INTERNAL AUDIT - ACCOUNTS PAYABLE AUDIT University of Washington August 11, 2011

1. INTERNAL AUDIT - ACCOUNTS PAYABLE AUDIT University of Washington August 11, 2011 Kim Herrenkohl, Director Western Washington University Office of the Internal Auditor 360-650-3435 Kim.Herrenkohl@wwu.edu

2. Training Objectives • Discuss common fraud risks • Objectives of an operational accounts payable audit • Discuss WWU’s Audit Program • Discuss WWU’s Audit Report

3. Common Fraud Risks in Disbursement Processes • Improper separation of key processing duties within A/P and Accounting • Returning checks to the person that enters the invoices into the system or prompted the payment • Department employee submits a fictitious invoice • A/P employee creates a fictitious vendor in system and enters invoices

4. Washington State Disbursement Frauds • Accountant issued 6 fictitious checks to two friends and recorded them as vendor refunds ($71,750) • A/P supervisor issued checks to himself & issued checks to vendors to pay his personal bills ($137,467) • Freight vendor took advantage of weak internal controls and relationship with an employee and overbilled for freight charges ($839,707)

5. Objectives of A/P Audit • As Internal Auditors (not financial statement auditors), our audit scope typically includes reviewing for: • Effectiveness • Efficiencies • Compliance with policy & regulation • Safeguarding assets (reasonable internal controls)