The Most Common Fraud in the Acquisition and Payment Cycle

question 127

Essay

The most common fraud in the acquisition and payment cycle is for the perpetrator to issue payments to fictitious vendors and deposit the cash in fictitious accounts. What procedures could the company take to prevent this type of fraud?

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Definitions:

Expensed

Recorded as an expense in the financial statements in the period in which it is incurred.

Statement

A formal record or document detailing financial activities or conditions, such as an income statement or balance sheet.

Adjusting Entries

Journal entries made at the end of an accounting period to update accounts for accuracies in preparation for financial statement generation.

Preparation

The act or process of making something ready for use or consideration.