8 Accounts Payable Fraud Controls to Implement Today

Accounts payable (AP) fraud is one of the most common—and costly—forms of occupational fraud. It affects organizations of every size and industry, often going undetected for months or even years. In fact, the ACFE's 2024 Report to the Nations found that fraud schemes take a median of 12 months to detect, and those that take five or more years to uncover cost victim organizations a median of $875,000. While no organization is immune, the strength of your accounts payable anti-fraud controls is one of the most reliable predictors of whether fraud will occur. AP fraud can severely disrupt cash flow, threatening a company's financial stability and creating operational challenges.

This guide outlines eight practical AP fraud controls organizations can implement today to reduce risk, improve oversight, and protect financial integrity. Regularly reviewing accounts payable records is essential for detecting suspicious activities such as invoice fraud, discrepancies, and irregularities that may indicate fraudulent behavior.

Why Accounts Payable Fraud Is So Difficult to Detect

Common accounts payable fraud can be difficult to spot because it often blends into routine financial activity. Understanding how accounts payable fraud work—including the various methods and schemes used to exploit weaknesses in payment processes—is essential for effective detection. Fraudsters may exploit trusted vendor relationships, weak segregation of duties, or manual approval processes. Common AP fraud schemes include:

• Fake or duplicate vendors
• Inflated or altered invoices
• Check tampering
• Unauthorized payment approvals
• Long-term collusion with external vendors
• Vendor collusion
• Shell company schemes

Without consistent controls, even well-run finance teams can miss warning signs. Detecting AP fraud early is crucial to minimize financial losses and protect your organization.

Types of Accounts Payable Fraud

Accounts payable fraud can take many forms, each designed to exploit weaknesses in a company’s accounts payable process and divert funds for personal gain. Recognizing the most common types of accounts payable fraud is crucial for organizations aiming to protect their financial assets and prevent significant financial losses.

Some of the most prevalent accounts payable fraud schemes include:

• Fake or Fictitious Vendors: Fraudsters may create fake vendor accounts to submit false invoices, resulting in unauthorized payments that are difficult to trace.
• Duplicate Payments and Invoices: Submitting the same invoice multiple times or manipulating invoice numbers can lead to duplicate payments, draining company resources.
• Billing Schemes: Employees or external parties may submit inflated invoices, false invoices, or invoices for goods and services never delivered, all with the intent to divert funds.
• Check Fraud: This includes altering, forging, or stealing company checks to make fraudulent payments from the accounts payable department.
• Expense Reimbursement Fraud: Employees may submit fake or inflated expense claims, or use expense reimbursement schemes to siphon off company funds.
• Kickback and Collusion Schemes: Collusion between employees and vendors can result in overbilling, inflated invoices, or payment for substandard goods and services, with the proceeds shared between the parties.
• ACH and Electronic Payment Fraud: Manipulating bank account details or payment instructions can result in unauthorized electronic transfers, a growing risk as more organizations move to digital payments.
• Pass-Through Schemes: Employees set up shell companies to bill their employer for goods or services, often at inflated prices, with no legitimate business purpose.

Understanding these types of accounts payable fraud helps organizations identify red flags, strengthen internal controls, and take proactive steps to prevent fraudulent activities that could lead to significant financial losses. By staying vigilant against these fraud schemes, companies can better safeguard their accounts payable operations and overall financial health.

1. Verify All Vendors Before They Are Added

Vendor fraud is a leading cause of AP losses. Organizations should establish a formal vendor onboarding process that includes independent verification. Verifying legitimate vendors is essential to prevent fraud schemes involving fake vendors and to ensure only trustworthy entities are added to your system.

Best practices include:

• Requiring approval from someone other than the individual adding the vendor
• Manually verifying vendors via phone, website, or in-person confirmation
• Screening for fake vendors during the onboarding process to detect and prevent fraudulent or fictitious entities
• Watching for red flags such as incomplete contact information or unusual payment requests

Separating vendor setup from payment processing significantly reduces fraud risk.

2. Reconcile Accounts Regularly

Account reconciliation is a key control in accounts payable fraud prevention, helping organizations identify discrepancies before they become significant losses.

Organizations should:

• Match accounts payable entries with bank statements and check registers monthly
• Identify duplicate invoices as part of the reconciliation process
• Investigate mismatches immediately
• Document reconciliation reviews for audit purposes

Regular reconciliation creates accountability and helps surface unauthorized or duplicate payments.

Maintaining detailed audit trails and accurate financial records supports effective reconciliation and strengthens fraud detection efforts.

3. Review Transactions for Fraud Indicators

Reviewing financial transactions is one of the simplest yet most effective anti-fraud controls, as it helps identify signs of accounts payable fraud.

Look for:

• Round-dollar payments
• Gaps or duplicates in invoice numbers
• Unusual transaction timing or frequency
• Payments just below approval thresholds
• Unverified payment details or changes to bank account information
• Signs of invoice fraud schemes, such as fake or altered invoices

These anomalies often indicate attempts to bypass controls.

Ongoing monitoring for fraudulent transactions is essential to strengthen accounts payable fraud controls and protect your organization.

4. Implement a Check Review and Approval Process

Checks should be reviewed before they are released—not after.

Recommended controls include:

• Independent review by someone not involved in check issuance
• Dual signatures for checks over a defined amount
• Monitoring for checks intentionally issued just below approval limits
• Ensuring proper invoice approval before checks are issued, as part of segregation of duties

Strong review procedures reduce both internal fraud and external manipulation.

Automating the payment process can help reduce human error, strengthen accounts payable fraud controls, and improve overall transparency and security.

5. Conduct Unscheduled Audits

Scheduled and regular audits are both essential for AP fraud prevention. While scheduled audits are expected, unscheduled audits can uncover what routine reviews may miss.

Effective audit practices include:

• Random reviews of AP files
• Periodic vendor audits to confirm legitimacy
• Documentation of findings and corrective actions
• Consulting certified fraud examiners for complex or high-risk cases

Unpredictability is a powerful fraud deterrent. Regular audits and proactive measures are key to preventing fraudulent payments and strengthening your AP fraud prevention strategy.

6. Rotate Employees Through AP Functions

Accounts payable departments and accounts payable teams are particularly vulnerable to fraud if roles are not rotated, as long-term control over a single AP function increases fraud risk.

Rotation helps by:

• Disrupting ongoing schemes
• Reducing opportunities for collusion
• Encouraging cross-training and resilience

While rotation requires planning, it significantly limits prolonged fraud activity.

7. Require Mandatory Vacations

Mandatory vacation policies are a proven fraud detection tool. The ACFE found that these policies can reduce the duration of a fraud scheme by 50 percent.

When employees are required to step away:

• Fraud schemes are harder to conceal
  Mandatory vacations can reveal patterns of fraudulent behavior that might otherwise go undetected, as new personnel may notice suspicious activities or inconsistencies.
• Irregularities surface during coverage
• Oversight increases organically

This control is especially effective for finance and payment roles.

8. Foster a Culture That Discourages Fraud

Controls are strongest when supported by culture.

Organizations should:

• Encourage open communication and ethical reporting
• Provide clear reporting channels for concerns
• Reinforce accountability at all levels
• Provide employee training on how to recognize and report fraud

A strong ethical culture reduces rationalization—the most common driver of internal fraud. Ongoing training and a strong culture are essential to prevent fraud in accounts payable.

How Case IQ Can Help Strengthen AP Anti-Fraud Controls

Managing AP fraud risk requires visibility, documentation, and coordination across finance, compliance, internal audit, and leadership teams. Case IQ’s case management platform supports organizations by providing structure and accountability around fraud prevention and investigation efforts, while also supporting the accounts payable function with technology to automate controls and enhance compliance.

With Case IQ, organizations can:

• Centralize all documents for fraud investigations: Capture fraud reports, supporting documents, evidence, and interview notes in a single system.
• Track incidents from intake to resolution: Maintain clear timelines, assigned ownership, and documented outcomes for every case.
• Support audits and compliance efforts: Preserve audit-ready records, evidence, and review history to support internal and external audits.
• Identify patterns and repeat risks: Use reporting and data analytics to detect trends across vendors, departments, or payment types.

While technology alone cannot eliminate fraud, a structured case management approach helps organizations enforce controls consistently and respond effectively when issues arise.

Frequently Asked Questions About Accounts Payable Fraud Controls

What is accounts payable fraud?

Accounts payable fraud involves unauthorized or deceptive activity related to vendor payments, invoices, or checks, often committed by employees or vendors.

Why is AP fraud so common?

AP processes often involve high transaction volume, trust-based relationships, and manual workflows, making them attractive targets for fraud.

How can small organizations prevent AP fraud?

Even small teams can reduce risk by segregating duties, verifying vendors, reviewing transactions, and documenting investigations.

What are the most effective AP fraud controls?

Vendor verification, transaction reviews, independent approvals, and unscheduled audits are among the most effective controls.

How often should AP controls be reviewed?

AP controls should be reviewed regularly and updated as business processes, staffing, or technology changes.