How Australian Accounting Firms Are Becoming the First Line of Supplier Fraud Defence

For most of the last decade, supplier verification has been treated as a procurement function. The accounts payable team checks the ABN, the finance team approves the payment, and the auditor reviews the process after the fact.

That model is under pressure. As business email compromise fraud escalates and insolvency risks build through the supplier chain, clients are increasingly asking their accountants a question the profession has not traditionally needed to answer: "Did you check this supplier?"

The liability question

Tax agents and BAS agents carry explicit professional obligations. But general accounting practice also creates a duty of care environment around advice on financial decisions — including, in some circumstances, advice that leads a client to pay a fraudulent invoice or extend credit to an insolvent entity.

The litigation landscape is still developing, but several trends are clear:

• Insurers are asking accounting firms about their supplier verification practices during PI insurance renewals.
• Clients who have experienced BEC fraud are increasingly scrutinising whether their advisers flagged warning signs they should have noticed.
• The ATO's focus on GST fraud has created expectations that professional advisers will notice entities that fail basic legitimacy checks.

The opportunity in advisory positioning

Accounting firms that move first on systematic supplier verification advisory have a positioning advantage. The service is genuinely valuable to clients — particularly SMEs who lack in-house procurement functions — and it creates recurring touchpoints that deepen client relationships.

The model that works for most firms:

• Incorporate supplier verification into standard accounts payable advisory engagements.
• Offer periodic supplier portfolio audits — checking the entire supplier list against live ABN, insolvency, and risk signal data.
• Provide continuous monitoring as an ongoing service for clients with large supplier bases.

One accountant, one hundred clients

The leverage in accounting advisory is scale. An accounting firm with 200 small business clients is the effective procurement risk manager for all of them. A single process improvement — incorporating supplier verification into every new payment relationship — multiplies across the entire client base.

A client who would never independently check a new supplier ABN against the ASIC insolvency register will follow their accountant's advice to do so when it is framed as standard practice. Professional norms set the floor for client behaviour.

The Gumshoe partner programme

We are building a programme for accounting and professional services firms who want to offer supplier verification as part of their advisory practice. This includes volume pricing, white-label reporting options, and integration support for practice management systems.

If you are an accounting firm interested in exploring this, contact us at partners@gumshoe.au. We are currently working with a small number of firms in design partner relationships to build the programme infrastructure.

Uncommon Insights

Under Corporations Act section 588G(2), a company's director can be liable for insolvent trading if they fail to prevent the company incurring a debt when there are reasonable grounds to suspect the company is insolvent. This raises an interesting question for accountants advising on payments: if a supplier is insolvent, does the accountant's failure to verify the supplier's solvency create a duty of care to the client? The answer may depend on the specific circumstances, but ASIC's Regulatory Guide 217 suggests that accountants may have a role in helping clients manage this risk.

The ATO's focus on GST fraud has created a new expectation that professional advisers will notice entities that fail basic legitimacy checks. For example, the ATO's GST Advisory Panel has noted that advisers should verify a supplier's ABN and GST registration status before advising a client to make a payment. This expectation is not limited to tax agents and BAS agents, but also applies to general accounting practice. Failing to meet this expectation may create a liability risk for accountants, particularly if a client suffers a loss as a result of paying a fraudulent invoice.

ASIC's enforcement pattern in relation to section 912A of the Corporations Act suggests that the regulator is taking a closer look at the role of professional advisers in preventing financial crime. In particular, ASIC has noted that advisers have a responsibility to report suspicious transactions and to implement robust anti-money laundering and counter-terrorism financing controls. This raises an interesting question for accountants advising on payments: do they have a responsibility to report suspicious supplier activity to ASIC or the ATO? The answer may depend on the specific circumstances, but it is clear that ASIC expects advisers to play a proactive role in preventing financial crime.

The Australian accounting standards (AASB) require accountants to consider the risk of fraud when advising on financial transactions. In particular, AASB 110 requires accountants to assess the risk of fraud and to design and implement controls to mitigate that risk. This raises an interesting question for accountants advising on payments: do they need to consider the risk of supplier fraud when advising on payments? The answer is clearly yes, and accountants who fail to consider this risk may be in breach of their professional obligations. By incorporating supplier verification into their advisory practice, accountants can demonstrate their commitment to mitigating this risk and protecting their clients' interests.