Are you being defrauded by the people closest to you?

Corporate investigators can uncover facts about any specific problems your company has through interviews, interrogation, and data analysis; identify facts and corroborate complaints within a written report with the facts surrounding the situation, equip you with options to deal with the offending employees, or bad actors and provide guidance on how to improve business operations to avoid recurrence. 

Forensic accounting a specialized field of accounting that looks at disputed financial issues. These can be how much money someone lost when they couldn't work after a car accident, business losses following a fire, or suspected fraud or embezzlement. Because these types of disputes can end up in court, a forensic accountant has to apply legal standards to their work as well as accounting standards.

The job of forensic accountants is to investigate financial activity to find evidence of fraud. This typically involves tracing a complex series of financial transactions in your accounting systems to find the root of the theft. Sometimes forensic accountants follow a long paper trail to find incriminating financial data. At Chesley Brown, we have even dug through trash bins and paper shredders in a forensic investigation. The evidence gathered is often used in confrontation, litigation, or out-of-court settlements. Proper forensic accounting collects and catalogues the evidence of fraud or embezzlement in such a way to support potential litigation. 

Remember, a review by your accounting firm does not detect fraud. Nor does having your CPA file taxes create adequate controls to prevent fraud. 

Business owners typically suspect fraud months or years after it has been regularly occurring. If you think fraud might be happening, there is a good chance that it has been occurring for a long time. Signs of employee fraud often include: 

• Your bookkeeper never takes vacation or time off 
• Your bookkeeper constantly seems too busy or overwhelmed 

• Your bookkeeper is unable to explain changes in business profitability, or the explanations seem inadequate  
• You have consistently shrinking cash flow despite profitable financials 
• When questioned, you get evasive responses from your bookkeeper or accountant 
• When asked about controls, your bookkeeper says, “Small businesses don't need sophisticated controls.” (In fact, businesses of all sizes need controls.) 

Neither a CPA financial audit nor a financial review will detect fraud. To perform proper due diligence, you need to hire a forensic accountant. Forensic analysis requires specialized skills not included in the standard CPA license. 

If you are unsure whether your company is experiencing any of the above signs of fraud, contact us for a free, confidential consultation. 

If a forensic accounting investigation determines your bookkeeper or accountant is committing fraud, navigating the next steps will be critical both for your business' success and legal standing. The aftermath of fraud can be filled with legal fees, damaged reputations, and wasted time if not handled professionally. A forensic accountant and attorney should advise you on the right actions and related risks, which may include: 

• Confronting the employee 
• Arranging repayment or reimbursement 
• Terminating the employee 
• Pressing civil and criminal charges 
• Negotiating an out of court settlement 
• Implementing accounting controls to prevent future fraud 
• Avoiding frivolous countersuits and expensive legal fees 
• Navigating any cash shortfalls within the business 

If an internal investigation of the company shows evidence of employee misconduct, generally this means that several actions will be taken immediately. Depending on the specific misconduct in question, this could include any combination of the following: 

• Update company policies and procedures 
• Taking corrective action internally 
• The discipline of the employee (or employees) involved 
• Self-disclosing the issue to the appropriate federal authorities 

How a company deals with federal regulators requires a measured, strategic, and forward-thinking approach. If the wrongdoing triggers an obligated self-disclosure, federal authorities are already investigating your company's business or registration practices, or there's a chance that a federal investigation can happen soon, the risk management team of the company will need to make informed decisions and engage an external adviser to chart a course of action that mitigates the risk of civil or criminal penalties or reduces exposure.