WHITE-COLLAR CRIMINALS ARE always looking for new ways to steal time and money, but forensic accountants are catching many of them in the act, assisting clients and protecting their assets. Here are some case studies that show how CPAs are finding the crooks and uncovering their clandestine activities.
Baker Tilly Virchow Krause, LLP
By Robert Sprague, MBA, MSA, CPA, Partner, Forensic, Litigation & Valuation Services
Fraud within the procurement function of an organization can be costly and is often difficult to uncover. Typically, the perpetrator has found a way to circumvent existing controls, which allows the fraud to go undetected. When a company suspects that a fraud has occurred, it must act quickly to minimize any losses. Recently, a client contacted us when they suspected an employee was exploiting his senior role in procurement to purchase personal items. Our specialists quickly preserved important electronic evidence, including performing a forensic image of the subject’s laptop. Once we identified the fraudster’s primary scheme of electronically altering invoices to disguise the nature of purchases from legitimate
company vendors, our forensic data preservation sealed the case. We were able to use metadata captured on the fraudster’s laptop to obtain important, forensically preserved evidence showing the invoice alteration that we provided to law enforcement for prosecution.
BDO USA LLP
By Gerard M. Zack, CPA, CFE, CIA, CCEP, CRMA, Director, Advisory Services
Digital evidence has become key in detecting and investigating fraud. A mid-size wholesaler recently discovered a discrepancy in inventory after attempting to reconcile a physical count with the company’s accounting records. Management assumed one or more employees must be stealing inventory, but the amount of the discrepancy was quite large, so BDO was called in to investigate. Once we extracted the electronic data from the company’s accounting and inventory management system, we uncovered an entirely different type of fraud scheme. Nobody was stealing inventory (at least not in the amounts suspected). Instead, an employee in the accounting department had set up a shell (fake) supplier in the company’s purchasing system and paid this company thousands of dollars for “inventory” that was coded in the system in a manner designed to commingle it with real
inventory—but the funds were actually being deposited in a bank account controlled by the employee.
By Michael Napolitano, CPA, Partner
Our client’s bookkeeper had control over all aspects of banking, including check writing, receiving payments, making deposits and recording transactions. As part of Citrin Cooperman’s internal controls review, we asked to meet with the bookkeeper to assess his responsibilities and discuss implementing some separation of duties. The bookkeeper was repeatedly unavailable so, with the owner’s permission, we came without notice on a weekend to review the books and records. We immediately discovered that the bookkeeper was writing unauthorized checks to himself through QuickBooks, cashing the checks, then changing the checks to actual vendors so the owner would not detect the fraud—more than $17,000 was stolen within 18 months. We advised the owner about reparation options, as well as future fraud prevention controls. Separation of duties was one simple remedy; we advised the owner to personally review online transactions on a weekly basis, and review bank statements each month.