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Case Study Payables ABC Chemical started a new contract with Pure Oil Distributing to supply fuel oil for the plan generators on a cost plus contract. Pure delivered the oil weekly in 20,000-litre-tank truck and pumped it into ABC's storage tanks. ABC's receiving employees were supposed to observe the pumping and record the quantity on a receiving report, which was then forwarded to the accounts payable department, where it was held pending arrival of Pure's invoice. The quantities received then were compared to the quantities billed by Pure before the invoice was approved for payment and a cheque prepared for signature by the controller. Since it was a cost-plus contract, Pure billing price was not checked against any standard price The receiving employees were rather easily fooled by Pure's driver. He mixed sludged with the oil, the receiving employees did not take samples to check for quality. He called out the storage tank content falsely (e.g., 4,000 litre on hand when 8,000 were actually in the tank); the receiving employees did not check the gauge themselves; and the tank truck was not weighed at entry and exit to determine the amount delivered. During the winter months, when fuel oil use was high. Pure ran in extra trucks more then once a week but pumped nothing when the receiving employees were not looking Quantities "received" and paid during the first year of the contract were (in litre): Months JAN FEB MAR APR MAY JUNE JULY AUGUST SEP OCT NOV DEC Quantities (litres) 124000 112000 92000 76000 72000 56000 60000 56000 84000 92000 132000 144000