Cook the Books and Book the Ledgers - Part 1

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Brian Element's picture
Brian Element
Joined: 07/11/2012 - 19:57
Cook the Books and Book the Ledgers - Part 1

Hello Group Members,

We begin a series of discussion posts on identifying common 'Red Flags' through IDEA Software.
One of the 'Red Flags' we will cover today is identifying 'Potential Bogus Purchases'.
'Bogus Purchases' tend to spike towards the financial year end as a deliberate attempt to affect year end profitability. This also has an impact on Taxes to be paid and hence is a Compliance issue too.
By comparing the Summary of Purchases, Vendor wise for say March 2018 (Financial Year April 2017 to March 2018) with the Average Purchases, Vendor wise for April 2017 to March 2018 one can look to significant spikes in Purchases in March 2018 versus rest of the year.
In a recent review we noticed one Vendor where the Purchases for March 2018 were 14500 % more than the average Purchases for the rest of the year. Upon investigating that Vendor we noticed many questionable Purchase book entries in March 2018.
We also noticed Purchases in March 2018 not having a single prior Purchase for rest of the Year.
Upon validating these suspect entries we further noticed ~
(A) The material received against this Vendor in March 2018 was fully consumed in the same month.
This was identified using the Pivot Table in IDEA by arriving at the Total Receipt and Total Issue Quantity for the suspect Material bought where Total Receipt and Total Issue Quantity exactly matched for the month of March 2018
(B) Another point for confirmation was the entries featuring in the Purchase Ledger were not appearing in the Gate In Ledger electronically indicating there was not physical receipt of the material - just a Book Entry.
This was identified using the Join command in IDEA - Records with No Secondary Match for Records in the Purchase Ledger not in the Gate In Ledger electronically.
Our next discussion post will cover Unadjusted Vendor Advances.
Best Regards
Group Admin Team