How a Business Attorney Can Help Clients Identify Theft

In today’s complex business landscape, the risk of theft and fraudulent activities is a constant concern for businesses of all sizes. With the cost of goods and services rising, fraud is also increasing. To combat this fraud threat, companies often rely on a business attorney’s expertise who uses a forensic accountant with techniques to identify and prevent theft. This article will explore how a business attorney can assist their clients in detecting and mitigating theft by partnering with a forensic accountant. First, we will provide some stats from the 2022 Report to the Nations.

Even though every industry has fraud, the top five are:

  • Real estate – Averaging $435,000
  • Wholesale trade – Averaging $400,000
  • Transportation & warehousing – Averaging 250,000
  • Construction – Averaging 203,000
  • Utilities – Averaging $200,000

Organizations with the fewest employees had the highest median loss of $150,000

Asset misappropriation schemes that present the most significant risk:

  • Billing – 20% with a median loss of $100,000 /duration of fraud is 18 months
  • Noncash – 18% with a median loss of $78,000 /duration of fraud is 12 months
  • Expense reimbursements – 11% with a median loss of $40,000 /duration of fraud is 18 months
  • Check and payment tampering – 10% with a median loss of $100,000 /duration of fraud is 18 months
  • Cash on hand – 9% with a median loss of $15,000 /duration of fraud is 12 months
  • Skimming – 9% with a median loss of $50,000 /duration of fraud is 16 months
  • Payroll – 9% with a median loss of $45,000 /duration of fraud is 18 months
  • Cash Larceny – 8% with a median loss of $45,000 /duration of fraud is 14 months
  • Register disbursements – 3% with a median loss of $10,000 /duration of fraud is 12 months

Occupational Fraud: Who Commits It?

  • 23% is owners/executives

Nearly half come from the following departments:

  • 15% – Operations
  • 12% – Accounting
  • 11% – Executives/upper management
  • 11% – Sales
  • 85% of fraudsters displayed red flags of fraud
  • 6% had a prior fraud conviction

Top 5 concealment methods used:

  • 39% create fraudulent physical documents
  • 32% altered physical documents
  • 28% created fraudulent electronic documents on files
  • 25% altered electronic documents on files
  • 23% destroyed or withheld physical documents

How can partnering with a forensic accountant help you help your client?

1. Assessing Internal Controls:

One of the first steps is to assess the client’s internal controls. The forensic accountant can identify any vulnerabilities that may leave the business susceptible to theft by thoroughly reviewing the existing financial systems, policies, and procedures. They can then recommend improvements and strengthen internal controls to prevent fraudulent activities.

2. Detecting Financial Anomalies:

A forensic accountant has the knowledge and ability to analyze financial statements and transaction records to identify patterns or anomalies that may indicate theft. By scrutinizing the company’s financial data, they can uncover discrepancies, unauthorized transactions, or unusual fluctuations that may signal fraud.

3. Tracing Missing Funds:

If a client suspects that funds have gone missing, a forensic accountant has techniques to trace the path of those funds. By meticulously reviewing financial records, bank statements, and transaction logs, they can determine where the money has been diverted and assist in recovering the misappropriated funds.

4. Uncovering Concealed Assets:

In cases where theft involves the concealment of assets or embezzlement, a forensic accountant has techniques to unearth hidden accounts, property holdings, or investments. These findings can provide critical evidence in legal proceedings or negotiations to protect the client’s rights.

5. Expert Witness Testimony:

A forensic accountant can provide expert witness testimony to support the client’s case if the matter progresses to litigation. Their comprehensive understanding of financial records and ability to articulate complex financial matters in court can significantly bolster the client’s position in seeking damages and recovering losses.

6. Implementing Preventive Measures:

Beyond identifying theft, a forensic accountant can also work proactively with the client to implement preventive measures. This may include implementing internal controls, conducting regular audits, training employees on fraud prevention, and establishing reporting mechanisms to encourage whistleblowing.

In an era where fraud and theft pose significant risks to businesses, the expertise of a forensic accountant is invaluable. They possess the knowledge and experience to help clients identify, prevent, and recover from theft incidents. By leveraging forensic accounting techniques, they can uncover financial irregularities, trace missing funds, and assist in legal proceedings when necessary. By partnering with a forensic accountant, the client gains a vigilant guardian to safeguard their financial interests and ensure the integrity of their organization.

If your clients suspect or are experiencing fraud, call Sage Investigations, LLC at 512-659-3179 for a free 20-minute consultation. Let Sage shed light on the truth for your clients. We look forward to hearing from you and building a solid relationship you can count on. Click to read about the Sage Team and their CVs.