How to Stop Employees From Stealing

It might be hard to believe, but each and every day companies are losing money because they not only give employees opportunities to steal, they encourage it.

How? By not providing adequate oversight. A clerk, for example, sees that an error in an account wasn’t caught by anyone. A purchasing manager notices that no one is watching over his vendor relationships, and won’t know it if he establishes a fake account. Employees are not stupid. They know when they are being monitored and when their work is being checked. They know when they are working in an environment ripe for fraud.

But you have honest employees, you say? You’re probably right. If we thought job applicants were criminals, we wouldn’t hire them. But situations occur where the temptation to steal simply becomes too much. Imagine owing money to a hospital or having an expensive (and necessary) car repair that you can’t afford. What if your child needs clothing or food? There may come a day in your life when your morals are challenged because you have a financial need and an opportunity at the workplace that seems too good to pass up.

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Pyramid Legalization Act of 2016

A new bill is making its way through Congress, and it’s titled “Anti-Pyramid Promotional Scheme Act of 2016.” What’s it all about? It is an attempt by the Direct Selling Association and multi-level marketing companies to make sure that their pyramid schemes are never shut down. It is a bunch of fluff that is designed to look like it protects consumers, while the bill is really protection for MLMs. It makes inventory loading (getting recruits to buy inventory to “qualify” for commissions, regardless of the fact that they will likely never be able to sell that inventory) perfectly legal under basically all circumstances.

Attorney Douglas Brooks has analyzed the bill and dubs it the “Pyramid Legalization Act of 2016.” This is his analysis:

In the guise of an “anti-pyramid” bill, the proposed legislation would more accurately be called the “Pyramid Legalization Act of 2016.”   The bill would make it extremely difficult if not impossible to prosecute the most pernicious forms of deceptive multi-level marketing programs and product-based pyramid schemes.

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Fighting Fraud With Proactive Prevention Techniques

Companies devote significant time and money to the task of making sure that their customers don’t steal from them. But how much time do they spend considering the risk that their own employees are stealing from them?

That risk is great, so great that the annual internal fraud losses in the United States total an estimated $652 billion, according to the most recent study completed by the Association of Certified Fraud Examiners.

Each year, the average company loses 5 percent of revenues to internal fraud. This adds up quickly, especially for companies that are operating with little or no profit margin. Five percent of that company’s revenues can mean the difference between being in business or filing bankruptcy. It pays to implement aggressive fraud prevention techniques because they can save the company significant money in the long run.

The cost to implement procedures to monitor and restrict activities is far less than the fraud risk that companies face each day.

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Providing Forensic Accounting Services as a Small Firm

FOCUS – Newsletter of the AICPA Forensic & Valuation Services Section

Forensic accounting and fraud investigation are hot specialties in the accounting world. Experts agree that the need for fraud detection services is growing, creating opportunities for small and midsized firms that are looking to start or expand a forensic accounting practice. Building a stable forensic accounting practice takes time because the services and clients are unique. The key to becoming a real competitor in the area of fraud investigation to focus your firm’s strengths on the right quality services and clients to enhance your brand.

Forensic services are usually divided into two subsets: fraud investigation (financial statement fraud, corporate embezzlement, bribery, and insurance fraud) and litigation support services (contract disputes between corporations, shareholder divorces, intellectual property infringement, business insurance claims, bankruptcy consulting, business valuation, and family law issues). Within both service areas exists a variety of potential clients, including attorneys, corporations, government agencies, non-profit organizations, and individuals. Those clients can be divided further according to the industries in which they specialize or the types of matters in which they’re involved.

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So Many Sources of Information, So Little Time

Private and public records offer a wealth of information to fraud investigators

On Balance – The Magazine for Wisconsin CPAs

Without information, a fraud investigation goes nowhere. There are abundant sources of information on people and companies, and as the Internet continues to expand, so does the accessibility of the information.

Doing a thorough fraud investigation often goes beyond just analyzing documents produced by the client. The best forensic accountants and fraud investigators are able to find additional sources of information to help crack the case. There is plenty of art to finding clues in an investigation, and it all starts with knowing what to look for and where to find it.

Private records
Fraud investigations rely heavily on the availability of private records. In the typical business fraud case, helpful internal records could include financial statements, tax returns, sales and receivable records, expense documentation, proof of payments to vendors, or other information from a company’s accounting system.

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