In response to the news about bankruptcy due to employee embezzlement, an expert in forensic accounting (Pam Wickes, CPA, CFE, CFF, ABV) posts a response:
It is an unfortunate end result when a company has to file for bankruptcy as a result of an employee’s embezzlement. It is bad enough when an employee steals from their employer but when this is the ultimate effect, it takes it to another level.
I hope this is a reminder to all business owners that this can happen to any company. Plus, businesses with fewer employees, with which to separate accounting processes and duties, are at more risk than those with more accounting personnel. Business owners can take action to prevent this from happening by at least reviewing the bank statements (either online or from an unopened envelope from the bank) and the cancelled checks to check for suspicious check amounts or payees or other questionable transactions.
When I am hired to investigate employee fraud and to quantify the losses, it is not uncommon that the victim company has concerns that their outside CPA firm should have caught the fraudulent activity. The answer to that tends to depend on the fraud scheme, the fraudsters methods to cover up the fraudulent activity, and the level of services the outside CPA is hired to provide. Unfortunately, there is often a gap in the expectations of the CPA’s client in regards to the level of services that will be rendered as compared to the level of service a CPA is hired to provide. Please be aware that even an audit of a company’s financial statements is not designed to catch fraudsters.
A separate engagement specifically designed to perform tests to try to find fraudulent activity is necessary when a company wants to investigate that potential issue. However, due to the nature of fraud, assurances cannot be provided that fraud, if it exists, will be uncovered as a result of the engagement. Sometimes companies take preventative measures by retaining me to review their internal controls and processes related to their accounting functions and to provide recommendations as to additional checks and balances they may be able to implement to help protect themselves from this kind of employee dishonesty.
Read “Embezzlement forces Albany marketing and web design firm out of business” published by Albany Business Review