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Don’t Be Part of the Headlines! – Accounting Fraud Scandal

March 29, 2012 by Ed Becker

For eight years, the woman worked in accounts payable for a Catholic Archdiocese, gaining the trust of her superiors. Colleagues praised her quiet dedication and hard work, and noted that she prayed often.  No one questioned the hundreds of checks she wrote at the archdiocese to cover small expenses, like office supplies and utility bills.

Recently, this woman, was charged with embezzling more than $1 million over seven years from the archdiocese.  She kept the amounts to less than $2,500 each to avoid the approval of a supervisor required for larger checks, she was “lying” and “stealing” and writing checks to herself in all but one month during her many years at the archdiocese.

How do you avoid an accounting fraud scandal like this from happening to your business?

Tip #1 – Hire an accredited bookkeeping firm or accountant to review the work of your staff

If you do your own bookkeeping or have one employee dedicated to this task, consider having a third party, such as Oustource Your Books LLC review your books periodically. They may find honest mistakes, such as transactions that have been coded incorrectly, amounts that are wrong, or classifications that don’t make sense.

This additional set of eyes can also ward off accounting fraud by deterring dishonesty.  When employees know they are being watched, they are less likely to commit fraud.

Tip #2 – Insist on appropriate insurance coverage

Ensure that your outsourced bookkeeping service carries the appropriate insurance coverage in the event of such loss.  Not all do so ensuring that they are bonded and carry professional liability is critical in protecting your company.

Tip #3 – Make sure employees take vacation

Certain things may arise during that week that someone else is filling in that may raise a red flag. Many times when theft is occurring, an employee is hesitant to take vacation or allowing others to perform their functions.

Tip #4 – Create backups and audit trails

The right outsourced bookkeeping firm knows to keep a backup of your financial information off site. The firm can back up your information frequently, date the information, password protect it, enable you to retrieve your information, and encrypt it for you to prevent others from manipulating your important financial records.

Having a professional outsourced bookkeeping business conduct your backup, can help determine when records were tampered with, when a theft began or how long an honest mistake has been on your books. There is a hidden “audit trail” in QuickBooks that most bookkeepers do not know about.


As an owner, this is your business and you MUST stay involved even if you have hired a person to perform tasks for you.  Watch out, you don’t want your name on the front page of your local newspapers.

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