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Case Studies

Case Studies
Case Study 1
Duplicate payments.

Background:
Using data-mining software, we found duplicate payments in two vendor accounts which identified duplicate billings by related vendor companies.

Overall Findings:
We found instances where two related moving companies were billing for the same services. Further review uncovered major control issues processing transportation invoices. Billing problems were attributed to:

  • Lack of procedures for the processing of relocation invoices
  • Approvals by untrained staff affected by department turnover
  • Inadequate controls in the processing of shipment invoices
Long-term benefits of service to client:
  • Offered suggestions to improve processing in shipment activity
  • Gave the approving department reference information to prevent further entries
Tips to Prevent Similar Mistakes:
  • Document the specific procedures to follow when processing special purchase invoices.
  • Ensure adequate training of staff, especially in circumstances of employee turnover.
  • Maintain an adequate system of internal control procedures to prevent duplicate transactions.
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Case Study 2
Fictitious billings.

Background:
Our data mining software found unusual payments to a vendor. We determined that the services were never rendered, but we could not locate the company because it "has been dissolved." Using forensic accounting techniques, we discovered that the signing authority on the bank account where the checks were deposited was the same person who had been hired as a contract employee.

Overall Findings:
We found several payments that were made to a fictitious vendor. The amounts were paid to a contract employee who was given approval authority, which enabled her to submit false invoices.

Long-term benefits of service to client:

  • The payment irregularities were a dramatic wake-up call to the client's accounting management that there were significant control weaknesses managing national offices
  • Client was able to negotiate a large settlement at low cost
  • We outlined a system of approval authority which strengthened the company's internal control system
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Case Study 3
Sales taxes overstated on use tax returns

Background:
We found that invoice amounts for exempt manufacturing expenses and equipment were included in tax returns. The system to prepare use tax returns depended on hastily-trained buyers who would include purchases without fully understanding the tax status.

Overall Findings:

  • Noticed invoices marked for tax liability
  • Determined purchases were for tax-exempt activity
Tips to Prevent Similar Mistakes:
  • Ensure that only qualified individuals are allowed to prepare requests for payment.
  • Provide periodic training to persons who require knowledge of tax laws.
  • Prepare lists of activities and procedures for departments that are linked to accounts payable.
Long-term benefits of service to client:
  • Re-filed all use tax returns for a three-year period
  • Created improvement plan to ensure only taxable purchases were included in use tax returns
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Other War Stories
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Overpaid Rent. A landlord offered 11 months rent free when the company signed a lease for office space in New York City. They started rent billings in the tenth month. The recovery was $ 11,667.

Postage Escrow. The former mailing house of a client held an escrow balance of $ 2,538 in an old postage account. They refunded the balance, after an inquiry.

Old Credit Balance. A client placed deposits on furniture orders. The deposits were never deducted from the invoicing. When the supplier was subsequently acquired, a new account number was given, but the credits were never transferred to the new account. Our inquiry revealed credits of $70,596 in the old account.

Returned Merchandise. A client purchased computer equipment from a supplier. One year later, some of the equipment was returned under warranty. Three invoices were delivered with the replacement goods and they were paid. A call to the supplier revealed the returns had been recorded and a credit balance of $ 3,359 was refunded.

Pricing Discounts. A national telecommunications company offered discounts on long distance service in a contract signed several years prior. Even though the discounts were shown in the monthly reports, they never appeared in the main billing and consequently no discount benefit was realized. This was a six figure claim.

Security Deposits. A local rental agent provided a statement showing security and rent deposits held on properties which had been vacated for several years. They returned $ 10,379.

Balance Forwards. A limousine company submitted bi-weekly billings for services. The format of the invoices was ambiguous and the client paid the balance forward amounts. The supplier's accounts receivable clerk didn't know what to do with the extra money and posted it to unapplied cash. They gave back $ 4,068.

Duplicate Payments. The local agent of a national moving company accepted $ 67,163 in payments which should have been paid to the national office, and the agent never told them. Since the invoices were also paid to the national office, $ 67,163 was recovered.

Invoice not Ours. A supplier rendered an invoice and it was paid. The bill was intended for an unrelated company with a similar name at a similar address. The supplier credited $ 8,922 against other purchases.

Sales Taxes on a Maintenance Agreement. A software vendor billed for maintenance on a computer software installation, adding sales taxes. Taxes did not apply due to the nature of the maintenance agreement. They credited $ 15,333.

Deposit on Training Services. A client put a deposit of $ 45,000 on a ten session training program. After one session, they cancelled the program and hired another company, and forgot about the deposit. After deducting the cost of the first session, the training company refunded $ 34,704.

Overstated Lease Buyout. A lessor billed for the last monthıs rent and then for a buyout of leased equipment. Both bills were paid. Since the buyout presumed the last month's rent unpaid, it was overstated. They refunded $ 9,978.

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