Fraud and Forensic Investigation

Fraud

  • Shareholder or partner disputes
  • Business/Employee Fraud Investigations
  • Divorce Disputes
  • Contract Disputes
  • Litigation Support
  • Fraud Prevention
  • Fraud Risk Analysis
  • Financial statement reconstruction

Small businesses have it rough. They’re particularly vulnerable to fraud because they lack the resources to implement complete systems of internal controls and properly segregate accounting duties among their limited staffs. However, small businesses don’t have to be rife with fraud

Basic Types of Financial Fraud in Businesses

Too often, a business owner finds out too late that even the most loyal employee may commit financial fraud and steal from the company if the opportunity arises and the temptation becomes too great — or if the employee finds himself caught up in a serious personal financial dilemma and needs fast cash.

The four basic types of financial fraud are:

  • Embezzlement, also called larceny, which is the illegal use of funds by a person who controls those funds. For example, a bookkeeper may use company money for his own personal needs. Many times, embezzlement stories don’t make it into the paper because businesspeople are so embarrassed that they choose to keep the affair quiet instead. They usually settle privately with the embezzler rather than face public scrutiny.
  • Internal theft, which is the stealing of company assets by employees, such as taking office supplies or products the company sells without paying for them. Internal theft is often the culprit behind inventory shrinkage.
  • Payoffs and kickbacks, which are situations in which employees accept cash or other benefits in exchange for access to the company’s business, often creating a scenario where the company that the employee works for pays more for the goods or products than necessary. That extra money finds its way into the employee’s pocket who helped facilitate the access.
  • For example, say Company A wants to sell its products to Company B. An employee in Company B helps Company A get in the door. Company A prices its product a bit higher and gives the employee of Company B that extra profit in the form of a kickback for helping it out. A payoff is paid before the sale is made, essentially saying “please.” A kickback is paid after the sale is made, essentially saying “thank you.”
  • In reality, payoffs and kickbacks are a form of bribery, but few companies report or litigate this problem (although sometimes employees are fired when deals are uncovered).
  • Skimming, which occurs when employees take money from receipts and don’t record the revenue on the books.

Although any of these financial crimes can happen in a small business, the one that hits small businesses the hardest is embezzlement. Embezzlement happens most frequently in small businesses when one person has access or control over most of the company’s financial activities. For example, a bookkeeper may write checks, make deposits, and balance the monthly bank statement.

Prevention is the best method to help prevent and deter fraud from occurring in your workplace.

Do you worry that you or your business might be the victim of fraud?

Do you need to analyze your financial data to uncover potential misconduct?

Are you investigating an entity for possible acquisition and need to ensure the absence of financial irregularities? Maybe you’re involved in litigation and require an expert witness to testify on your behalf?

If any of these situations apply, you need our Forensic Accounting services.

Who Needs Forensic Accounting?

Forensic accounting – also called financial forensics or forensic auditing – is an area of accounting that investigates actual or anticipated disputes.

Disputes can range from business-related litigation to marital dissolution. We handle both litigation support and investigative accounting.

Litigation Support

This area covers accounting assistance for current or pending litigation.

For a litigation assignment, we…

  • assist in obtaining the necessary documentation to support or refute a claim;
  • examine the relevant documentation to form an assessment of the case;
  • review the damages report by the opposing expert;
  • assist with settlement discussions and negotiations; and
  • attend trial to hear the testimony of the opposing expert and provide assistance with cross-examination.

Investigative Accounting

Occasionally, you may need to explore whether fraud or misconduct has occurred, such as employee theft of property or inventory, misappropriation of funds by employees, kickbacks to employees from outside businesses, securities fraud, and insurance fraud.

Forensic Investigations Take a Variety of Forms

The services of a forensic accountant are required for a range of investigations across many different industries.

Here are the most common assignments in forensic accounting:

Disputes Among Shareholders or Partners. 

The compensation and benefits given to each of the shareholders or partners is one of the more common issues in these cases.

Business/Employee Fraud Investigations.

The investigation of employee fraud often requires a determination of the extent of the fraud. It may or may not include the identification of a perpetrator.  Many times, such assignments necessitate interviews of staff who had access to the funds.

Matrimonial Disputes.

Usually, when a dispute of this nature arises, forensic accountants must locate and evaluate the disputed assets, be they  businesses, property, or fiduciary.

Business Economic Losses.

These kinds of engagements include contract disputes, construction claims, expropriations, product liability claims, trademark and patent infringements, and losses stemming from an alleged breach of a non-compete agreement.

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