When an embezzlement takes place, emotions can become overwhelming and have a huge influence on how the matter is either investigated or disregarded.
The Impact of Embezzlement
Embezzlement is defined as the misuse or misapplication of an organization’s assets that are entrusted to an individual.
Most stories of embezzlement include how the employee was liked, trusted and helpful. Often they were “treated like family” within the company. This is part of the reason why the emotional impact of embezzlement is so deeply felt by an organization.
The matter becomes even more complicated when the person involved is an actual family member. While no one wants to believe their son, daughter, husband or wife could steal from the family business, it happens more than you might realize. Situations like theft from a family trust, family estate or a grandparent are common place.
The Association of Certified Fraud Examiners shows that 75% of all businesses are affected by some type of fraud. On average, it takes 24 months for that fraud to be uncovered. On a good day, 60% of a company’s employees are stealing from them.
Why do employees embezzle?
Embezzlement’s Emotional Toll
Everyone has an emotional attachment to the business they work for. That emotional attachment becomes even stronger when the business is their own. If employees didn’t attach themselves emotionally to the business they work for, how successful would that business become? This is even true in governmental agencies.
That emotional attachment, however, cannot prevent employees or family members from stealing. Typically, individuals are under heavy financial pressures and do things they normally would not do in order to make ends meet.
Emotional attachment clouds your decision surrounding holding a family member or long trusted employee accountable for their actions. How can you be assured this individual will no longer victimize your business or family? Even if you terminate this employee, how are you assured this individual will not victimize the next business/organization or friend they work for?
The Importance of a Certified Fraud Examiner
When it comes to protecting your business, family revenue or taxpayer assets, it takes individuals who can focus on the task at hand and not miss important information or facts. A certified fraud examiner (CFE) can do just that.
CFEs assist with training and suggestions on how to help prevent an employee theft from occurring in the first place. This advice revolves around establishing checks and balances regarding the financial accounting for the business or organization. This typically happens through an internal control examination.
Involving a CFE to help determine exactly what occurred and how it occurred will assist with determining the type of prosecution to follow should the matter be referred to a law enforcement agency for a criminal investigation or handled through the civil court process. If the referral becomes a criminal case or a civil trial, the CFE becomes the voice for the affected business/organization. They can speak to what occurred, as well as the losses that resulted from the embezzlement.
Unsure if you need a Certified Fraud Examiner to conduct a forensic audit?Here are a few reasons you might
How Hiring Practices Can Help Prevent Embezzlement
The first step in preventing embezzlement is to ensure you have the proper controls in place. This begins with the interview process.
The following are recommendations for vetting potential candidates during the pre-employment hiring process to avoid becoming the next victim of embezzlement:
Although these recommendations are essential in mitigating embezzlement risks, your organization should follow its hiring policy. If your hiring policy hasn’t been updated in several years, consider working with an employment attorney to review and update your policy manual to today’s standards.
The hiring process is an important step in fraud prevention because fraud doesn’t happen if people aren’t involved. The next step in preventing fraud is to ensure your organization has the proper checks and balances over its cash receipts, cash disbursements, payroll and all other assets. Your organization’s internal controls are only as good as its weakest link, so be sure to review and monitor your internal controls on a periodic basis.
Take the Emotions Out of Embezzlement
The emotional impact to employee or family theft is huge. But it shouldn’t prevent you from taking the necessary steps to protect your business, both from current and potential fraud and embezzlement activity.
Prevention mechanisms like internal controls and certified fraud examinations can help give organizations a clearer view of the situation, removing the emotional element and allowing more full reconciliation.
Fraud can happen to anyone.
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