False or Altered Disbursement Documents (Part 1)

This column, the first in a series of three, begins a discussion about some of the most common issues fraud examiners face when they detect false or altered documents in the organization’s disbursement records.

IMPORTANCE OF ORIGINAL SOURCE DOCUMENTS 

Auditors and fraud examiners have always known that original- source documents are critical in determining if disbursements have been made to a valid vendor for official business purposes. An organization’s first line of defense against the risk of fraudulent disbursements must be to obtain original source documents for all expenditures. But is this always possible? Some would say: “Yes, absolutely!” But, others might say: “No, there must be some exceptions.” Let’s explore these responses.

COPIED SUPPORTING DOCUMENTS  

Copies of documents might support legitimate disbursement transactions but only rarely, in my opinion. You should independently verify the authenticity of these transactions. My first question to an organization is: “How did you get these copies?” Staff members usually casually say that they made copies of the original documents for the files. “Where are the original documents?” I ask. The conversation generally deteriorates at this point. Don’t be too eager to accept staffers’ first plausible answers. Inquisitive fraud examiners must use other investigative steps to determine if the transactions actually represent payments to valid vendors for official business purposes. I’ll illustrate in this case.