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suspects Joshua is a negligent supervisor or that he and periodic confirmations are possible, other
is inattentive and/or overly trusting of his employ- companies receive hundreds of invoices a week. If
ees. Some negligent supervisors are known to sign Marcella were to check on each one, she would slow
everything while never examining to see what they down her processing and that of the vendor com-
are approving. Other negligent supervisors may lack pany. Other controls can be implemented instead.
the technical knowledge that their employees have If Marcella waits until the invoices are past
and are unable to spot fraud when it happens. due to receive payment request notices to ensure
In general, Joshua can trust his employees, but their authenticity, she is putting the company in a
he must still verify that paperwork is accurate and disadvantaged position. Not only will the company
that the audit trail is clear. By simply paying every forgo any discount for paying on or before time,
request that is submitted right away, he can fall but its reputation would likely be tarnished by the
victim to employee and vendor fraud schemes. slow payment.
And while Joshua can check the vendor file
against the invoices he receives, doing so does not 5. (d) TJ charged for a consulting service. Most
immediately confirm that obligation belongs to the shell company schemes involve the purchase of
organization. Mickey can submit a credit card bill services rather than goods because services are
from the same company that the executives use for intangible and nothing is required to be delivered.
their expense credit cards, for example. Therefore, In contrast to physical goods, which can be
to truly protect against this type of invoice scheme, reconciled, it is harder for an organization to verify
Joshua must confirm that both the charges and the whether services were actually rendered. Thus, bill-
account belong to his company. ing for fictitious services increases the probability
of the invoice being overlooked and the payment
4. (a) Marcella checks whether the invoice number being issued. Of the options provided, this would
has been submitted from the vendor before. To most likely be the first red flag for auditors
prevent being victimized by a duplicate invoice because they will not yet know about TJ’s relation-
scheme, Marcella should look for duplicate invoice ships and connections. They should recognize the
numbers from each vendor to ensure an invoice, risk that not every invoice received is authentic
if resubmitted, is not a new charge. She should and that services provided should be verified.
also look for duplicate project information, such TJ’s other methods for obscuring his involve-
as dates, location, project numbers, and names. By ment with the fake invoice are not as noticeable
verifying all the information is unique, Marcella can at first inspection. However, fraudsters often do
confirm each invoice is genuine. use names, locations, and businesses connected
Looking at the invoice date will not help to family members or friends to hide their direct
Marcella with verifying her invoice, as the vendor connection to a scheme. With research and records,
could submit multiple invoices in one day for dif- one can uncover relationships between names and
ferent projects. While some vendors may prefer to people; consequently, if an invoice draws suspicion,
have one invoice for everything, others may bill by scrutinizing names is a good place to start.
location, project, or some other factor.
It is not appropriate or time-efficient for any SCORING KEY
party if Marcella calls the vendor for verification 0–2 correct: If you answered fewer than three
after receiving every invoice. While some com- questions correctly, you may want to increase your
panies might only receive a few invoices a month knowledge of invoice fraud and red flag indicators.
Keep learning about potential scams to ensure you
are able to protect yourself, your clients, and others
AICPA RESOURCES from the harms these schemes can cause.
3–4 correct: If you answered three or four ques-
Articles tions correctly, you’re on the right track. Continue
“What’s Your Fraud IQ?,” JofA, May 2022 to build your knowledge about how to look for
potential investment fraud and scams.
“What’s Your Fraud IQ?,” JofA, March 2022
5 correct: If you answered all five questions
“Fighting Fraud on a Limited Budget,” JofA, correctly, congratulations. Your thorough knowledge
March 2021
will go a long way in protecting your clients’ financial
assets from invoice scams. Keep up the good work. ■

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