The use of fictitious vendor accounts to hide improper transactions is often associated with the following processes: 1. **Fake invoices**: By creating fictitious vendors and using fake invoices, company insiders can improperly withdraw funds from company accounts. The fake invoices look like legitimate business expenses, but the funds actually flow to personal accounts. 2. **Money laundering**: Fictional vendor accounts can be used to "mix" illegal funds with legitimate transactions to disguise their origin. By frequently transacting with these fictitious vendors, illegal fund flows can be hidden in the company's financial statements. 3. **Bribes and kickbacks**: Fictional vendors can be used to pay bribes or kickbacks. For example, some employees may create fictitious vendor accounts to receive payments from third parties and describe these payments as vendor payments. 4. **Asset misappropriation**: Employees may create non-existent vendors on the books, then generate payment records to move funds out of the company's accounts and transfer the money to their own accounts or those of their accomplices. 5. **Inventory overstating**: By using fictitious vendors, companies can falsify inventory purchase transactions, thereby inflating assets and profits in financial statements to mislead investors or management. These activities usually involve fraud and are often revealed during audits and financial inspections, so organizations need strict internal controls and audit mechanisms to prevent such fraud from occurring.