Forensic Accounting Services

What is forensic accounting?

Forensic accounting is an investigative service to detect fraud, embezzlement, theft, or improper financial controls. The most common source of fraud is your company’s accounting staff, so fraud investigations must be performed by an outside forensic accountant.

You should hire forensic accountants if:

You suspect your accountant, bookkeeper, or managers have been stealing company money.

You question the competency of your controller, finance manager, or CFO

Your managers cannot explain the company’s recent losses

How can I tell if my bookkeeper is stealing money?

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 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 a 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. None of the above are definitive proof of fraud but trained forensic accountants will use these clues to begin their investigation.

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How do bookkeepers commit fraud?

There are hundreds of ways to commit fraud. The most common forms of small business fraud are:

Charging personal expenses to business credit cards
Falsifying payroll hours or reimbursements
Creating false vendors paid through the company AP process
Masking cash transactions through balance sheet accruals such as inventory or prepaid expenses
Hiding assets or liabilities off the balance sheet
Falsifying internal audit reports

Accounting controls are the best forms of fraud prevention, and a lack of controls create opportunities for embezzlement. Common small business controls deficiencies often include:

Allowing their bookkeeper to pay bills without formal approval process
Lack of verification of payroll hours
No formal credit card expense approval process
Failure by management to examine financial statements monthly
Business owners do not know how to read financial statements
Inadequate paid-time-off policy
Hiring bookkeeping services with poor oversight (e.g. lack of complimentary CFO services)

How forensic accountants detect fraudulent activity.

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 CFOshare, we have even dug through shredder bins 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 CPA firm does not detect fraud. Nor does having your CPA file taxes create adequate controls to prevent fraud.

What should you do if your bookkeeper is committing fraud?

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

Expert Witness Services

CFOshare’s forensic accountants are qualified experts to assist in civil or criminal lawsuits involving fraud or financial negligence. As expert witnesses, our team will review evidence, interview parties, document opinions and, if necessary, testify in court in a simple, clear manner that can be understood by judges and juries.

How do I hire a forensic accountant?

Hiring forensic accountants is different than hiring a regular accountant. Qualifications like being a Certified Public Accountant (CPA) do not indicate someone will be good at forensic accounting. Instead, you need to seek an agency specifically experienced at forensic accounting.

Our team at CFOshare is experienced at conducting fraud investigations and helping small business owners clean up the mess. Whether you hire us or a different service, look for the following investigative skills when interviewing:

Experienced in forensic accounting with multiple organizations
Understands your industry and its nuances
Identifies potential weaknesses simply by looking at your financial statements
Experienced in litigation around forensic accounting investigations
Experienced implementing new controls to prevent future fraud.

Do not wait to hire a forensic accountant!

With each passing day the damage becomes greater.

We will review your financials on the call and identify weaknesses right away.