Recovering From a Fraud Loss

Standard

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

Standard

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

Standard

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

Standard

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

What Types of Cases are Done By Forensic Accountants?

Standard

Forensic accounting is sometimes called investigative accounting. There is a fairly wide variety of cases that can be done by a forensic accountant, with all of them having something to do with fraud or litigation. Tracy Coenen talks about some of the most common types of cases in which a forensic accountant will be called in.

Divorce Lifestyle Analysis: Just Data Entry?

Standard

A question often comes up relative to the lifestyle analysis in divorce cases: Isn’t is just data entry that anyone could do? Why do I need a forensic accounting expert?

As I explain below, the lifestyle analysis is NOT just a data entry exercise. A level of quality control is necessary in order to ensure that all transactions are included in the analysis and no transactions are duplicated. In larger cases, there may be enormous volumes of data to be managed, and the client needs an expert who can effectively handle the data. Also, the numbers must be categorized and analyzed. Sometimes estimates or judgment calls need to be made. That is the work of an expert.