Follow the Money to Find the Fraud

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Forensic accounting has been around for decades, but only in the last ten to fifteen years have people become aware of the profession on a wide scale. Many of the techniques used by forensic accountants to investigate fraud and analyze the numbers are the same today as they were decades ago.

Computers have made things easier, as we can track, sort, and manipulate data faster. While software solutions for analyzing data, managing documents, and following the money are being used in investigations, they’re not being used to their full potential. This is obviously a missed opportunity for clients.

Old Fashioned Investigations
The old way of investigating fraud – the one that requires manual data analysis – is tried and true. Examining source documents is critical to finding out what really happened with the money. There is no substitute for the judgment, skepticism, and investigative intuition of a seasoned forensic accountant. Continue reading

Lifestyle Analysis in Family Law Cases

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LifestyleAnalysisInDivorceCasesSmallThis article was originally printed in the ABA Section of Family Law eNewsletter, November 2011.

One of the chief concerns in a divorce or child custody case is identifying the true income of one or both of the parties. It is not unusual for such a case to include allegations of hidden income or assets. It is common for a closely held business to suspiciously encounter declining sales and profits following the filing of a family law case.In each of these instances, properly determining the income of the party is critical to getting a fair and equitable settlement, maintenance award, or child support award. Until you have the correct numbers, the attorney may find it very difficult to decide what is fair or in the best interest of the client.
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Fraud Prevention on the Cheap

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One common misconception among small business owners is that fraud prevention is expensive. And like anything else in this world, it can be expensive. A company that strives to eliminate virtually all opportunities for fraud by employees can spend a chunk of money doing so.

But it’s not always necessary to spend lots of money on fraud prevention. And it’s not always possible for a small business owner to spend a lot on fraud prevention. Let’s face it… budgets are tight and big new projects aren’t often possible. Continue reading

Recovering From a Fraud Loss

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Frauds committed by employees can have devastating effects on businesses. The company’s finances suffer, employee morale may drop, and the company’s reputation could be affected by negative publicity.

Following the investigation of an internal fraud, owners and managers of companies need to rethink how they do business. It is the perfect time to carefully analyze the operations and create procedures and an environment in which ethical behavior thrives.

A fraud by a trusted employee is often devastating to management, both financially and emotionally. A company can be thrust into turmoil because of a significant theft, and it’s important to approach the situation methodically in order to mend the damage and prevent future occurrences. Companies can recover from an internal fraud by focusing on three key areas, in addition to completing a thorough investigation of the fraud. Continue reading

Divorce Financials: The Lifestyle Analysis and the Search for Hidden Income or Assets

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Tracy explains the purpose of a lifestyle analysis in a divorce case, and the process used to analyze the family’s finances. The lifestyle analysis may be used to determine how much money is required to continue living the lifestyle the parties had while married. It may also be used to find hidden income or hidden assets, and Tracy discusses how she may uncover these items.

Family Lies: Fraud in Family Business

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Trust is inherent in any good business. We continuously place trust in our employees and in those with whom we do business. But that trust which is so necessary to the operation of a business is also the impetus for thieves to profit.

It is unfortunate that fraud occurs when and where you least expect it. Blood may be thicker than water, but that doesn’t protect a company from theft by family members. In fact, it may be just that trust between family members that is exploited by a dishonest sibling, uncle or cousin.

Some fraud experts suspect that fraud occurs more often in family businesses than other businesses, and that the increased fraud risk is due to the trust factor. Family members put more trust in one another and therefore grant one another more access and opportunities for fraud. The controls in family businesses may be lax, particularly as they relate to the oversight of management’s activities. Continue reading

Bribery and Corruption: Difficult Frauds to Find

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When fraud happens within an organization’s accounting system, there is often a paper (or digital) trail left behind. It’s unavoidable, as there is a record of something related to the fraud, whether it is a legitimate invoice that was later adjusted, an account balance that was changed, or a fake employee who was added to the payroll system.

Frauds involving bribery and corruption are different. They happen almost completely outside the accounting system, so they often don’t leave a paper trail. Management instead must rely on tips or other vague clues to the existence of such a fraud scheme.

Bribery and corruption typically arise out of relationships between people, so in order to detect them, management must often be aware of the personal relationships between employees and outside parties. That is clearly a difficult task, and often nearly impossible. Continue reading