Purchasing and Receiving Schemes Purchasing and receiving functions are used to facilitate theft of noncash assets False billings – Purchase merchandi
{"Image DocumentName": "Purchasing and Receiving Schemes", "Image ImageDescription": "Purchasing and receiving functions are used to facilitate theft of noncash assets. False billings. Purchase merchandise that company doesn\u2019t need. Noncash misappropriations. Intentionally purchased but misappropriated by the fraudster. Falsifying incoming shipments. Purchasing and Receiving Schemes. The purchasing and receiving functions of a company can also be manipulated by dishonest employees to facilitate the theft of noncash assets (see Exhibit 9-6). It might at first seem that any purchasing scheme should fall under the heading of false billings. There is, however, a distinction between the purchasing schemes that are classified as false billings and those that are classified as noncash misappropriations. If an employee causes his company to purchase merchandise that the company does not need, this is a false billing scheme. The harm to the company comes in paying for assets for which it has no use. For instance, a carpenter was allowed control over the ordering of materials for a small construction project. No one bothered to measure the amount of materials ordered against the size of the carpenter\u2019s project. The carpenter was therefore able to order excess, unneeded lumber, which was then delivered to his home in order to build a fence for his own residence. The essence of the fraud in this case was the purchase of unneeded materials. On the other hand, if the assets were intentionally purchased by the company but simply misappropriated by the fraudster, this is classified as a noncash scheme. In the preceding example, assume that the victim company wanted to keep a certain amount of lumber on hand for odd jobs. If the carpenter took this lumber home, the crime is a theft of lumber. The difference is that, in the second example, the company is deprived not only of the cash it paid for the lumber, but also of the lumber itself. It will now have to purchase more lumber to replace what it is missing. In the first example, the company\u2019s only loss was the cash it paid in the fraudulent purchase of the materials it did not need. Falsifying Incoming Shipments One of the most common ways for employees to abuse the purchasing and receiving functions is for a person charged with receiving goods on behalf of the victim company\u2014such as a warehouse supervisor or receiving clerk\u2014to falsify the records of incoming shipments. In one case, for instance, two employees conspired to misappropriate incoming merchandise by marking shipments as short. If 1,000 units of a particular item were received, for example, the fraudsters would indicate that only 900 were received. They were then able to steal the 100 units that were unaccounted for. The obvious problem with this kind of scheme is that if the receiving report does not match the vendor\u2019s invoice, there will be a problem with payment. In the above example, if the vendor bills for 1,000 units but the accounts payable voucher shows receipt of only 900 units of merchandise, then someone will have to explain where the extra 100 units went. Obviously, the vendor will indicate that a full shipment was made, so the victim company\u2019s attention will likely turn to whoever signed the receiving reports. In the preceding case, the fraudsters attempted to avoid this problem by altering only one copy of the receiving report. The copy that was sent to accounts payable indicated receipt of a full shipment so the vendor would be paid without any questions. The copy used for inventory records indicated a short shipment so that the assets on hand would equal the assets in the perpetual inventory. Instead of marking shipments short, the fraudster might reject portions of a shipment as not being up to quality specifications. The perpetrator then keeps the substandard merchandise rather than sending it back to the supplier. The result is the same as if the shipment had been marked short.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}