Expenditure Fraud: Understanding Theft from Payments

School: Kwantlen Polytechnic University - Course: ACCT 1210 - Subject: Accounting

Chapter 9: MISAPPROPRIATING OUTGOING CASH: EXPENDITURE FRAUD

01. INTRODUCTION TO EXPENDITURE FRAUD

INTRODUCTION TO EXPENDITURE FRAUD ● The term "expenditure" refers to spending ● Accountants: capital expenditures—long‐lived assets (land, buildings, equipment, vehicles, etc.) ● Operating expenditures— normal expenses involved in running the operations (insurance, rent, salaries, telephone and Internet service, etc.)

Expenditure fraudis theft from expenditures— defrauding the organization by stealing from payments intended for capital or operating expenditures.

• Most commonly perpetrated by individuals through the purchases and/or payments systems, • by submitting fabricated invoices for payment, • or abusing credit and purchase card privileges.

02. FRAUD RISK AND MISAPPROPRIATIN G OUTGOING CASH

• Fraud risk is considered high • Effective controls, enough resources, and proactive management that is aware of fraud are essential for risk mitigation. • The following are some examples:  Policies and processes (e.g., ethics policies, code of conduct)  Anti-fraud awareness campaigns for board, senior management, staff, and third parties  Fraud risk management training for employees and contractors commensurate with roles and responsibilities

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