Preface xv
PART I CORE FUNCTIONS 1
Chapter 1 Internal Controls in Accounts Payable 3
Ignore Accounts Payable at
Your Own Peril 4
The Fraud Problem 5
State Auditing Groups 6
Sarbanes-Oxley Impact 7
A Marriage Made in Heaven—Not! 7
Ideal Accounts Payable Function 8
“When the Invoice Arrives” 9
Segregation of Duties 11
Control on Payment Types 12
Other Payment Type Control Issues 13
Often-Overlooked Issue: Spreadsheets 14
Spreadsheet Control Plan 15
Policy and Procedures Manual 16
Bad Control Practices 18
Recommended Management Actions 19
Chapter 2: Invoice Handling.
Three-Way Match.
Common Invoice Problems and Solutions.
Alternative to Three-Way Match: Evaluated Receipt Settlement.
Alternative to Three-Way Match: Negative Assurance/Assumed Receipt.
Statements.
Paying from Statements.
A Word about Credits.
Getting Approvals.
Stamping Mail in Accounts Payable.
Electronic Invoicing.
Bad Practices.
Recommended Management Actions.
Chapter 3: Payment Processing and Alternatives.
Check Stock.
Check Storage.
Check Printing.
Who Should Print Checks.
Monitoring Check Stock Used.
Between Printing and Mailing.
Check Signing.
Distribution of Checks.
Mailing Checks.
Difficulties Caused by Checks.
Why Returning Checks Can Be a Problem.
An End Run around the Returning Check to Requisition Problem.
Check Fraud.
Positive Pay and Its Cousins.
P-cards.
Wire Transfers.
ACH Payments.
What Every Company Needs to Know to Avoid Making Payments to Terrorists.
Chapter 4: Exception Processing.
Check Problems: Exception Processing Heads the List.
Typical Rush Check Scenario.
Background on Rush Checks.
Ways to Minimize the Number of Rush Checks.
Positive Pay Issue.
Why Returning Checks Can Be a Problem.
Need Checks Returned: Here’s a Policy You Can Use.
Audit Point.
Petty Cash Box.
Chapter 5: Duplicate and Erroneous Payments.
The We-Never-Make-a-Duplicate-Payment Myth.
Duplicate-Payment Hypocrisy.
Policy.
In-house Checking: Before the Payment Is Made.
In-house Checking: After the Payment Is Made.
A Word about Software.
Why Duplicate Payment Audit Firms Are Needed.
Hiring a Postaudit Firm.
Second Postaudit.
Word of Caution.
Overall Action Plan.
Chapter 6: Vendors, Vendor Relations, and Master Vendor File.
Vendor Relations.
What Is the Master Vendor File?
Responsibility for the Master Vendor File.
Who’s In and Who’s Not?
Handling Inactive Vendors.
Cleansing the Master Vendor File.
Fraud Through the Master Vendor File.
Vendor Welcome Letter.
New Vendor Applications.
Access to the Master Vendor File and Making Changes.
Review of Changes.
The Spot-Check Annual Review.
Master Vendor File Standards 99
Coding Standards 99
Coordination with Invoice Coding
Standards 101
Vendor Calls into Accounts Payable 101
IVR/IWR 102
Segregation of Duties 103
Contract Compliance 103
Contents
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Chapter 7 Discounts and Deductions 105
Lost Early-Payment Discounts 105
The First Problem 106
Another Dirty Secret 107
To Take the Discount or Not 108
Disputes: Effects on Payments and
Relationships 109
Tracking Disputed Invoices 109
Electronic Invoicing Dramatically
Improves Invoice Handling 110
Online Dispute Resolution Programs 110
Invoice Amnesty Day 111
Explaining Deductions 111
Special Deals 112
Late Fees 113
PART II SPECIALTY FUNCTIONS 115
Chapter 8 Travel and Entertainment 117
T&E Policy 117
Equality under the Policy and
Sarbanes-Oxley 118
Reimbursement Issue 119
Issues to Be Addressed in Your T&E Policy 119
Timely Submission of T&E
Reimbursement Requests 121
T&E Practices: Spot-Checking and Cash
Advances 123
T&E Reimbursement Request 123
Advantages of ASP (Online) Models 124
Contents
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T&E Fraud: Don’t Let Your Employees
Pull the Wool over Your Eyes with
These T&E Tricks 124
T&E Fraud: The Gift Card Problem 130
Chapter 9 Unclaimed Property/Escheat 135
What’s Required 135
Legal Oversight 136
Timing of Reporting 136
Unclaimed Property: An Unending Process 137
Unclaimed Property Dilemma for Those
Currently Not in Compliance 142
Chapter 10 Use of Purchasing Cards 147
Control Features 147
Payment Terms 149
Rebates 150
Expanding Your Program 150
Issues 151
Payment 153
Departing Employees 154
1099s 154
Chapter 11 Independent Contractors, 1099s,
and 1042s 157
Workable TIN Policy 158
What if the Information Provided
Is Wrong? 158
Independent Contractor versus Employee 159
Keeping Up to Date 161
IRS’s TIN Matching Program 161
Making Payments to Foreign Individuals 164
Payments to Terrorists 166
Chapter 12 VAT Reclaim and Other International Considerations.
Countries Allowing VAT Reclaim.
What Can Be Reclaimed?
Outsourcing.
Chapter 13 Sales and Use Tax.
Definition of Sales and Use Tax.
Some Terminology.
Nexus.
What to Expect in an Audit.
Tougher Audits.
Help with Your Sales and Use Tax Issues.
PART III MANAGEMENT AND OVERSIGHT ISSUES.
Chapter 14 Fraud: Check, Employee, and Vendor.
Check Fraud.
Demand Draft Fraud: The Latest Form of Check Fraud.
Employee Fraud.
Segregation of Duties.
Desktop Computers: Handle with Care.
Phony Vendors.
Upfront Vendor Verification.
Chapter 15 New Technology Initiatives.
Imaging and Workflow.
Electronic Invoicing.
Forward-Thinking Functionality.
Electronic Payments.
B2B ACH Payment Awareness and Usage in the Middle Market.
UPICs.
IVR/IWR.
Conclusion.
Chapter 16: Cash Management Initiatives.
Cash Management Initiatives.
Clean Desk Syndrome.
Scheduling Payments.
Payment Timing: Is It Stretching or Timing?
Conclusion.
Chapter 17: Sarbanes-Oxley and Certification.
Overview of the Act.
Management Assessment of Internal Controls.
Auditors’ Assessment of Internal Controls.
Audit Trails.
Records Retention.
Policy and Procedures Manual.
Segregation of Duties.
Eliminate Really Bad Accounts Payable Practices.
Monitoring Reports.
Real-World Observations.
Index.
