The term flexible can mean many things when listed in a job description asking employees to adjust to different aspects of the position on a regular, if not a daily basis. Flexibility is certainly an aspect of forensic accounting, but in ways many people and organizations overlook or perhaps are just unfamiliar with.
Many Different Needs
The examinations being conducted by Eide Bailly’s Fraud & Forensic Advisory Services run the gamut of resolving allegations of misconduct/fraud in the work place. That includes embezzlement, employee theft, false vendors, ghost employees, improper payroll, exaggerated overtime or expenses, as well as many others. We might also be engaged to resolve disputes between partners and/or spouses, calculate lost profits, determine any economic damages suffered by a company or individual or assist with current or potential computer forensics matters. Any of these engagements could include summarizing and/or reconciling revenues and expenses to confirm the use of company and/or individual funds. In divorce matters, we are commonly engaged to identify any potential questionable transactions where company funds were used to pay personal expenses and may not be included in financial income statements for disclosure in divorce court. The concern of one party hiding money from the other is also a common concern in divorce resolution matters.
Same Start, Different Paths
Many times, a forensic engagement/examination will begin simply with same concern a company and/or individual has: What happened to all the money? The scope of the work can then change directions due to new information showing some other type of potential fraudulent scheme or practice taking place.
For example, a car dealership engaged us to help determine if the cash being collected for deductible payments in the body shop and being sent to accounting were being documented properly. The initial work identified issues with how funds from each department were being accounted for. It was determined all funds were being co-mingled so heavily, it was going to be very costly to unravel all the transactions. The owner then asked if there was anything else that might identify potential issues quickly. Knowing embezzlements have been covered up internally by concealing transactions in past due bills, a report of all 180-day past due invoices was requested. Upon reviewing this report, 11 transactions involving the same employee were observed. One of these transactions, in the amount of $14,000, was past due six months. This specific transaction was a business-to-business transaction, which made it stand out even more. When the service manager was asked to identify the employee involved, he said it was himself. When asked why he had not contacted this company about the outstanding $14,000 invoice, his response was not what was expected. The sales manager’s response was; “do you think I should call them?” Most of our forensic accountants are CFEs (Certified Fraud Examiner) and several are recognized as CFIs (Certified Forensic Interview) who are trained in identifying deception in individuals, so they knew this response was not typical and appeared deceptive. Within a short period of time, the service manager left for lunch and abandoned his job. The examination was refocused onto the service manager’s activity. This flexibility identified $250,000 in questionable transactions involving the service manager. One of these was the $14,000 transaction, which was found to be past due two years and was for repair work completed for a friend of the service manager, who had told the friend he would take care of the repairs for them.
Thinking Outside the Checklist
The flexibility of forensic accounting examinations allows for work to be conducted without the use of what many people might associate with a common audit or “checklist.” This flexibility allows our forensic accountants to change focus quickly to assist our clients with resolving their concerns and trying to answer that question of what happened to all the money.