Most cases involving embezzlement, or suspected embezzlement, benefit from the input of forensic accountants like us, and the outcome of embezzlement cases often hinges on the types of evidence we can provide. We are specially trained in analysing vast amounts of financial data and supporting documentation to uncover the true facts of a matter and the extent of any embezzlement. We use advanced embezzlement accounting techniques to identify any suspicious activity and couple our accounting expertise with creative thinking and an inquisitive mindset to establish the handling of the funds in question. We act for employers seeking to establish the illegitimacy of an employee’s suspicious activities, as well as employees accused of embezzlement seeking to defend the charges.
What Is Embezzlement?
Embezzlement is a type of white-collar fraud involving those in a position of trust. The perpetrators receive the funds legitimately, but go on to intentionally misappropriate them and use them for illegitimate purposes.
Embezzlement can range from simple fraud involving relatively small amounts of money, to large-scale, complex operations through which millions of pounds are stolen. Embezzlement can be conducted in a variety of ways, but some of the most common are as follows:
As the name suggests, ‘siphoning’ is where an employee with direct access to their employer’s funds siphons off some of the money for themselves. It is one of the simplest forms of embezzlement. For example, a cashier might take small amounts of money from the cash drawer over a long period or might not enter a transaction into the till and pocket the money instead.
Payroll fraud is one of the most prevalent types of embezzlement. It involves employees, or, in some instances, the company itself, conducting criminal activity through the payroll system. A common example of payroll fraud is the so-called ‘Ghost employee fraud’. Ghost employee fraud occurs when the employee enters a ‘ghost employee’, being an individual who does not work at the company, onto the company’s payroll system, so they are paid wages. The ghost employee might be a member of the dishonest employee’s family or an accomplice. Ghost employee fraud commonly arises in large organisations with thousands of employees spread over a large geographical area, where the payroll functions are carried out centrally. The scale of the company’s operations, and the sheer volume of employees, mean the fraud can go unnoticed for some time.
Lapping involves an employee altering the company’s accounts receivables, which are the sums due to the company but not yet paid, to cover up their theft. The employee steals a payment made to the company by one customer and covers up their actions by diverting sums subsequently received from another, to the first customer’s account. The fraud can go undetected for considerable periods of time, with the employee continuously using newer payments to cover up their theft of older ones.
Lapping requires one employee to be responsible for recording all cash receipts, so is usually committed in smaller businesses that do not require an entire payroll department to undertake accounting duties.
4. Charity Embezzlement
Unfortunately, charities suffer from embezzlement in much the same way as any other enterprise. Charity embezzlement involves employees, volunteers or anyone else in a position of trust within the organisation handling the charity’s money improperly, for their own benefit as opposed to that of the charity. For example, they might steal money donated to the charity, or use the charity’s credit cards to make purchases of goods or services for their personal use.
What Is Embezzlement Accounting?
Uncovering the nature and extent of embezzlement can be an incredibly complex task. Even apparently simple frauds can go back years, and successfully unravelling them often involves the analysis of huge volumes of financial data, financial records and other documentation. The skill set and expertise of forensic accountants render us ideally placed to carry out the task. We use cutting edge embezzlement accounting technology, much of which we develop in-house, to review the relevant information, identify any that is missing, and get to the bottom of a matter swiftly and efficiently.
For example, in the context of lapping schemes, we use our embezzlement accounting expertise to audit the company’s cash receipts over the relevant period to identify how they have been applied. If our investigations show that cash receipts have regularly been applied by the employee to the incorrect customer accounts, this can be a red flag for lapping, and we will go on to carry out further analysis to substantiate our findings and establish the exact nature and extent of the scheme.
We can present our findings in a variety of formats and will tailor our approach to your requirements and budget. For example, we can provide a letter of advice highlighting the pertinent points of our investigations, or a more detailed, full Report describing our methodology and results. We regularly appear in Court as expert witnesses, presenting our evidence under cross examination clearly and robustly.
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