Final answer:
Without comparing invoices to purchase orders and receiving reports, companies risk overpayments and fraud. This verification is essential for financial integrity, as illustrated by Noel's experience in preventing a significant overpayment. .
Step-by-step explanation:
When suppliers' invoices are not compared to purchase orders or to receiving reports before payment, several types of errors or fraud may occur. Without this verification process, companies may be susceptible to overpayments for goods that were never received, or paying for items at higher prices than agreed upon. Additionally, it opens the possibility for fraudulent activities such as invoicing for goods not supplied at all or the creation of fictitious suppliers.
In a scenario where a vigilant employee, like Noel, notices an invoice discrepancy and acts swiftly to prevent a potential $250,000 overpayment, it highlights the crucial nature of double-checking all financial documents before making any payments. Actions such as Noel's demonstrate the importance of vigilance in financial controls. Accounting departments must be on alert to ensure that invoices match purchase orders and receiving reports to protect the company from significant financial errors or potential fraud.
When imperfect information exists, buyers and sellers may find difficulty agreeing on a price due to uncertainties about product quality, delivery consistency, or market rates. Sellers can reassure potential buyers by providing comprehensive product information, offering warranties or return policies, and maintaining open communication to minimize the impact of imperfect information on the transaction process.