Don’t Let Your Clients be the Next Fraud Victim

By Chrissie A. Powers, CPA, CFE, CFF, CVA

You lock your car doors to keep burglars out and tell your children not to talk to strangers, but are your clients doing enough to protect their Company’s assets? The owner of ABC Company thought so but he was wrong when he found out the controller was deleting invoices paid in cash out of their accounting software and pocketing the money. The controller was caught when a customer tried to return merchandise and the invoice could not be found in the system. This unsophisticated accounting software used by this Company was the fraudster’s best friend. We were called to investigate the allegation and were able to identify all of the missing invoice numbers in the accounting system, got a signed written confession, and a restitution agreement.

Are your corporate clients paying fictitious vendors or ghost employees? John Smith the owner of Smith Packaging didn’t think so until he discovered that his controller and human resource director were in collusion and doing just that. Plus, Smith Packaging was paying the controller’s and human resource director’s personal credit cards. During the investigation, we were able to prove the controller was also buying multiple electronic items from office supply stores and selling them. Both suspects served time in jail for their crimes.

The accounting package your corporate clients are using may be an aid in assisting their employees in diverting Company funds. Many employees are aware of how to override the system and what the dollar thresholds are for needing a second approval. They know how to manipulate the journal entry to put the dollar amount below the scope of their auditor or they are able to give a convincing answer to the individual questioning the entry’s validity. Let’s put this in perspective; we often see employees massaging the numbers on expense reports. The policy at many Companies is that a receipt is required for any amount $25 and over. Analyzing expense reports from Companies with this type of policy will produce a lot of $24.99 amounts submitted for reimbursement. In order to deter employees from abusing expense report reimbursement, we suggest employees be made aware that the expense reports are randomly being analyzed.

Do your clients feel that someone may be committing fraud within their Company? Is there a particular area, like Accounts Receivable, that they feel their internal controls may be lacking? While fraud is a crime of deception and we cannot guarantee that you will catch all frauds, P.D. Eye Forensics, LLC may help them sleep a little easier at night. We can analyze the accounting records, systems and procedures for signs of potential fraudulent activity on the part of Company employees. We can also evaluate the measures the Company is taking to deter fraud within the organization. Don’t wait until your clients are a VICTIM.

(Names have been changed to protect the victims and suspects.)

Chrissie A. Powers, CPA/CFF, CFE, CVA

Chrissie A. Powers,
CPA/CFF, CFE, CVA

Managing Member
P.D. Eye Forensics, LLC