurement fraud is the second most prevalent fraud, according to the 2016-2017 Kroll Global Fraud Annual Report.
It goes on to point out that technology has added a new layer of complexity in combatting vendor fraud. Many times, the most damaging vendor fraud scheme involves a cyber component that exploits an organizationâ€™s vulnerabilities in its IT systems, making the schemes more difficult than ever to defend against.
The information from the Kroll report is included in an article in a recent issue of FVS Eye on Fraud, the AICPAâ€™s Forensic and Valuation Services quarterly report. The article points out that fraudsters have access to the same publications and guidelines that have helped organizations become more familiar with necessary internal controls. Further, the rise of cloud computing and digital data has presented these individuals with new opportunities to take advantage of weaknesses in an organizationâ€™s internal controls and IT systems.
Who is most at risk from vendor fraud? The article says small to mid-sized private entities generally face greater risk. This is because they are less likely to have robust internal controls or internal audit functions in place. Moreover, such organizations typically rely heavily on a few employees to handle the vendor and payment functions and lack careful segregation of duties.
More information, including guidelines for detecting and preventing vendor fraud, can be found here.
To learn how REDW can assist your organization with this or other fraud related issues, including boosting your business internal controls and IT systems, please contact Tim Tribe, Halie Garcia, or Marcus Clarke, respectively.