- Collusion can occur between purchasing and suppliers
- Employees posing as suppliers, or scam suppliers
- Transactional fraud
The opportunity for fraudsters usually arises when internal controls are weak in the areas of approvals, access controls, and reviews. Paper processes that encourage “after the fact” reports, and purchasing policies that are not enforced also play a role.
For employees, fraud is usually justified as a way to “get even” if things like benefits were cut back or a promotion didn’t occur, and the idea that the funds are being “borrowed” and will one day be “paid back”. Employees who partake in fraudulent activity may be driven by debt, a loss of income, or the need to maintain their social status. Poor management practices encourage fraudulent behavior as well.
Internal P2P Areas of Risk
A lack of follow through with regards to purchasing policies is one of the largest internal control risk areas, as well as inefficient supplier records management, unexpected changes to configurations, and split purchase orders.