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Forensic Accounting

When should you call a Forensic Accountant?

What is Divorce Forensic Accounting?

Who typically is responsible for fraud and Embezzlement?

Is Fraud Limited to Businesses?

What Causes Fraud?

What Are the Signs of Fraud and Embezzlement for Companies?

What are the Telltale signs of Fraud and Embezzlement for Individuals, Retirees, and the Elderly?

How Does an Individual Avoid Financial Fraud?

What is Leakage?

What are the Chances of Recovering Funds That Were Embezzled or Stolen?

How Long does it Take to Detect the Fraud?

 

When Should You Call a Forensic Accountant?

If your gut is telling you something is not right, or you suspect an individual or company is fraudulently stealing money from you, it's time to act.  You need to contact us immediately and do a preliminary forensic investigation.

Fraud and embezzlement are financial crimes that usually start with a "one time, never do it again" opportunity by an individual facing a financial crisis.  They see your company's checkbook or cash register as a solution to their problem.  But once they get a taste of having access to funds that can solve many of their problems, they often become reckless and dip into the company till again and again to straighten out a second, third, then fourth problem, etc.  These people must be stopped.  If left unaddressed, the problem can worsen to the point of financial collapse.  If caught early enough, the siphoning of funds can be halted, and a recovery process begun to recoup a portion of the missing monies.  Most importantly, it allows your company to regain the profit margins that should have existed all along.

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What is Divorce Forensic Accounting?

If you are going through a divorce with significant assets and income involved, and suspect your spouse is hiding these, you should allow Accounting For Everything to do a preliminary Forensic Investigation.  We can determine if this is occurring and detail what steps should be taken to expose it.

A divorce is never a pleasant experience and when finances are involved all parties develop a war like mentality, which often gets nasty.  Sometimes the major income provider will attempt to hide or disguise income and assets.  It is very easy on paper to make a privately owned business look like a failure with little or no assets, but a proper Forensic investigation can uncover the real financial picture.  The fact that any attempt to disguise assets or income generally leads to a bigger financial deception that can result in a completely different divorce settlement.

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Who Typically is Responsible for Fraud and Embezzlement?

For many businesses, Partner or Corporate Officer greed accounts for much of the financial discrepancies.  When a business has two or more partners or owners, there often is a sense of entitlement that one partner deserves more compensation than the other because they feel they are doing more of the work.  They often find ways of diverting funds, through the use of corporate credit cards, fake invoices, fake vendors, and hundreds of other methods.

Employee Embezzlement and Fraud is another major contributor to these financial crimes.  Many times employees can develop very clever schemes that allow them to pilfer funds from the company that can be hard to detect.  When a company begins to see an unexplained erosion of margins, it is urgent that a complete forensic review be implemented.  Sometimes this will lead to an employee, business partner, or relative committing fraud or embezzlement, but sometimes the forensic review simply uncovers costs that have outgrown the sales mark-up.

Another major cause of fraud is a person has a gambling or drug problem, which leads them to steal from companies they work for or individuals they are related to.  It is urgent that these people be located and stopped as their addiction usually becomes more severe and the amount of theft increases over time.

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Is Fraud limited to Businesses?

People, especially the elderly and religious, are very susceptible to fraud through family members, caregivers, telemarketers, con artists, fake financial institutions, fake charities, religious organizations, pyramid schemes or disreputable companies.  It is critical that a forensic examination of the financial records be conducted to determine how the fraud is occurring and develop steps to catch the predator, and make some attempt at recovery of the funds.  The chances of full recovery are very low, but identifying the predator will stop the theft of funds and allow the person to understand the depth of the problem. 

For Low Income individuals living on Social Security with meager savings we will often do the forensic investigation for free or at a minimal fee.  The only requirement is that if we do find fraud in any form the affected individual must file a police report and/or Securities and Exchange Commission action and prosecute the perpetrator so others can avoid the calamity of losing their life savings, even if it is a family member.  We know this will be an extremely emotional and potentially embarrassing experience but good people have to work together to put a stop to those who are greedy and criminally selfish.

Retirement funds can be completely stolen by a fraudulent telemarketer or fake charity, without the family knowing it.  Often the elderly person is too embarrassed to admit the problem and continues to send money to the fraudster in the hope that a little more cash paid out will deliver them the windfall of a lottery or contest that will never come. 

Sometimes it is just their innocence in not understanding there are people out there who seek to criminally exploit the vulnerable for their own personal greed.  You must control your anger, especially if the funds lost were your inheritance.  Take a step back, take a breath, realign your attitude and then approach the victim with a sincere and understanding mind-set.  Be there as a healer, not a disciplinarian.

Churches are especially liable for the financial abuse of the elderly.  They make claims of buying the elderly's way into heaven, when in fact; they are just taking the money from people who often have to sacrifice medications, or day-to-day living expenses and simply can't afford these contributions to line the pockets of church leaders.  A legitimate church must refuse the donations of the elderly on a fixed income, or if the elderly insist on contributions, return those funds in full by providing meals or paying for their medications.

As a caring family member you have to be available and patient with the victim of the crime.  Be understanding, not judgmental, for often the victim is not fully aware of how seriously they have been exploited.  They often fall into these financial traps as a result of trying to define their financial legacy, to leave something for their relatives, or to get out from under the tremendous pressure of living on a limited, often insufficient retirement income.

Make sure they know you are going to be there to help them through it.  Sometimes it is going to be extremely frustrating, and other times it will be very emotional, but often only a family member can offer the type of support and understanding they so desperately need.  Don't stand in the wings, go forward and force your way into their lives, no matter how proud the victim is.  Make them understand you are doing this as an act of love, not punishment.

Often these family members will be in denial, so you must prove to them how they are being taken advantage of, and often it is best to find videos from credible news organizations that lay out how the fraud occurred and what to do when it has happened.

If you feel there is any type of financial irregularity involving an elderly person or a person with a disability, take action and contact Adult Protection Services.  Let them investigate the issue and take the proper legal action to put an end to any unauthorized or suspicious transactions.  They have the resources to prosecute the person responsible and to provide the necessary protections to stop the financial abuse.

Sometimes the State or County agency will not have the resources to do a full forensic investigation into the finances of the abused person, and Accounting For Everything can provide those services to make the prosecution of the individual criminally responsible far easier and swifter.

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What Causes Fraud?

Greed is the single largest cause of fraud facing companies and families and that is why laws and regulations exist to prevent this, and, when exposed, to prosecute it.  We provide the intelligence to determine who it is, and much of the evidence to prosecute them.  We know this is an emotional and potentially heartbreaking situation, but if not addressed this funneling of funds can lead to your financial distress and eventual collapse.

To stop them takes a decision on your part to explore the potential of fraud or embezzlement.  You need to allow us to do a preliminary investigation in which we do a cursory review of your financial records to determine if there is a pattern of abuse.

Typically a cursory review will take 3 to 5 hours for small companies and individuals, while larger companies can take significantly longer depending on the accounting software or the method of bookkeeping.  If the accounting was shoddy or done by hand instead of using an accounting program, it will add greatly to the time necessary to locate the fraud events and determine who committed them.

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What are the signs of Fraud and Embezzlement for Companies?

If you have noticed that the profit margins have been declining without a reasonable explanation, it is urgent you contact us to investigate the cause.  If you find that the amount of cash in the bank has routinely decreased and there is no explanation, you need to take action.

There are schemes greedy people use to increase costs and keep those funds for themselves.  Sometimes margins do change because costs go up, but your company has not adjusted the selling prices to reflect this, and it is a matter of just proper margin control.  On the other hand, if costs for your company have gone up, it could be because you have someone in your company exploiting a situation in which they are stealing using a criminal enterprise that requires a forensic investigation to detect.

If you find credit card use has increased, it is critical that the charges be examined for legitimacy and as true business expenses.  Owners of businesses are notorious for using their corporate credit cards for personal use, and this practice can lead to special investigations by the IRS and State tax officials.  Anytime money is spent on a credit card it MUST be for a legitimate business expense.  If it is not, it is considered a personal withdrawal and the person making the charge has to include that as income, unless they pay the company back for the full amount charged.

If you suspect financial theft in your company, you need an independent third party to review your financials and come to an unbiased determination of whether there are any real discrepancies.  The good news, the majority of times the discrepancies are just bookkeeping errors that are easily addressed.  But when there is fraud involved it must be addressed immediately, and for the owners to seriously consider civil or criminal action; or a change in corporate structure.

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What are the Telltale Signs of Fraud and Embezzlement for Individuals, Retirees, and the Elderly?

For individuals, being able to detect when they are in distress can be difficult, even impossible.  Usually it starts off subtlety.  They change their spending habits, such as stop going to lunch to save money, or they don't handle stress as well as they used to, or their personalities seemed to have changed, where they were once jovial, now they are more serious.

They often will look like they have not slept well in weeks.  If you ask how they are sleeping and they answer they are not sleeping well, and other signs of distress have appeared, inquire as to why they are not sleeping well.  Most often they will either divert the question or answer in a way that suggests nothing is wrong.

Remember, often these people are stressed, and they are not thinking clearly.  Casually ask them if they have played any lotteries or contests, or have they made any contributions to a charity and how often?

Never talk down to them, talk to them as you want to be talked to.  Do not berate them for making a mistake.  Accept it, even if it affects you financially.  If you are a spouse or relative, it is important that you treat the situation with a great deal of understanding; even though you may now be subject to the same stress and anxieties your loved one is enduring.  Work together to seek out a solution. 

If you or loved one find yourself in this situation, do not hesitate to contact Accounting For Everything and we will guide you as to how to approach this difficult time at no charge.  We recognize people come first, and your well-being is our reward.

One of the biggest exploiters of the elderly is religious organizations and churches.  They play on the fear and vulnerability of the elderly, pushing forth the farce that their money will help them get to heaven and better their community.  Churches, especially Mega Churches have one purpose, to abscond with the social security and pensions of the retired, for these people are the most vulnerable to fear and fraud.

A person on a fixed retirement income should NEVER make donations to religious organizations, for they are giving up a sizable portion of their income they need to survive, while the church or religious organization often uses the Elderly's donations to benefit the leaders and to build an empire. 

Ask yourself, who needs the money more, the retired person who has to skip medications and meals, or the person who is riding around in a luxury car preaching how the Church needs their money to spread the word and survive?  Shame on them.

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How Does an Individual Avoid Financial Fraud?

There are five specific situations all people should be wary of: 

1)  Investment Schemes:  Any investment that promises interest income of 10% or more per year should be scrutinized extensively.  An investment scheme offering greater than 15% interest is bound to be fraudulent, and could be illegal or conducted by unscrupulous people.  Either Accounting For Everything or you must do a complete background check of the company and the individuals managing the company, plus the person you are dealing with directly.  If they have any criminal history the investment should be avoided.

Be wary of the investment advisor who tells you they have something that is going to pay off big time, but you must make the investment right this minute.  HANG UP.  An investment can only be made with careful consideration and due diligence.

Be especially cautious of the telemarketer that says a friend of yours referred them to you.  Even if they name that friend, do not make the investment.  Speak to that friend; see if they really did make the recommendation.  If they did you MUST do your own research, independent of your friend.  Remember, there will always be safer investments with realistic returns in the future.

2)  Contests, Raffles, Lotteries:  If anyone ever asks you over the phone to participate in a Contest, raffle, or lottery, immediately hang up on them.  All Lotteries are basically losing propositions.  If you have to participate in a gambling scheme, the only lottery you should ever participate in are those sponsored by the government and sold in retail outlets like 7-Elevens, Circle Ks, etc.  If somebody you don' know calls asking for money to enter you into a contest, raffle, or lottery:  HANG UP.  They are not legitimate, and it is going to lead to greater and greater financial risk.

3)  Telemarketers:  NEVER deal with a telemarketer.  There are very few legitimate telemarketers, and many use various ruses to entice you, the target.  One approach they use is they are doing a survey, another is they are calling from a religious organization.  If any telemarketer ever asks you to take a survey, HANG UP.  If any telemarketer says they are calling from a religious organization that you do not recognize HANG UP.  Do not engage them in any conversation.  Do not say "No Thank you".  Just HANG UP!!!!

NEVER be kind or courteous to a telemarketer.  Don't tell them you are not interested and then continue to be kind to them.  The only way to stop a telemarketer is to hang up on them.  If you suspect a telemarketer JUST HANG UP.  Do not say a word, JUST HANG UP.  If they get even the slightest hint that you are courteous or kind, they know they have you as a target and will continue to hound you for money.  Even worse they may sell your phone number to other telemarketers.

4)  MLM (Multi-Level Marketing):  Companies like Amway, Herbalife, Nu Skin, ACN, etc. are pyramid schemes in which there is little to no chance of ever making any money or achieving sales goals, and their promises of riches are near impossible to achieve.  Most people caught up in these scams are through so-called friends or business associate.  Their products tend to be inferior and grossly overpriced.  Be very wary of ads that say "work from home" or "earn money in your spare time", as these are often enticements to sign up for a Multi-level Marketing Scam.  .  There is little to no chance of recovering funds stolen by these people and companies, however, often there are lawsuits or class actions against the company and it would be wise to join one of them. 

5)  Charities, especially religious Charities:  Religious people are extremely susceptible to Churches and religious organization preying on the Elderly.  As they face the end of their life, they are susceptible to claims that their money will be for the greater good or will help them get into heaven.  The hard reality is most religious charities benefit the people who run the charity or church instead of their parishioners.  Asking for money for a new building or for a crusade in another country, these are all a means of getting money from the elderly, and if you examine their financial statements, you will find that the majority of the money is never used for the stated purpose, but rather is used to raise more funds and to pay the leaders of the charity exorbitant salaries and benefits.

If your relative or acquaintance is living on a fixed retirement income, help them see that their donation does not benefit the people they think it is. 

If you want to know if a charity is legitimate and what their operating expenses are compared to the funds used for the stated purpose go to:  https://www.charitynavigator.org/  This website has a great deal of public information that is required to be filed by charities, however, you will find a consistent lack of religious organizations being listed, because they know they are operating a fraud scheme and the law is allowing them to do it under the guise of religion.  If a religious organization was legitimate they would insist of publishing their financial data so everyone knows they are doing the work they promise.  When you are operating a fraud, the last thing you want is a public record of their finances.

If someone insists on making a religious donation, steer him or her towards one with a public disclosure that shows the money is really being spent as promised.  Enrich the lives of the people who need it, the elderly on fixed income.

If you have already fallen into one of these schemes, get help.  Allow your family member or close friends to help you.  A fresh set of eyes will give you sensible advice and an unbiased voice.  You need help to deal with the problem and contact Adult Protective Services and see if they can offer advice and take action to stop the abuse, not only to you, but also to potentially others.

This is going to be embarrassing, it is going to be emotionally draining, but you need to seek help and get the problem resolved, and put an end to the continued financial abuse you are experiencing.  Realistically, you will begin to heal somewhat, but never fully.  If possible, use your family and friends to help you through this time.

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What is Leakage?

Leakage is an accounting term in which there are funds used for purposes that are not for the corporate benefit, often taken from a cash register or other cash transaction.  Sometimes it is inventory that is normally sold that is diverted to personal or internal corporate use.  An example would be an office supply store taking copying paper and using it in their corporate copiers, versus selling it to a customer.

It can be as simple as someone taking $5.00 from the cash register to buy coffee.  Can this be stopped, yes and no, it depends on what steps you are willing to take.

Some companies allow employees to do this as long as they provide a receipt.  This permits the bookkeeper to enter the transaction as an expense, and allows for a complete reconciliation of the cash draw.  But this can also lead to a sense of entitlement, in which dipping into the cash draw becomes more attractive to the employee, and emboldens them to do it more often. 

Another approach is to reimburse employees who use their personal credit cards in the form of a payroll payment for receipts submitted.  This can be tricky, because technically it is a personal income item, instead of an expense for the individual. 

Also worth considering is getting reusable gift cards, or a debit card linked to a specific account, which the employee can use, as long as they submit a receipt.  Never fill the card or account with more money than would be reasonable.  As an example, a Manager might get a card with $100 on it at a time so they can buy coffee for several people as a reward for a job well done, while a regular employee would get a card with just $25.  It is important to note that a manager should only spend the money as a reward, versus a daily occurrence, unless you want this to be an added benefit for the employees.

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What are the Chances of Recovering Funds That Were Embezzled or Stolen?

The truth is there is little to no chance of recovering all of the funds that have been stolen.  Depending on the person who stole them and how they were used will determine the chances of recovery.  If they have a drug or gambling problem, most likely the funds will never be recovered, but at least you can stop the bleeding, and potentially sue in civil court for a small amount of recovery, now or in the future, if the person has any real assets.

On the other hand if it is just greed that motivates the criminal, chances of a small recovery are better, but not great.  Often they spend money on assets like real estate, cars, boats, jewelry, collectibles, etc.  These items can be seized and sold to recoup a portion of the stolen funds.

There is a limited time to recover funds, and often a delay can result in substantial additional losses.  But often this fraud will result in little to no recovery, but our investigation will allow you to put an end to it, and if you so choose to pursue criminal or civil prosecution in court.

We are determined in our approach.  We take our assignment very seriously and do more than just examination financial records; we explore hundreds of other avenues that help us to determine the fraud, and what recovery of funds can be achieved, if at all. 

Once the criminal converts the funds into cash it is very difficult to trace them, and if they have been sent out of the country, chances are slim to none of recovering those funds.

Accounting 4 Everything will conduct a preliminary examination of your financial records based on the information you provide to determine if there is the potential of fraud or embezzlement.   Uncovering fraud is challenging, and as Forensic Investigators all we can do is detect it, and trace the funds to the person responsible.  If you want to recoup those funds, it will require an attorney and the filing of a civil case against one or more of the suspected fraudsters.  This gives you the power of subpoena and the ability to place an injunction on those believed to be criminally or civilly at fault.  With this power we can freeze their assets, and then get their bank records and other financial documents to build the case and determine what the potential of recovery is.

 Often the cost of civil litigation will be far greater than the amounts to be potentially recovered.  In this situation, the best alternative is to pursuit criminal charges against the individuals responsible, but this takes a lot of time and any funds stolen will most likely be moved into cash and then not be recoverable.

If the money leaves the United States it is usually to areas in the world where US legal authority is nil to none, and in fact the criminal may be fully protected.  But if the individual transferred the funds through the United States Banking System a trace can be made to where the funds went, but there is little that can be done to recover them

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How Long Does it Take to Detect the Fraud? 

Every occurrence of fraud is unique and singular.  There are always variations that surprise us, but for the most part the inkling of fraud is usually detected within 5 to 25 hours of investigation, depending on the size of the company for smaller companies and large family matters.  For larger companies, it can take weeks to isolate the fraud because there are so many transactions that have to be assessed and researched.

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