Strong internal controls are essential for any effective accounts payable function. Without them, fraud is easier to commit, duplicate payments increase, and cost-effectiveness is sacrificed. This course presents information you can use to identify control problems and implement strong controls. Industry expert Mary Schaeffer shows auditors, controllers, and managers where control issues are likely to occur, how to strengthen controls, and best practices for an effective accounts payable function.
Please note that the information covered in this course is also covered in Creating an Accounts Payable Policy and Procedures Manual, Vendor Issues in Accounts Payable, and Best Practices for Accounts Payable.
Upon successful completion of this course, participants will be able to:
- Identify problems likely to occur as a result of weak controls.
- Identify the regulatory consequences of poor or ineffective controls.
- Identify accounts payable practices that weaken controls.
- List problems likely to occur if strong controls are not used in accounts payable.
- Cite problems created when segregation of duties are not set up correctly.
- Identify issues that arise due to poor internal controls.
- Identify the relationship between fraud and poor internal controls.
- Identify weak control practices that enable duplicate payments.
- Identify places where internal controls commonly breakdown in accounts payable.
- Cite how an accounts payable policy and procedures manual strengthens controls.
- Identify places where purchase orders cause control problems.
- Identify how best invoice control practices improve the processing function.
- Cite how control issues can fail during the month-end and year-end close.
- Cite proper controls regarding the check production process.
- Identify controls related to check request forms.
- Identify controls that should be incorporated into every corporate procurement program.
- Cite best control practices related to electronic payments.
- Cite how controls around the master vendor file prevent fraud and help the bottom line.
- Identify how to control expense reimbursement fraud.
- Cite why it is important to have a policy regarding employees using personal devices for work.
- Identify how to check for bribery into the accounts payable department.
- Identify control problems created when employees share passwords.
- Cite the importance of eliminating petty cash boxes.
- Identify issues created by super users of ERP systems.
- Identify how a good policy and procedures manual can strengthen internal controls.
- Cite how updating the policy and procedures manual on a regular basis strengthens internal controls.
Table of Contents
Chapter 1 – Why Internal Controls Matter
Chapter 1 – Review Questions
Chapter 2 – The Basics of Internal Controls: The Theory
Segregation of Duties
What Gets Moved
Reasonable Hiring and Background Checks
Strong Controls throughout the Accounts Payable Process
Eliminate Really Bad Accounts Payable Practices
Related Internal Control Concepts
Chapter 2 – Review Questions
Chapter 3 – The Basics of Internal Controls: In Practice
Problems Created by Inappropriate Segregation of Duties
Segregation of Duties Problems
Dissecting the Procure-to-Pay Process
Common Control Conflicts
Practices that Make AP More Efficient and May Tighten Controls in the Process
Chapter 3 – Review Questions
Chapter 4 – Fraud Prevention Controls and Practices
Types of Fraud
ACFE’s Biannual Report
Who Commits Fraud
Dealing with Employee Fraud
The Ugly Issue: Employee Fraud Prevention
The Big Problem
Overriding Fraud Prevention/Detection Guidelines
If You Suspect Fraud
Small Dollar Invoice Fraud
Six Practices that Enable Internal Check Fraud
Demand Draft Fraud
Chapter 4 – Review Questions
Chapter 5 – Duplicate Payments and Their Relationship with Poor Internal Controls
Traditional Prevention: What Works and What Doesn’t
What Doesn’t Work
What Does Work
Check Request Practices to Avoid Duplicate Payments and Fraud
Where Check Requests Cause Problems
Best Check Request Practices
Reducing the Number of Check Request Forms
Common Scenarios That Cause Duplicate Pays & How to Stop Them
Scenario #1: Credit Card Payments and Invoices
Scenario #2: Extinguishing POs and Receivers
Scenario #3: Travel and Entertainment Reimbursement & Invoices
Scenario #4: Check Request Forms and Invoices
Scenario #5: Printing Electronic Invoices
Chapter 5 – Review Questions
Chapter 6 – Where Internal Controls Breakdown
The Internal Controls Breakdown: The Overlooked People Issues
Segregation of Duties
Internal Controls Breakdown: The Payment Process
Payments Made Outside Accounts Payable
Recurring and Repetitive Payments
When Internal Controls Breakdown: The AP Practice
Breakdown #1: Master Vendor File Access
Breakdown #2: Not Insisting on Rigid Coding Standards
Breakdown #3: Allowing Rush (ASAP) Checks
Breakdown #4: Returning Checks to Requisitioners
Breakdown #5: Having a Petty Cash Box
Five Reasons Internal Controls Can Fail and What You Can Do to Make Sure It Doesn’t Happen to You
Chapter 6 – Review Questions
Chapter 7 – Purchase Orders & Their Role in Internal Controls
Purchase Orders and Appropriate Internal Controls
Purchase Order Problems
Purchase Orders for Everything
Non Purchase Order Invoices
Purchase Orders for Everything
Controlling Maverick Spend
How Purchase Order Analytics Can Help
Maverick Spend by an Unlikely Source
Chapter 7 – Review Questions
Chapter 8 – Invoice Processing: The Core of the Accounts Payable Function
Practices That Ensure Tight Controls
Invoice Handling: Clear Instructions
Invoice Approval Process: Delegations
Getting the Approval
The Three-Way Match
Special Invoice Situations
Handling Small-Dollar Invoices
Dealing with Invoices without Invoice Numbers
Chapter 8 – Review Questions
Chapter 9 – Invoice-Related Control Issues
Recommended Invoice Processing Practices to Ensure Tight Controls
Master Vendor File Basics Related to Invoices
Fiscal Period Closes
The Month-End Close
Making the Close Run a Little Smoother
Chapter 9 – Review Questions
Chapter 10 – When Paying by Check: The Internal Control Migraine
Check Issuance from a Strong Control Perspective
Authorized Signers and Board Delegations
Documentation: Check Signers and Accounts
Laser versus Preprinted
Check Signing and Mailing Procedures
Facsimile Signer: Rubber Stamps
Other Facsimile Signers
Chapter 10 – Review Questions
Chapter 11 – Check Related Control Issues
Strengthening Controls around Checks
Check Request Forms
Use of Positive Pay
Timely Reconciliation of Bank Statements
Rush Checks: A Control Nightmare
Reducing the Number of Rush Checks
Talk to the Requester
Insist on Mailing the Payment
Better Yet, Insist on ACH
Some Additional Tactics
Returning Checks to Requisitioners
What You Can Do to Ensure No Hanky Panky
The Attachment Issue
Checks at Closings
The Rebate Check Issue
Chapter 11 – Review Questions
Chapter 12 – Corporate Procurement Cards: An Alternative to Paper Checks
How the P-Card Process Should Work
Auditing the Program
Chapter 12 – Review Questions
Chapter 13 – Electronic Payment Alternatives: A Better Payment Approach
Wire Transfers: Who’s in Charge
Initiating a Wire Transfer
Automated Clearinghouse (ACH): Electronic Payments for the Masses
Protecting Your Bank Accounts
More Electronic Payment Fraud Prevention Tips
The Electronic Control Best Practice Checklist
Chapter 13 – Review Questions
Chapter 14 – Master Vendor File: Where It All Begins
When Should the Vendor Be Set up in the Master Vendor File?
New Vendor Set-up Spectrum
The Complete Lack of Control Scenario
The Average Control Scenario
The Tight Control Scenario
Master Vendor File Controls
Best Practice Overview
Best Practice: Controls
Naming Conventions: Increase Control
More about the Naming Convention
Vendor Contact Information
Change of Bank Account Requests
How Good Is Your Contact Information?
Fraud through the Master Vendor File
In Closing: A Word about Segregation of Duties
Chapter 14 – Review Questions
Chapter 15 – The Travel and Entertainment Component: Expense Reimbursements
The Expense Reimbursement Policy
The Importance of Uniform Enforcement of the Policy
Where Policies Sometimes Fall Apart
Going the Extra Mile
Airline Pricing Opportunities
The Receipt Debate
Best Practices to Deter & Detect T&E Fraud
Additional Tactics That Tighten Controls around Expense Reimbursements
Chapter 15 – Review Questions
Chapter 16 – Computers, Tablets, and Smartphones: The Often-Overlooked Control Component
What is BYOD?
The Security Issue
The Corporate Stance
The Future for BYOD
Creating a BYOD Policy for Your Organization
Issues to be Covered
Chapter 16 – Review Questions
Chapter 17 – Controls to Prevent the Bribing of Foreign Government Officials
Basics of FCPA
What Constitutes a Violation?
One Last Caveat
Where to Look for Bribery Payments
1. Typical invoices
2. Consultants’ Invoices
3. Travel and Entertainment Expense Reports and FCPA Risk Management
What Should You Look for
What Should You Do if You Suspect Bribery Is Involved
What This Means for Accounts Payable
Chapter 17 – Review Questions
Chapter 18 – Other Issues That Present Control Concerns
The Super User
The Super User, the Semi-Super User and Their Impact on Internal Controls
When Employees Leave the Organization
The Ideal Process
Avoiding the Card Problem Completely
When HR Doesn’t Notify AP
The IT Component
Resist the Temptation
Another Password Control Issue: Sticky on the Side of a Computer
Dumpster Diving and Confidential Information
The Recommended Approach
Awful Petty Cash Practices
Chapter 18 – Review Questions
Chapter 19 – Policy and Procedures Manual: Tying It All Together
Why a Policy and Procedures Manual Is Needed
The Policy and Procedures Manual from a Control Standpoint
The Policy and Procedures Manual: An Ongoing Project
Including a Flowchart Is Not a Bad Idea
Chapter 19 – Review Questions
Review Question Answers and Rationales
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