Vendor Red Flags: Detect Fraud with These 12 Signs

Vendor Red Flags
Presented by:
Greg Taylor, CFE
Vice President/CTO
Corporate Audit Partners

Introduction
Vendor Red Flags
Incomplete W9 Duplicate Payments
Incomplete Address Round Dollar Invoices
Vendor/Employee Match Invoices Near Approval Levels
Check Requests Cancelled or Return Checks
Benford’s Law Rapid Dollar Increase
Sequential Invoice Numbering High Volume of Activity
Vendor/Employee Relationships Vendor Bidding Process
Abbreviated Vendor Names
Corporate Audit Partners - 30900 Rancho Viejo Road - Suite 245
San Juan Capistrano, CA 92675

Red Flags
 Red Flags are identified as a set of circumstances that vary from
normal practices.
 Red Flags do not dictate guilt or innocence but are a warning to look
closer.
 Do not ignore Red Flags. Studies of fraud cases usually show that
Red Flags were present but ignored.
 Sometimes an error is just that; an error.

Vendor Red Flags
Incomplete W9
Finding
 Incomplete W9
Concern
 Pertinent information is not filled out on the W9
 The lack of complete information on the W9 inhibits follow up of
the vendor review process
 Deliberate manipulation of W9 or Vendor Form
 Tax ID numbers are the same as another vendor
Process
 Verify that all vendors have completed W9’s and Vendor forms
have been reviewed and verified.

Vendor Red Flags
Incomplete Address
Finding
 Incomplete vendor address or PO Box or mail drop only address
Concern
 Incomplete vendor addresses missing street, city, state or zip
 Foreign addresses won’t fit the accounting system form
 Difficult to mail checks to vendors with missing addresses
Process
 Run vendor master missing address report
 Key on missing street, city, state or zip
 Run vendor address with PO Box only report
 Run vendor address to mail drop matching report

Vendor Red Flags
Incomplete Address Report
VM Report VI
Sample Company A
VENDORS WITH MISSING ADDRESS FIELDS
VENDOR
NUMBER
VENDOR NAME
VENDO
R TYPE
ADDR 1 ADDR 2 CITY
STAT
E
COUNT
RY
POSTAL
CODE
0000017171 1st. Fighter Wing CCMSgt Fund 1 Langley AFB Langley VA USA
0000006918 7th AF/CCC Fund 1 Unit 2047 Apo Ap KOR 96278-2047
0000019407 89th SPTG Combat 1 Andrews Air Force Base Clinton MD USA
0000048888 A7SOFT.COM 1 81375, An Der Rehwiese, 10 Munich Germany DEU
0000003059 Adam Lowenstein 1 New Hyde Park Memorial High School New Hyde Park NY USA
0000015466 AIG Europe 1
Oberlindau 76-78 Attn: H.
Jahnert Postafach 3866; D-6000 60323 Frankfurt, Germany DEU
0000030240 Aiken Office Solutions 2 3838 South Florida Avenue Lakeland FL USA
0000006757 Alea Group Inc 1 60 Granton Drive #122 L4B2N6 Richmond Hill, Ontario ON CAN
0000036010
All Palm Beach Safe & Safe &
Lock, Inc. 1 8575 Hall Blvd. Loxahatchee FL USA
0000029272
Alpine Glass Inc. & Charles J.
Lloyd, 1
4200 IDS Center 80 South
Street Minneapolis MN USA
0000031456 B.K.V. Enterprises Ltd. 1 Box 850 613 Hywy 16 & Govern Burns Lake AB CAN
0000022752 Balboa Municipal Golf Course 1 san Diego CA USA
0000007330 BJ's Wholesale Club 2 3985 Plank Rd. Fredericksburg VA USA
0000006252 Blair Lee & American University 1 Washington DC USA

Vendor Red Flags
Vendor/Employee Match
Finding
 Vendor and employee located at the same address
Concern
 Employee and vendor are the same
 Collusion between employee and the vendor
 Employee approving vendor invoices
Process
 Run vendor/employee match report
 Key on stripped address
 Verify reasons for vendor at employee address
 Sometimes the reason is the employee was once a vendor

Vendor Red Flags
Vendor/Employee Match Report
Address
Match
Employee
ID
Vendor
Number Vendor Name Address 1 Address 2 City State Postal Code
614153317 DOUBLETREE HOTEL SAN JOSE 1050 GATEWAY PLACE SAN JOSE CA 95110
0000000845 Plotter Pros 1086 The Alameda Suite 100 San Jose CA 95116
C11145617 RECOMMENDED RESOURCES 11 AMHERST ROAD AMHERST MA 1001
C11145617 RECOMMENDED RESOURCES (INACTIVE) 11 AMHERST ROAD AMHERST MA 1001
MATCH 009985 1336 Hill San Marcos TX 78022
MATCH 917150807 S M DESIGNES 1336 HILL St SAN MARCOS TX 78022
711131708 RT CONSTRUCTION 13455 NOEL RD SUITE 430 DALLAS TX 75140
615094134 RYDER TRANSPORTATION SERVICES 1481 O'TOOLE AVENUE SAN JOSE CA 95131
617143713 MONARCH INSTRUMENT 15 COLUMBIA DRIVE AMHERST NH 03031-1334
616094959 MASON WEST INCORPORATED 1840 GRETTO LANE ANAHEIM CA 91806
517160003 ADVANCED SYSTEM SOLUTIONS 3115 PERIVALE CT SAN JOSE CA 95148
831 Ev ent Connections 3657 El Grande Driv e San Jose CA 95131
110 MURAD SALES INCORPORATED 4600 GREENVILLE AVE SU DALLAS TX 75106
MATCH 731143218 G Consulting 5506 CHIMNEY RCK DR IRVING TX 76017
MATCH 009511 5506 Chimney Rock Driv e IRVING TX 76017
111 JUNIOR NATIONAL WHEELCHAIR CHAMPIONSHIPS 5730 CHAMBERLIN DRIVE SAN JOSE CA 95118
0000000510 HANSON PUBLICATIONS 64 CLIFTON AVENUE PO B AN SONIA CT 06401-0514
MATCH 008701 6610 Manzanita Dr. San Marcos TX 78027
MATCH A28135104 JS GRAPHICS 6610 MANZANITA DRIVE SAN MARCOS TX 78027
0000000701 INTERNET ASSOCIATION GROUP, INC. 6610 SOUTHPOINT DRIVE SUITE 600 JACKSONVILLE FL 31116
MATCH 007901 6701 row Way Laconia CA 05842
MATCH 624135327 DYGNETS 6701 ROW WAY LACONIA NH 05842
811 BLACKSTONE - NEY 9 N. MAIN ST JAMESTOWN NY 14701
817111810 CAE ULTRACSONICS 9 NORTH MAIN STREET JAMESTOWN NY 14701-0110
101090844 LAB SAFETY SUPPLY INCORPORATED DEPT #0000185191 PO BOX 5004 JANESVILLE WI 53547-5004
909111811 SPECIALIZED PRODUCTS COMPANY PO BOX 890006 DALLAS TX 75389-0006
101090036 LAIRD PLASTICS PO BOX 951111 DALLAS TX 75395
516165940 RW/STEARNS RIVER PARK TOWER 333 W. SAN CARLOS SSAN JOSE CA 95110-1711
515091707 IEEE VLSI TEST SYMPOSIUM VLSI Test Sy mposium 1001 Attn: Maddie Harw ood Amissv ille VA 10106
Client: xyz Company - Report VI
Employee Address / Vendors Address Comparison

Vendor Red Flags
Check Request
Finding
 Vendor has numerous check request or special check handling
request
Concern
 Checks are hand delivered by an employee
 Outside of normal payment processes and procedures
 Lack of documentation such as invoice, bill of lading, etc
Process
 Review all check requests for special handling
 Understand the reasons behind the check request

Vendor Red Flags
Benford’s Law
Benford’s Law
 Invoice data has particular sequences which are always followed
 Anomalies show up when same numbers are used multiple times
 The number 1 should show up 30% of the time, the number 2
should show up 17% of the time. The number 9 should only
show up 4.5% of the time
Concern
 Fraudsters using the same number or similar numbers over and
over again
Process
 Run benford’s law on all invoice data to look for anomalies
 Research anomalies

Vendor Red Flags
Benford’s Law Graph
1 2 3 4 5 6 7 8 9
MFG 1 0.301980 0.173300 0.122330 0.091430 0.082010 0.066050 0.057500 0.054620 0.050770
MFG 2 0.310863 0.173561 0.131462 0.086964 0.080502 0.064560 0.055869 0.049351 0.046868
MFG 3 0.303399 0.171330 0.125069 0.098053 0.085215 0.065212 0.055819 0.050058 0.045845
Benford 0.301030 0.176091 0.124939 0.096910 0.079181 0.066947 0.057992 0.051153 0.045758
min 0.300000 0.166000 0.113000 0.087000 0.069000 0.057000 0.048000 0.041000 0.036000
max 0.320000 0.186000 0.133000 0.107000 0.089000 0.077000 0.068000 0.061000 0.056000
0.000000
0.050000
0.100000
0.150000
0.200000
0.250000
0.300000
MFG 1 MFG 2 MFG 3
Benford min max

Vendor Red Flags
Sequential Invoice Numbering
Finding
 Vendor invoices are sequential.
Concern
 Fraudster is using consecutive invoice numbering on fraudulent
invoices
 Fraudster may be making copies of the same invoice and
changing the invoice number
 May be a single source vendor
Process
 Create invoice number test by sequential invoice numbering

Vendor Red Flags
Sequential Invoice Numbering
ID
Invoice
Number
Invoice
Date Invoice Amount PO ID
Vendor
Number Vendor Name Address 1 Address 2 City State
Postal
Code
Check
Number
Check
Date
31104 126012607 12/06/03 $11,615.49 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/04
31105 126012608 12/07/03 $154.69 6602 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311532 01/17/04
31139 126015480 01/16/04 $5,233.59 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/04
31140 126015481 01/16/04 $769.65 420101954 CELESTIC SEASONING 2121 QUMEN DRIVE SAN MARCTX 72315 3311642 02/22/04
75541 507600 06/29/03 $2,861.43 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/03
75542 507601 06/29/03 $504.60 415082120 MORRIS, MORTON, HOWE 137 METEOR BLVD. SUITE 700 SAN JOSE CA 95110 3312624 08/08/03
82364 602104/0100 01/01/03 $3,384.17 L213709B 119163000 CORPORATE TRANSPORTATION INC FILE 66970 PO BOX 22100 SAN FRANCA 94144-4758 3305826 04/03/03
Client: xyz Company - Report XII
Vendors / Consecutive Invoice Numbering
Prepared by: Corporate Audit Partners

Vendor Red Flags
Vendor/Employee Relationships
Finding
 Unusual relationship seems to exist between employee and
vendor. Particularly upper level management or purchasing
Concern
 Employee is colluding with vendor for preferential treatment,
kickbacks, bid rigging, etc.
Process
 Observe vendor employee relationships
 Create “conflict of interest” agreements for employees
 Verify that there is a clear understanding of employee vendor
relationships
 Review suspect vendors for bid rigging etc.
 Cross training

Vendor Red Flags
Abbreviated Vendor Names
Finding
 Vendor name is an abbreviation
Concern
 False vendors may be set up as abbreviations of employee
names or other names
 ie. ABC Inc., D&G corp.
 Abbreviation may be similar to actual vendor (ABC Inc. vs. AB&C
Inc)
Process
 Internal audit should review new vendors on a regular basis and
pay particular attention to vendors with abbreviated names
 Create new vendor spend report and review abbreviated names

Vendor Red Flags
Duplicate Payments
Finding
 Duplicate payments are being made to vendors
Concern
 Employ is asking for refund on forced duplicate payment
 Employee is colluding with vendor and receiving kickbacks
Process
 Create duplicate payment reports
 Remember an error may just be an error
 Verify that money was returned to company
 Use a variety of duplicate payment reports

Vendor Red Flags
Duplicate Payments
Business
Unit
Vendor Invoice
Amount
Invoice
Number
Invoice Date
Different Same Same Same Same
Same Different Same Same Same
Same Same Different Same Same
Same Same Same Different Same
Same Same Same Same Different
These are some of the duplicate reports that have been successful for
There are a number of variations on the reports such as “Soundex” and
“fuzzy matches” or “less than number of days”

Vendor Red Flags
Round Dollar Invoices
Finding
 Vendor has many round dollar invoices
Concern
 Fraudsters are creatures of habit and use even numbers and
round dollar numbering on invoices
Process
 Create round number invoice report
 Use “MOD” function
 Review vendors with the highest percentage of round numbers

Vendor Red Flags
Round Dollar Invoices MOD Function
MOD
Function

Vendor Red Flags
Invoices Near Approval Levels
Finding
 Vendor has many invoices just under approval levels
Concern
 Fraudsters are making fictitious invoices just under approval
levels to circumvent the approval process
 Invoice splitting to circumvent approval process
Process
 Create approval amount report
 Create invoice splitting report
 Review vendors with the highest percentage of invoices close to
approval levels

Vendor Red Flags
Invoices Near Approval Levels

Vendor Red Flags
Invoice Splits Query
In (SELECT [VendorName]
FROM [dbo_Invoice] As Tmp
GROUP BY [VendorName],[InvoiceDate]
HAVING Count(*)>1 And [InvoiceDate] = [dbo_Invoice].[InvoiceDate])
 This is the Microsoft Access Query for invoice splits
 Where the vendor name is the same and the invoice date is the
same

Vendor Red Flags
Invoice Splits Query

Vendor Red Flags
Cancelled or Returned Check
Finding
 Vendor has a large number of cancelled or returned checks
Concern
 Fraudsters may create a return check situation and then modify
the already signed check.
 There may be an issue with the vendor
Process
 Create a vendors with the highest amount of returned checks per
spend report
 Use criteria to exclude most normal cancellations

Vendor Red Flags
Rapid Dollar Increase/High Volume
Finding
 Vendor has very rapid dollar increases in spend over time period
Concern
 Fraudsters may be colluding with vendor to create fictitious
invoices
 Vendor is circumventing the approval process
Process
 Create vendor histogram or vendor scattergraph report
 Search by vendors with more than 10 transactions and greater
than $10,000 per year spend
 Use 300% and greater increase in spend to further isolate
suspect vendors

Vendor Red Flags
Histogram
 The histogram is a per vendor comparison on dollar volume and
number of transactions over a given period (normally one year)
Vendor
Number Vendor Name
Invoices
2006
Invoices
2005
Transa
ctions
2006
Transa
ctions
2005 Inv Amt Diff
Inv
Cou
nt
Diff
Percent
Change
Dollars
Percent
Change
Transact
ions
Quadr
ant
0000036202 101 Communications $8,962.00 $30,681.25 2 6 ($21,719.25) (4) -70.79% -66.67%
0000038093 22nd District Agricultural Association $11,000.00 $11,000.00 1 1 $0.00 0 0.00% 0.00%
0000033059 24 Outdoor Com $13,990.00 $14,660.00 11 13 ($670.00) (2) -4.57% -15.38%
0000000375 360 Youth $275,593.74 $446,557.65 24 69 ($170,963.91) (45) -38.28% -65.22%
0000000375 360 Youth, LLC $275,593.74 $300,020.41 24 7 ($24,426.67) 17 -8.14% 242.86%
0000030601 4000 Sherwood Office Associates, L.P. $34,767.88 $57,410.06 10 16 ($22,642.18) (6) -39.44% -37.50%
0000008190 4103 Chain Bridge Road $104,564.62 $83,012.40 16 13 $21,552.22 3 25.96% 23.08%
0000040622 4th Services Squadron $2,000.00 $2,000.00 1 1 $0.00 0 0.00% 0.00%
0000040093 500 Clearlake Plaza $61,955.42 $33,507.84 16 10 $28,447.58 6 84.90% 60.00%
Amount and Count
are the same

Vendor Red Flags
Scattergraph
 The scattergraph is a graphical analysis of changes in vendor
spend and transactions between two periods of equal length
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
($25,000,000.00)($15,000,000.00) ($5,000,000.00) $5,000,000.00 $15,000,000.00 $25,000,000.00
I
3
3
1
1
244
2
1
1
1 High dollar change and low count
2 Dollar to count changes that DON'T contradict one another
3 Dollar to count change that contradict one another
4 Inefficiency that may be developing
4 4

Vendor Red Flags
Procurement Fraud
Finding
 Vendors and/or employees are colluding to commit fraud
Concern
 Procurement fraud is one of the hardest to detect.
 In many ways it is committed before accounting books cost
 Payments or other compensation is made off books
 Company may be overpaying for goods or services
Types of Procurement Fraud
 Bribes and kickbacks
 Bid rigging among vendors
 Collusion between vendor and employee
 False Claims

Vendor Red Flags
Procurement Fraud (cont.)
Types of Procurement Fraud
 False Claims
 Performance schemes (material substitution)
Process
 Set up “tip line”
 Compare vendor bidding
 Review vendor bid winning percentage (are they a sole source
vendor)
 Do procurement employees have unusual relationships with
vendors or potential vendors
 Review change orders
 Review final costs (were they over budget)

Vendor Red Flags
Data Extraction
How do I get the data out so I can analyze it?
Accounting Systems
 Most common accounting systems QuickBooks, Great Plains,
Oracle, SAP, etc have programs to extract data sets as text files
 “Business Objects” and “Qubed” are some third party software
used for extraction.
 IT staff can typically extract data into text form
 DO NOT USE .cvs file or comma delimited options when
extracting
 CAP uses proprietary table identifiers. Clients export tables as
text files.

Vendor Red Flags
Data Extraction
What does Extracted data look like?

Vendor Red Flags
Data Extraction
Imported to Excel – Text Import Wizard

Vendor Red Flags
Data Extraction
Imported to Excel – Finished

Case Study
 Case Study 1
 Jewelry Company
 $1.5 Billion in Annual Sales
 Anderson, SC
 Vendor Red Flag
•Number Duplication Report.
•High Dollar Volume.
•Sequential Invoicing.
•Invoices per Month.
•Google Earth.
•Phone number and Contact.
•Common industry practices.
•Demographics.

Number Duplication Report
Duplicated Number Count of Duplicated Number Vendor Nmber Vendor Name
Total of Duplicated
Number
$20.00 94 11853 SOUTH CAROLINA DEPT OF REVENUE $1,880.00
$20.00 80 360445 SC CHILD SUPPORT CENTRALIZED COLLECTIO $1,600.00
$20.00 22 33223 STATE OF CALIFORNIA FRANCHISE $440.00
$20.00 21 359586 UNITED STATES TREASURY $420.00
$20.00 8 368331 ARCTIC FALLS $160.00
$20.00 7 35953 FEDERAL EXPRESS $140.00
$20.00 6 80982 OXFORD $120.00
$23.08 154 365055 COUNTY CLERK OF SUPERIOR COURT $3,554.32
$23.08 39 61424 CHAPTER 13 OFFICE $900.12
$24.00 156 365325 CONNECTICUT CC $3,744.00
$24.00 19 366393 SHOREWOOD $456.00
$24.00 16 368974 COFFEE SERVICE INC $384.00
$25.00 181 359586 UNITED STATES TREASURY $4,525.00
$25.00 57 243643972 JP WELDING SERVICE $1,425.00
$25.00 30 2717 GE CAPITAL $750.00
$25.00 25 13203 NEW JERSEY MOTOR VEHICLE COMISSION $625.00
$25.00 19 63277 CHAPTER 13 TRUSTEE $475.00
$25.00 7 371257 GE FLEET SERVICES $175.00
$25.00 7 13828 WORM KIE GALE & JAC $175.00
$25.00 6 368974 COFFEE SERVICE INC $150.00
$25.00 5 5809 ANALYTICAL LAB INC $125.00
$30.00 5 366958 BDP INC $150.00
$30.00 5 359968 IMPACT INC $150.00
$35.00 5 360955 WOOD BP $175.00
$40.00 137 362975 ADMINISTRATOR $5,480.00
$40.00 16 359402 CINTAS $640.00
$40.00 9 360955 WOOD BP $360.00
$40.00 7 44746 ROADRUNNER $280.00
$45.00 14 39547 BUSINESS WIRE $630.00
$45.00 8 360955 WOOD BP $360.00
$45.00 7 365555 DJ ASSOC $315.00

Number Duplication (cont.)
Client - Number Duplication - Report X
Years 2005 - 2007
Top 20 Duplicated Numbers by Vendor
Duplicated Number
Count of Duplicated
Number Vendor Nmber Vendor Name
Total of
Duplicated
Number
11_RPT_X_NUMBER_DUP_2.xls

High Dollar Volume
 Why is High Dollar Volume Important?
 JP Welding Stats
 $709,190.86 over three years
 1,443 invoices submitted over three years
 $491.47 average invoice amount
What can we learn from these statistics?

Sequential Number Invoices Association of Certified Fraud Examiners
2004 Report to the Nation on Occupational Fraud and Abuse
348587 ANDERSON, SC JP WELDING SERVICE 5694 04/04/05 06/01/05 $200.00 $0.00 4085.07 86022-41--MOVE ITEMS FOR TERESA WIGGINS CHECK 225113 06/02/05 $4,085.07
348587 ANDERSON, SC JP WELDING SERVICE 5695 04/04/05 05/02/05 $315.00 $0.00 7991 86022-41--MOVE SINK--S REECE CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5696 04/04/05 05/02/05 $160.00 $0.00 7991 86022-41--CRATE PALLET --SHAWN NUTTER CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5697 04/04/05 05/02/05 $1,265.00 $0.00 7991 86022-41--WORK ON ELEVATOR CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5698 04/04/05 05/02/05 $25.00 $0.00 7991 86022-41--HANG POUCHES--ART WRIGHT CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5699 04/04/05 05/02/05 $25.00 $0.00 7991 86022-41--WORK IN WAREHOUSE--BILLY WIGGINS CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5702 04/04/05 05/02/05 $75.00 $0.00 7991 86022-41--MOVE MOTORS--S REECE CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5703 04/04/05 05/02/05 $175.00 $0.00 7991 86022-41--MOVE LOCKERS--DAMION MITSOCK CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5704 04/04/05 05/02/05 $50.00 $0.00 7991 86022-41--MOUNT SIGNS--S REECE CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5705 04/04/05 05/04/05 $506.00 $0.00 7991 86022-41--INSTALL TOOL BOARDS--WILLIAM MURPHY CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5706 04/25/05 05/04/05 $1,250.00 $0.00 7991 86022-41--ADDITIONAL TOOL BOARDS--WILLIAM MURPHY CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5707 04/11/05 05/04/05 $100.00 $0.00 7991 86022-41--COLOUM HIT BY FORKLIFT--HARVEY HENDRICKSON CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5708 04/11/05 05/06/05 $841.19 $0.00 5491.69 86022-41--MOVE STRETCH WRAPPER--JERRY JACKSON CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5709 04/11/05 05/06/05 $500.00 $0.00 5491.69 86022-41--MOVE PIPING--JERRY JACKSON CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5710 04/11/05 05/05/05 $337.50 $0.00 5491.69 86022-41--SANTIZING ROOM STEWART REECE CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5711 04/11/05 05/04/05 $260.00 $0.00 7991 86022-41--KART --CLARENCE ROYSTER CHECK 221910 05/05/05 $7,991.00
348587 ANDERSON, SC JP WELDING SERVICE 5713 04/11/05 05/05/05 $538.00 $0.00 5491.69 86022-41--RUN WATER PIPE--DAMION MITSOCK CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5714 04/18/05 05/06/05 $207.50 $0.00 5491.69 86022-41--LINE 3515 ALEX HENZEL CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5715 04/18/05 05/06/05 $225.00 $0.00 5491.69 86022-41--DOOR JAMB--JIM RUSH CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5716 04/18/05 05/06/05 $100.00 $0.00 5491.69 86022-41--WELD SAFETY BAR--MIKE SPARKS CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5717 04/18/05 05/06/05 $150.00 $0.00 5491.69 86022-41--POWDER ROOM CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5718 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--PATCH HOLES--DENNIS CLAYBOURN CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5719 04/18/05 05/06/05 $375.00 $0.00 5491.69 86022-41--POWDER ROOM CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5720 04/18/05 05/06/05 $37.50 $0.00 5491.69 86022-41--FILL CRACK HOLE--DENNIS CLAYBOURN CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5721 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--PAINT COLUMN--JOHN COGHILL CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5722 04/18/05 05/06/05 $250.00 $0.00 5491.69 86022-41--MAIN CONFERENCE ROOM--SANDY HICKS CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5723 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--CONFERENCE ROOM--ROSE BOYD CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5724 04/18/05 05/06/05 $200.00 $0.00 5491.69 86022-41--WELD REPAIR BEAUTY CARE ASILE--HARVEY HENDRICKSON CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5725 04/18/05 05/25/05 $100.00 $0.00 2840 86022-41--CLEAN UP A FRAME--JERRY JACKSON CHECK 224302 05/26/05 $2,840.00
348587 ANDERSON, SC JP WELDING SERVICE 5726 04/18/05 05/10/05 $125.00 $0.00 5491.69 86022-41--R-16 DOOR--CLARENCE ROYSTER CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5727 04/18/05 05/06/05 $100.00 $0.00 5491.69 86022-41--WELD SINK LEGS--STEWART REECE CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5728 04/18/05 05/06/05 $250.00 $0.00 5491.69 86022-41---ASSEMBLE FILE HANGERS--JANET POWELL CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5729 04/18/05 05/06/05 $50.00 $0.00 5491.69 86022-41--BALLARD--DENNIS CLAYBOURNE CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5730 04/18/05 05/06/05 $25.00 $0.00 5491.69 86022-41--ANCHOR BALLARD BACK--BRENDA KOSHADA CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5731 04/18/05 05/06/05 $25.00 $0.00 5491.69 86022-41--BALLARD--JIM BRAZIL CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5732 04/18/05 05/06/05 $37.50 $0.00 5491.69 86022-41--ANCHOR BALLARD--HARVEY HENDERICKSON CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5733 04/18/05 05/06/05 $487.50 $0.00 5491.69 86022-41--CLEAN TRASH ITEMS--STEWART REECE CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5734 04/18/05 05/06/05 $160.00 $0.00 5491.69 86022-41--1425 AREA--ANDY CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5735 04/18/05 05/06/05 $320.00 $0.00 5491.69 86022-41--CONSTRUCT BALLARDS--MILES GOTO CHECK 222678 05/12/05 $5,491.69
348587 ANDERSON, SC JP WELDING SERVICE 5737 04/25/05 05/20/05 $865.00 $0.00 2840 86022-41--RUN WATER LINE--S REECE CHECK 224302 05/26/05 $2,840.00

Invoices Per Month
 1,433 invoices submitted over three years
 How many working days or hours are they in a given year?
 One person working, two people working?

GoogleEarth
 Map Streetview or Satellite
JP
WELD

Phone Number and Contact Vendor
Search
 Sites
 www.hoovers.com
 www.manta.com
 http://www.archive.org/web/web.php Wayback Machine
 Review vendor name on Search Engines
 Review principles names on search engines
 Review vendor website on waybackmachine.
 Review IP address on whois.
http://whois.domaintools.com/ to look for owner of
account.

Common Industry Practices
 Does the vendor fit common industry practices?
 Did it seem normal to hire an outside welder to do
maintenance?
 What business is client in?
 Pros and Cons?
 Cost Savings?

Demographics

Conclusion
 Invest in a tip line.
 Simple tests to identify suspect vendors.
 Search vendor history
 Does it make sense?
 What is the make up of the community?
 Smell test.
 Finding vendor fraud is as much and art as a science.

Reference Material
Mark J. Nigrini Ph.D. / Saint Michael's College / http://www.nigrini.com/
Dept of Business and Acctg - Campus box 104
One Winooski Park / Colchester Vermont 05439
Tel: (802) 654-2894 (Saint Michael's office)
Association of Certified Fraud Examiners Inc. / www.CFEnet.com
The Gregor Building
716 West Avenue / Austin, TX 78701-2727
Tel: (800) 245-3321
Advanced Software Solutions
Phone: 949.488.7648 Ext 829
Email: gtaylor@corporateaudits.com
Web: www.corporateaudits.com
LinkedIn http://www.linkedin.com/in/gregtaylorcfe

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