Chapter 10
Disbursement Fraud
Stuff happens. For our discussion, we prefer the variation disbursement fraud happens. It's not a question of “will” it happen; it's a question of “when” it will happen. And in case you were wondering about the “how” of the proverbial when, where, and how troika, that will depend on the opportunities created within the organization. Disbursement fraud is typically thought of as occurring in the check-writing process because of the cash nature of disbursements in general. However, there are many more methods of implementing disbursement fraud than just through the check-writing process. It can be found in an accounts payable function where there is internal or external collusion with a vendor or when management initiates a transaction through the authorization of the organization's treasurer. So, checks, while an important document, are not the exclusive document to talk about when discussing disbursement fraud. Purchase orders, invoices, wire transfers, even packing slips can be essential documents in detecting this type of fraud.
Fraud Risk Structure
A fraud audit addresses disbursement fraud in the same manner as discussed in general in the preceding chapters with the first step being a determination of whether the entity is a false one or a real one. Then, depending on which it is, the fraud risk assessment would focus on the action element of the inherent scheme. For disbursement fraud, the action element is how the theft of monetary funds takes ...
