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A Closer Look at Fraudsters, Part Two: How They Are Caught and Who They Are

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

This blog continues the discussion started last week by forensic accounting expert David Anderson of David Anderson & Associates, a Certified Fraud Examiner in Philadelphia. Over the next few weeks, Anderson will be looking at the Association of Certified Fraud Examiners (ACFE) 2018 Report to the Nations – 2018 Global Study on Occupational Fraud and Abuse.  This week, Anderson examines how frauds are detected and the characteristics of the people who commit fraud:

  • Most people believe that having a financial audit will detect fraud. However, the 2018 Report found that only 4 percent of all frauds were detected by external auditors.  The percentage of frauds detected by accident was 7 percent – nearly double the audit rate.
  • The most frequent method by which frauds were detected came from tips – the 2018 Report found that 40 percent of all frauds were detected from tips. Employees were the source of 53 percent of all tips, followed by customers (21 percent), vendors (8 percent) and competitors (3 percent).
  • Internal auditors detected 15 percent of all frauds.
  • Management review detected 13 percent of all frauds.
  • The 2018 Report found that although owners and executives committed only 19 percent of all frauds, the median loss from such frauds was $850,000. Managers committed 34 percent of all frauds with a median loss of $150,000, and lower level employees committed 44 percent of all frauds with a median loss of $50,000.
  • Tenure with the organization correlated with the amount of fraud loss. The median fraud loss from employees with 5 years or less tenure was about $100,000.  This grew to $173,000 for employees with 6 to 10 years tenure, and to $241,000 for employees with more than 10 years tenure.
  • Men were responsible for 69 percent of all frauds with a median loss of $156,000. Women were responsible for 31 percent of all frauds with a median loss of $89,000.  The lower loss level is most likely due to the lower number of women in senior positions.
  • The perpetrator’s age followed a bell curve with 67 percent of all frauds committed by persons between the ages of 30 and 50. The median loss correlated directly with the perpetrator’s age in that the older the person, the higher the median loss.  This is most likely because the older the person, the higher up they are likely to be in the business or organization.
  • Ninety-six percent of all perpetrators had no criminal background.
  • Eighty-five percent of perpetrators displayed at least one behavioral red flag. These included:
    • Living beyond their means
    • Having known financial difficulties
    • Having an unusually close relationship with a customer or vendor
    • Having control issues, including an unwillingness to share duties
    • Experiencing divorce or other known family problems
    • Having a “Wheeler-Dealer” attitude
    • Displaying frequent irritability, suspiciousness or defensiveness
    • Having known addiction problems (drugs, gambling, alcohol, etc.)
    • Frequent complaining about inadequate pay

Next week’s blog article will discuss the various anti-fraud controls that businesses/organizations employ, and the effectiveness of each of the controls.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

A Snapshot of the State of Fraud in America and Beyond in 2018

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

Every two years, the Association of Certified Fraud Examiners (ACFE) commissions a survey of fraud in the United States and abroad.  The ACFE just released its 2018 study entitled “Report to the Nations – 2018 Global Study on Occupational Fraud and Abuse.” Over the next several weeks, forensic accounting expert David Anderson of David Anderson & Associates, a Certified Fraud Examiner in Philadelphia, will discuss some of the key findings from the 2018 report.

Up first, some general observations regarding fraud:

  • The median loss from fraud is $130,000. This is down 13 percent from the $150,000 median loss identified in the 2016 Report;
  • Twenty-two percent of all frauds result in a loss of over $1 million;
  • The median duration of reported frauds is 16 months, down 11 percent from the 2016 Report duration of 18 months;
  • Smaller businesses (those with fewer than 100 employees) lost nearly twice as much to fraud as larger businesses ($200,000 versus $104,000). This disparity is significantly higher than that of the 2016 Report, which indicated that smaller and larger businesses averaged about the same amount of loss;
  • Asset misappropriation schemes (frauds involving the theft of cash, inventory, supplies, equipment or other company assets) remained the most common scheme, rising to 89 percent of all fraud schemes (versus 83 percent in the 2016 Report). Median asset misappropriation losses fell from $125,000 in the 2016 Report to $114,000 in the 2018 Report;
  • Financial statement fraud remains the least common scheme at 10 percent, but results in the highest losses – $800,000 per fraud in the 2018 Report. The loss amount is down 18 percent from the $975,000 median loss shown in the 2016 Report;
  • Internal control weaknesses, including inadequate separation of duties, were responsible for nearly one-half of all frauds reported in the 2018 Report;
  • The 2018 Report identified 18 different anti-fraud controls that companies had implemented (Anderson will discuss these in greater detail in an upcoming blog article). It found that every control implemented resulted in a reduction in both the duration and amount of fraud.

Next week’s blog article will discuss how frauds are detected and the characteristics of the people who commit fraud.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Keep an Eye Out for These Common Payroll Fraud Schemes

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley. 

Payroll fraud, says forensic accounting expert David Anderson of David Anderson & Associates, a Certified Fraud Examiner in Philadelphia, is one of the most common frauds perpetrated upon businesses and other organizations. This crime can take a number of forms, including:

  • Ghost employees – in this scheme, the fraudster creates a non-existent employee in the payroll system. The fraudster then enters time for the non-existent employee, resulting in production of a paycheck.  The fraudster intercepts the paycheck and either deposits it in an account under his/her control or has a confederate either cash the check or deposit it in an account under the confederate’s control.
  • Terminated employees – in this scheme, the fraudster works with a terminated employee. The fraudster keeps the terminated employee on the books and enters time for the terminated employee, resulting in production of a paycheck.  As with a ghost employee, the fraudster intercepts the paycheck and forwards it to the terminated employee.  The terminated employee either cashes the check or deposits it in an account under the terminated employee’s control (and shares the proceeds with the fraudster).
  • Fraudulent hours – in this scheme, the fraudster enters a higher number of hours worked either for him/herself or for another employee. This results in a larger pay amount than that to which the employee or confederate is entitled.  If entered for a confederate, that person shares the increased proceeds with the fraudster.  This fraud can also result in the fraudster or confederate earning larger pension credits than the credits to which he/she is entitled.
  • Fraudulent pay rate – in this scheme, the fraudster adjusts either his/her pay rate or that of another employee. This results in a larger pay amount than that to which the employee or confederate is entitled. If entered for a confederate, that person shares the increased proceeds with the fraudster. This fraud can also result in the fraudster or confederate earning larger pension credits than the credits to which he/she is entitled.
  • Fraudulent bonus pay – in this scheme, the fraudster either adds him/herself to the list of employees receiving a bonus; or adjusts his/her bonus amount; adds a confederate to the list of employees receiving a bonus; or adjusts the confederate’s bonus amount. If entered for a confederate, that person shares the increased proceeds with the fraudster. This fraud can also result in the fraudster or confederate earning larger pension credits than the credits to which he/she is entitled.
  • Fraudulent expense reimbursement – in this scheme (which applies to companies/organizations that reimburse employee business expenses through payroll), the fraudster enters a higher expense reimbursement amount either for him/herself or for another employee. This results in a larger pay amount than that to which the employee or confederate is entitled.  If entered for a confederate, that person shares the increased proceeds with the fraudster.

So, how can companies and organizations avoid being victimized by these payroll frauds?  They can take some or all of the steps identified below:

  • Separate the hiring and human resources functions from the payroll function;
  • If this is not possible, ensure there is adequate separation of duties so different employees are responsible for different steps in the payroll process. For example, the employee who sets up other employees in the payroll system (including pay rates) should be different from the employee who enters employee time;
  • Require two levels of review and approval for time cards and pay sheets;
  • Maintain a list of terminated employees and periodically check the list against payroll data;
  • Require someone other than the employee’s supervisor to distribute paychecks;
  • Require either multiple signoffs for pay changes (especially for manager and executive salaries) as well as for approvals of vacation and sick pay;
  • Have either a higher-level manager or a third party, such as a forensic accountant, periodically review payroll, including pay rates, hours/time and total payroll funding amounts.

Does your company need to enact stronger safeguards against payroll fraud? If so, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. You can do just that by contacting the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Anderson to Speak on the Role of the Business Valuation Expert in Collaborative Divorce

Posted by & filed under Blog Articles, Business Valuation, Company News, Forensic Accounting, Marital Dissolution.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of forensic accounting services including fraud investigation and fraud deterrence programs in Philadelphia and the Delaware Valley.

On Tuesday, April 24, David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides marital dissolution and business valuation services in Philadelphia and the Delaware Valley, will be speaking about the role of the business valuation expert in a collaborative divorce at the Make Divorce Healthier 2018 Symposium.

The symposium, being held at the Normandy Farm Hotel and Conference Center in Blue Bell, PA, is an energizing day for professionals to come together around respectful, mindful, and more affordable divorce. Changemakers will gather to remove the shame, blame, and fear associated with divorce.

Anderson’s presentation will address such issues as:

  • Having a properly credentialed business valuation expert
  • Comparing and contrasting the role of the business valuation expert in a traditional divorce vs. a collaborative divorce
  • Understanding the business valuation process
  • Understanding key issues in valuing a business

He will be presenting to therapists, mediators, collaborative attorneys, financial planners, divorce coaches, graduate students, and clients-turned-advocates.  His co-presenter will be Joseph Barbagallo, CPA, CFF, CVA, CFD, CFS, CFE, CFI, ABV, FCPA, CGMA.

The Symposium begins at 8:30 a.m. on Tuesday the 24th with the keynote address “Managing the Negotiation Within – For Our Clients and Ourselves” by David A. Hoffman, Esq. from the Boston Law Collaborative, LLC. That speech will be followed by a series of hour-long breakout and roundtable sessions.

Anderson and Barbagallo are scheduled to speak in the 2:30 p.m. slot on the topic “The Role of The Business Valuation Expert in Collaborative Divorce.”

For more information about the Make Divorce Healthier 2018 Symposium, please visit www.makedivorcehealthier.org.

For more information on marital dissolution, business valuation, or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.  Anderson also has served as a divorce accountant or marital dissolution accountant in Philadelphia and the Delaware Valley.

Separation of Duties: A Critical Element of Fraud Prevention

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

Many of the frauds investigated by forensic accounting expert David Anderson of David Anderson & Associates, a Certified Fraud Examiner in Philadelphia, share a common element: The fraudster was able to perpetrate and hide the fraud for an extended period due to the lack of separation of duties.

Separation of duties requires more than one person be involved in the processing and reporting of financial transactions to eliminate the possibility of that person alone committing a fraud. If a fraud were to occur in a situation in which there was adequate separation of duties, it would have to be due to the collusion of two or more people involved in the processing or reporting.

For example, Anderson said, if you look at a sales transaction from start – entry of the customer purchase order/request – to finish – receipt, deposit and recording of the customer’s payment for the sold item(s) or services – you could expect to see the following steps:

  • Receipt and entry into the business system of the customer’s purchase order/request
  • Fulfillment of the customer purchase order via product shipment/delivery, manufacture and shipment/delivery, or provision of services
  • Creation, entry, and sending of customer invoice
  • Receipt and entry of payment
  • Application of credits, if any – usually for returns or errors in the customer invoice
  • Deposit of customer payment
  • Periodic reconciliation of an operating bank account into which the deposit is made.

Proper separation of duties would prevent a single person from processing the customer invoice; receiving, entering, and depositing the payment; applying credits; and performing the bank reconciliation.  If those duties are not separated, the person could potentially divert the payment received to a bank account under control of that person or, if the payment is made in cash, to that person’s own pockets, while hiding the diversion by:

  • Not recording the sale or customer invoice in the accounting system to hide diversion of the customer’s payment; or
  • Recording in the accounting system the receipt of the payment and hiding the failure to deposit the customer payment when performing the bank reconciliation; or
  • Applying credits against the customer’s account so that the balance in the bank equals the balance on the books, as adjusted through the bank reconciliation process.

Similarly, if you were to look at a purchase transaction from start – setup of the vendor and entry of purchase order/request – to finish – preparation and recording of vendor check for goods or services purchased – you could expect to see the following steps:

  • Receipt and entry into the business system of internal purchase order/request
  • Setup of the vendor, if not already in the system)
  • Fulfillment by the vendor of the purchase order via product shipment/delivery, manufacture and shipment/delivery, or provision of services
  • Receipt and entry of vendor invoice
  • Preparation and recording of vendor check
  • Sending of vendor check
  • Periodic reconciliation of an operating bank account from which the check was written
  • Interfacing with the vendor regarding amounts due to the vendor.

Proper separation of duties would prevent a single person from setting up the vendor in the business system, making changes to the vendor information, entry of the internal purchase order/request, receiving and entering the vendor invoice, preparing and recording the vendor check, and sending the vendor check and performing the bank reconciliation.  If those duties are not separated, the person could potentially:

  • Divert the vendor’s check to an account under control of that person, in which case the person would tell the vendor that there were problems with processing their payment or would refuse to pay the vendor; or
  • Create a phony vendor, or change the mailing address of an existing inactive vendor, and cause payment to be made for non-existent products – typically office supplies and other items that are expensed rather than being recorded as inventory – or services; and
  • Hide the diversion when reconciling the operating bank account.

Note that failure to adequately separate duties for payroll could be similarly exploited for payments to either a terminated employee or a non-existent employee.

Based on the description above, it is easy to see the need to properly separate duties as part of a fraud prevention program. However, many businesses and other organizations – including governmental and non-profit entities – do not possess a staff large enough to facilitate adequate separation of duties.  So, what are some alternative steps that can be employed?

In such circumstances, some alternatives these businesses and organizations should consider are:

  • Engaging an outside party such as a forensic accountant to provide periodic oversight and review of financial transactions and bank reconciliations;
  • Arranging for all bank statements to be sent directly to the owner or a designated executive, at an address outside the business, so the bank statements and cancelled checks can be briefly reviewed for unusual or missing items prior to being given to the person performing the bank reconciliation;
  • For deposits, requesting that the bank provides a separate machine-printed deposit receipt matching the in-house prepared deposit slip;
  • For checks, requiring two separate approvals and signatures for all checks above a designated amount, or requiring a separate management approval for all checks, i.e. someone separate from the check signer;
  • For payroll prepared by a third-party company, arranging for a periodic list of active employees be sent directly to the owner or a designated executive, at an address outside the business, so the list may be scrutinized for unknown employees or terminated employees still receiving pay.

The costs of these alternatives, either financial – for the outside review – or time – for internal review – are low relative to the potential cost of undiscovered fraud.

If you want to learn how a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley can help safeguard your company, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Key Issues Regarding Marital vs. Non-Marital Assets in a Divorce

Posted by & filed under Blog Articles, Business Valuation, Company News, Forensic Accounting, Marital Dissolution.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of forensic accounting services including fraud investigation and fraud deterrence programs in Philadelphia and the Delaware Valley. 

One of the key tasks in a divorce is identifying the marital versus the non-marital assets of the divorcing couple.

To obtain a better understanding of the key issues involved regarding marital versus non-marital assets, David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides marital dissolution and business valuation services in Philadelphia and the Delaware Valley, interviewed Kathy Bloom, Esquire. Ms. Bloom is an attorney-mediator who is the Managing Partner of the family law firm of Bloom Peters, LLC; the firm has offices in Horsham, PA and Mount Laurel, NJ.

Ms. Bloom began by stating that Pennsylvania, New Jersey and Delaware are “equitable distribution” states (as opposed to states like California which are community property states).  This means that the courts decide what they consider to be an equitable or fair distribution of the marital assets between the divorcing spouses (whereas in community property states the parties are generally entitled to a 50/50 distribution of marital assets).

As a result, it is very important to distinguish between marital and non-marital assets.  Such assets include homes and other real estate, vehicles (including cars, trucks, boats and planes), personal property (including art, collectibles, antiques, jewelry, furnishings, clothing, etc.), investment accounts, bank accounts and investments in businesses.  In Pennsylvania, 529 education accounts not held in trust are also considered marital assets regardless of the source of the contributions.

Ms. Bloom stated that the delineation between marital and non-marital assets is not based upon the name in which the assets are held, but rather when the assets were acquired.  If the assets were acquired prior to the marriage or after the date of separation (or date of filing for divorce, depending upon the state of residence), they are generally considered non-marital assets.  Assets acquired during the marriage as well as the increase in value of non-marital assets during the marriage are marital assets.

Of course, there are always exceptions to the above.  If there is a pre-nuptial agreement providing for segregation of certain non-marital assets and their subsequent earnings or increase in value, these can remain non-marital assets.  Another exception can occur for non-marital assets acquired by inheritance or gift during the marriage.  If those assets are segregated from marital assets, they can retain their non-marital status (although any earnings or increase in value during the marriage will still be considered as marital assets).

If non-marital assets are “comingled” with marital assets, these non-marital assets can become marital assets.  This can happen when one or both spouses put non-marital assets into a common marital asset.  For example, if both spouses contribute non-marital assets to a common joint account (such as a checking account or investment account) or to a commonly owned asset (such as a home, car, or real estate), over time the non-marital asset may become indistinguishable from the marital asset.

There are even exceptions to some of these exceptions.  Some Pennsylvania counties (such as Bucks County) employ the concept of “vanishing or diminishing credit”.  This credit is applied ratably over a twenty-year period.   For example, if a spouse contributed $20,000 of non-marital funds towards the purchase of a jointly owned home, and the couple divorces fifteen years later, the contributing spouse may claim a diminishing credit and be considered to still retain a 25% non-marital interest in the original $20,000 contribution.  While Bucks County commonly applies a diminishing credit, in other Pennsylvania counties, it is generally up to the judge to determine whether any credit remains in similar circumstances.

Issues can also arise if one or both spouses withdraw funds, marital or separate, before final distribution.  If any of those funds are invested (such as in a house, real estate or investment account), the increase in value of such investment may or may not be considered a marital asset.  As a result, Ms. Bloom recommended that any such distribution prior to the final divorce decree be subject to an agreement between the parties regarding any increase in value.

As can be seen from the above, there are many key issues involved in determining marital versus non-marital property.   Very often, the parties will need to engage a forensic accountant to trace both marital and non-marital assets throughout a marriage, particularly if some of the non-marital assets have been comingled with marital assets.

If you need of a marital dissolution accountant in Philadelphia, or if you require any other services of a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.  Anderson also has served as a divorce accountant or marital dissolution accountant in Philadelphia and the Delaware Valley.

Understanding the Three Most Commonly Used Approaches to Valuing a Business

Posted by & filed under Blog Articles, Business Valuation, Company News, Forensic Accounting.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

The three most commonly used approaches to valuing a business are: The Income Approach, the Asset-based Approach, and the Market Approach.

Professional business valuators are required to consider all three approaches.  In the end, a business valuation expert must use his or her judgment to determine the best approach or combination of approaches to arrive at a business valuation that is as fair and accurate as possible.

These three most common approaches which a business valuation expert will consider are:

  • The Income Approach, which values a business by using one or more methods to convert anticipated economic benefits (earnings or cash flow) into a single present amount.  There are two primary methods under this approach:
    • Capitalization of Earnings/Cash Flows Method, which is used when there has been a steady level of historical growth; and the
    • Discounted Earnings/Cash Flow Method, which is used when there have been fluctuations in historical growth and when the company can reasonably project earnings for the next five or more years.
  • The Asset-based Approach, which values a business by calculating the value of net assets, (the difference between total assets and total liabilities).  There also are two primary methods under this approach:
    • The Book Value Method, which calculates the net asset value as shown on the books of the business – typically at historical cost, and the
    • Adjusted Net Asset Method, which adjusts the value of assets and liabilities of the fair market value as of the valuation date.
  • The Market Approach, which values a business by comparing it to sales of similar businesses.  There are four primary methods under the Market Approach:
    • Transactions of comparable publicly held companies;
    • Transactions of comparable privately held companies;
    • Prior transactions involving shares of the company itself, and lastly,
    • The ability of the company to pay shareholder dividends as compared to dividends paid by comparable companies.

The specific methods used depend on the facts and circumstances surrounding the business being valued.  For example, if there are no comparable market transactions or an insufficient number to be meaningful, the Market Approach may not be useful.

Once the value of the business has been set under each of the approaches, the business valuation expert must determine whether one of the values is the best representation of the true value of the business or if a weighted blend of the values provides a more accurate final business value, he said.

Typically, the Asset-based Approach yields the lowest value, and is usually relied upon by the valuator to establish a floor value for the business.  However, if the business has had recent operating losses and no comparable market transactions are available, the Asset-based Approach may well be the basis for the valuation.

If the valuation expert is valuing a startup business with little or no operating history and/or profitability, the Income Approach might yield a very low value. However, the Market Approach might result in a considerably higher value based on the sale of comparable businesses.

Under this scenario, some valuators would select the Market Approach as being most indicative of value and others might choose a blend of the Income Approach and Market Approach with a higher weight on the Market Approach.

It all comes down to the professional judgment of the business valuator, based on his or her experience and knowledge about the business being valued.

If you need a business valuation professional in Philadelphia, or if you require any other services of a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst and a Certified Fraud Examiner in Philadelphia.

Bring in Expert Witnesses Early to Enhance Your Litigation Support

Posted by & filed under Blog Articles, Company News, Litigation Support.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

Trial attorneys know expert witness testimony from a forensic accounting expert can be critical in determining the outcome of legal proceedings.  Likewise, the timing of when an attorney engages the services of a forensic accountant for litigation support services and, ultimately, expert witness testimony, also has a direct bearing on the success or failure of the case.

“The earlier a forensic accounting expert is called in to consult on a case, the greater the chances the expert will be able to contribute information crucial to winning the case,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides litigation support services and expert witness testimony in Philadelphia and the Delaware Valley.  “Forensic accounting experts who are engaged too late in the process often cannot have the impact on the case that the attorney needs.”

Earlier in his career, Anderson was asked by an attorney to provide expert witness testimony in Philadelphia for ongoing litigation.  The attorney’s client, a minority shareholder in a medium-sized distribution business, was claiming the majority shareholders were taking outsized salaries and benefits; paying significant salaries and benefits to family members who performed little or no work; paying exorbitant office rent to entities owned by the majority shareholders; and running personal expenses through the business.

The attorney said he and his client expected to resolve the litigation without going to trial, but that didn’t happen.  Now, an expert report was due within two weeks.  Discovery had closed several months before, but the attorney had the company’s federal income tax returns for the past five years and believed that would be enough for Anderson to create a comprehensive report detailing the transgressions of the majority shareholders.

Anderson, whose full range of forensic accounting services in Philadelphia and the Delaware Valley includes litigation support services and expert witness testimony in Philadelphia, agreed to examine the tax return and let the attorney know that same day if he would or would not be able to produce the rushed report that was requested.

“Unfortunately, certain schedules were missing from the returns, and the information presented was in summary form – merely totals of overall expense categories with no specifics, said Anderson, a forensic accounting expert in Philadelphia and the Delaware Valley.  “Individual employee wages were not shown and there were no details for benefits, travel, professional fees, meals and entertainment and other categories the minority shareholder suspected were being inappropriately paid by the company.  A $50,000-line item for ‘Miscellaneous Expenses’ appeared on one year’s return, but with no breakdown.”

Absent the complete accounting detail that is often not found in the income tax returns, but instead in the company’s accounting records and detailed financial reports, Anderson was unable to produce the comprehensive report the attorney needed to assure a win in the case.

Engaging a forensic accountant for litigation support services at the very beginning of a case can help attorneys establish the foundation of the case and determine the most effective course for the litigation, said Anderson, whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley.  Forensic accounting experts provide litigation support services and expert witness testimony for both plaintiffs and defendants in civil cases, as well as both prosecutors and defense attorneys in criminal cases.

Early involvement allows the expert witness to provide advice in areas such as:

  • Assistance in identifying and formulating arguments for the complaint (if for the plaintiff)
  • Initial evaluation of the plaintiff’s claims and identification of the information or testimony needed to support those claims
  • Analysis of the complaint and assistance with identifying arguments for the response (if for the defendant)
  • Assistance with preparation of discovery requests and interrogatories, including identifying the format(s) for delivery of the requested information (for example, if requesting detailed accounting system information, identifying acceptable formats for the delivered information so that it can be analyzed in a timely and cost-effective manner)
  • Follow-up on information delivered in response to discovery requests and responses to interrogatories to identify either missing information or additional information needed
  • Assistance with identification of individuals to be deposed
  • Assistance with development of questions for the deponents, including for the expert witness’s own deposition
  • Preparation of a report identifying and calculating damages or business value
  • Preparation of rebuttals for opposing expert reports (if necessary)

“Engaging a forensic accountant from the start provides expert analysis of your case before the discovery and deposition phases are closed,” Anderson said.  “In any financial dispute, the insights and advice of a forensic accounting expert can make the difference between winning and losing the case.”

If you require the services of a forensic accounting expert in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert in Philadelphia with more than 30 years of experience in financial and operational leadership positions. He is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.  Anderson also has provided expert witness testimony in the Greater Philadelphia area and served as a forensic consultant on both civil and criminal cases.

Set Up A Tip Hotline to Help Stave Off Business Fraud

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs and forensic accounting services in Philadelphia and the Delaware Valley.

Many business owners and executives believe performing a formal financial audit each year is the most effective way of detecting and deterring fraud.

They are wrong.

Less than four percent of all fraud is detected by a formal financial audit.  In fact, nearly twice as many frauds are discovered by accident than by formal audit.

So then, what is the best way to detect and prevent fraud?  You might be surprised.

A recent “Report to the Nations” from the Association of Certified Fraud Examiners (ACFE) shows tips are responsible for uncovering fraud more so than any other method.  More than 39 percent of all frauds were exposed as the result of information provided by tipsters.

And who were the main source of these tips?

By far, it is a company’s own employees. One surprising finding of the ACFE report was that a surprisingly high 52 percent of all frauds reported via tips came from company employees.

“Employees can be your first line of defense against fraud,” said Anderson, of David Anderson & Associates. “Employees may see fraudulent or suspicious activity but may be reluctant to be identified as the source of a tip, either because they fear retribution from other employees or because they’re not absolutely sure that fraud is occurring.”

So how do you encourage employees to come forward?  The best way is using an anonymous tip hotline.

“Employees are far more willing to report illicit activity if their anonymity is protected,” said Anderson, a Certified Fraud Examiner and an ACFE member.  “The anonymous tip hotline provides them with the vehicle they need to do the right thing and bring the fraud to the attention of people in charge.”

Companies do not have to set up the tip hotline themselves, Anderson said. Third-party companies will step into set up and operate the hotline for a reasonable fee and will maintain the employee’s confidentially.  In fact, having an outside party manage the hotline further assures employees their identity will not be revealed by something they say or by speaking with someone who recognizes their voice.

In addition to tip hotlines, the ACFE Report referenced by Anderson shows many companies also are providing mechanisms for receiving tips through e-mail and/or through their websites.

Companies that provide tip hotlines for their employees typically find both the duration of fraudulent activity and amount of the losses are reduced by 50 percent.

A tip hotline is an important component of a comprehensive fraud deterrence program that, Anderson said, can be created by a firm that provides forensic accounting services in Philadelphia and the Delaware Valley. Anderson also said he urges organizations to protect themselves by contacting a Certified Fraud Examiner to conduct a thorough fraud investigation at the first sign of suspicious activity.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Taking Steps to Prevent Rationalization Can Reduce the Threat of Fraud

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley. 

In this blog, the final of a three-part series on The Fraud Triangle, Certified Fraud Examiner David Anderson of David Anderson and Associates, a firm offering forensic accounting services in Philadelphia, reviews the three factors – Opportunity, Pressure, and Rationalization – that must be present for fraud to occur. 

If even one of these three situations can be eliminated, the potential for fraud and the need for a fraud investigation is either significantly reduced or goes away. After reviewing Opportunity and Pressure in the first two parts of this series, Anderson closes with a closer look at Rationalization. 

Rationalization is the mental process that a potential fraudster goes through to justify committing the fraud.

“Without being able to rationalize to oneself why it is OK to commit the fraud,” said Anderson, who provides forensic accounting services in Philadelphia, “a potential fraudster with the opportunity and pressure will not proceed.”

Anderson said examples of rationalization can include:

  • I’m only temporarily “borrowing” the money to meet my financial obligations, and I intend to pay back the “loan” in full;
  • I’m not being paid what I am worth, so I’m making up the difference through fraud;
  • The company makes a lot of money, so it won’t be missed/ be affected by the small amount I am taking;
  • The owner/management is committing fraud, so why shouldn’t I? and
  • I have been “wronged” by the company/owner/management, so this is how I can get back at them.

Owners/managers can influence the rationalization process and discourage the rationalization to commit fraud by taking several anti-fraud steps:

  • Provide anti-fraud training to all employees which, among other things, includes specific statements that committing fraud is wrong and unacceptable; that management is dedicated to preventing fraud; and that encourages employees to be on the lookout for fraud;
  • Establish a “hotline” which allows employees to confidentially report suspected fraud;
  • Establish a “tone at the top” that demonstrates that management is committed to fighting/preventing fraud (and not merely paying lip service to the fraud);
  • Establish policies and procedures which allow an employee to pursue complaints about being “wronged” (real or imagined);
  • Let employees know management is watching and is implementing such anti-fraud measures as surprise audits and regular management reviews.

Taking these steps as well as steps discussed in the previous two articles (establishing strong internal controls and getting to know one’s employees better) are all part of dismantling the three legs of the fraud triangle.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Break the Fraud Triangle by Keeping an Eye Out for Pressure Situations

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley. 

In this blog, the second of a three-part series, Certified Fraud Examiner David Anderson of David Anderson and Associates, a firm offering forensic accounting services in Philadelphia, reviews the Fraud Triangle – a combination of three factors – Opportunity, Pressure, and Rationalization – that must be present for a fraud to occur. 

If even one of these three factors can be eliminated, the potential for fraud and the need for a fraud investigation is either significantly reduced or goes away. After reviewing Opportunity in the first entry last week, here Anderson takes a closer look at Pressure. He will discuss Rationalization in next week’s conclusion of this series.

Pressure refers to the personal situation of the potential fraudster that can induce the person to commit the fraud.  Even if the opportunity to commit fraud is present, if the person feels no pressure to commit the fraud, he or she won’t.

“Eliminating such pressures,” said Anderson, who provides forensic accounting services in Philadelphia, “can be key to a successful fraud deterrence program.”

The primary pressure experienced by a potential fraudster is the need for money.  Other potential pressures (which are significantly less likely to occur) include revenge (the fraudster feels wronged by the business, its owners or management) and thrill (the fraudster has no need for money but wants the thrill of committing and getting away with the fraud).

Examples of the need for money include:

  • The potential fraudster’s spouse becomes unemployed or unable to work, and, as a result, the family’s household income has dropped significantly;
  • The potential fraudster has previously lost a higher paying job, and the current job pays significantly less;
  • A member of the potential fraudster’s family has become ill or was injured, and the family is unable to pay the resulting medical bills;
  • The potential fraudster has a drug or gambling problem, and needs additional money to support the problem;
  • The potential fraudster (and/or family) has a lifestyle that requires more money than is currently being earned;
  • The potential fraudster is going through a divorce or other family problems that require more money than is currently being earned.

Although the specific circumstances experienced by the potential fraudster are generally beyond the control of a business’s owners and/or management, the owners and managers should be on the lookout for these types of problems.  It is often as simple as getting to know better the employees who could have the opportunity to commit fraud.

For example:

  • Has the owner or manager noticed whether an employee is driving a more expensive car or wearing more expensive jewelry and/or clothing than would be expected?
  • Has the owner or manager heard (or has it been reported to the owner or manager by another employee) an employee discussing expensive vacations, the purchase of an expensive home or vacation home, or the purchase of an expensive boat that would appear to be more than the employee would be capable of handling?
  • Has the owner or manager heard (or has it been reported to the owner or manager by another employee) the employee discussing family problems, a family member’s illness or injury or a family member’s loss of employment?
  • Has the owner or manager heard (or has it been reported to the owner or manager by another employee) the employee discussing gambling winnings or losses?
  • Has the owner or manager noticed (or has it been reported to the owner or manager by another employee) an employee exhibiting signs of a drug problem?
  • Has the owner or manager heard (or has it been reported to the owner or manager by another employee) the employee complaining about being underpaid or passed up for a deserved raise, bonus, or promotion?
  • If the answer to any of these questions is “yes”, the next step would be to consult with the company’s attorney before taking any action (including confronting the employee or questioning other employees).

By being proactive with getting to know one’s employees better, the owner or manager can help identify when an employee is facing a pressure which could potentially turn the employee into a fraudster.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Breaking Down the Fraud Triangle – Don’t Let Opportunity Knock

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley. 

In this blog, the first of a three-part series, Certified Fraud Examiner David Anderson of David Anderson and Associates, a firm offering forensic accounting services in Philadelphia, reviews The Fraud Triangle – a combination of three factors – Opportunity, Pressure, and Rationalization – that must be present for a fraud to occur. 

If even one of these three factors can be eliminated, the potential for fraud and the need for a fraud investigation is either significantly reduced or goes away. In this first piece in the series, Anderson takes a closer look at the first leg of the triangle – Opportunity.  In subsequent articles, he will examine the other two legs.

All businesses have, or should have, a set of policies and procedures as part of their fraud deterrence programs that are designed to protect systems and safeguard assets.  These policies and procedures are often referred to as “internal controls”.  If such internal controls are lacking, are poorly designed, or are easily overridden, it presents the potential fraudster with the opportunity to commit fraud.

“Let’s look at two common businesses situations,” said Anderson, who provides forensic accounting services in Philadelphia, “and how internal controls should be designed to prevent or significantly reduce the potential for fraud.”

The first, he said, is for handling payments made by customers.  In a well-designed internal control system structured with fraud deterrence in mind, the person who opens the mail will be different from the person who prepares the deposit slip for the bank.  Furthermore, neither of these people will make the bank deposit or record the receipt of funds and bank deposit in the company’s accounting system.  In addition, the entire process would be overseen by a manager or supervisor.  This step helps in fraud deterrence and lessens the need for a fraud investigation.

However, as this example indicates, these controls require that there be at least five different people involved.  Many smaller businesses don’t have enough staff to separate these functions.  As a result, some employees end up performing more than one of these functions.  This creates an opportunity for the employee to commit fraud.

For example, the employee who opens the mail could also prepare the deposit slip and record the receipt of funds and bank deposit in the company’s accounting system.  If that employee is trusted by the manager/supervisor, the manager/supervisor might not actively review the employee’s activities.  This creates the opportunity for the employee to divert certain customer payments.

A second common business situation is for processing vendor invoices.  In a well-designed internal control system, the person who sets up the vendor in the company’s accounting system is different from the person who approves the vendor invoice.  Furthermore, neither of these people enter the invoice in the company’s accounting system, process the payment or sign the payment check.

As with the previous example, the entire process would be overseen by a manager or supervisor.  If a company is unable to separate these duties, it creates an opportunity to commit fraud.  If the employee who sets up vendor in the company’s accounting system can also enter vendor invoices and process payments, that employee would have the opportunity to create a phony vendor (or change the address of an actual vendor), process phony invoices and produce payments that the employee could divert for his/her own use.

Well-designed internal control systems help prevent the opportunity for the fraudster to commit fraud.  This, in turn, “knocks out” one leg of the fraud triangle, thereby preventing or significantly reducing the potential for fraud.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.

Are You Sure Your “Trusted” Employees Can Really Be Trusted?

Posted by & filed under Blog Articles, Forensic Accounting, Fraud, Fraud Deterrence.

David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

You have them, your competitors have them, every company large or small has them. “Them” are your trusted employees, women and men on your team who have worked with you forever and have, time after time, proven their loyalty to you and your organization.

Despite a spotless track record, though, can you really trust your “trusted” employees?

Certified Fraud Examiner David Anderson of the Philadelphia forensic account services firm of David Anderson & Associates, says you never should forget that these “trusted” employees can pose a significant fraud threat to businesses and organization.

“They may be family members, employees who have worked their way up the management ladder over the years, employees who are hardworking and who put in long hours, and/or employees who have contributed to the past success of the business,” he said.

Because of this “trusted” status, Anderson said, business owners and senior managers tend to exert less oversight over these employees than they do over the typical employee.

Most “trusted” employees are worthy of the trust they have earned.  However, other “trusted” employees have used the trust and lack oversight to commit fraud.  Over the past several years, investigations of “trusted” employees conducted by David Anderson & Associates have identified the following frauds perpetrated on their employers:

  • Use of employers’ business credit cards to charge personal expenses
  • Use of expense reimbursements to have the business pay for personal expenses or non-existent expenses
  • Manipulation of payroll to take improper salaries and bonuses
  • Use of more vacation, personal, and sick days than earned
  • Running purchases for their own personal business through the purchase accounts of their employer, and having the employer pay for these purchases
  • Diverting customer cash payments to themselves, and covering up the diversion by manipulating the employer’s accounting system
  • Removing inventory from the employer’s warehouse, and covering up the diversion by manipulating the employers accounting system
  • Diverting customers and sales from the employer’s business to their own personal or a friend’s business
  • Selling the employer’s fully depreciated assets to a third-party and pocketing the proceeds.

In each case, Anderson said, the employer had no fraud deterrence program in place.  These companies could have significantly reduced the likelihood of fraud occurring if management had instituted such procedures as:

  • Regular top management or third-party consultant review of credit card statements and expense reimbursement requests
  • Regular top management or third-party consultant review of payroll journals
  • Regular top management or third-party consultant review of monthly bank statements and monthly financial statements
  • Regular periodic review of operations by top management or a third-party consultant
  • Instituting an anti-fraud policy, disseminating it to all managers and other employees, and holding periodic training sessions on spotting and report fraud
  • Letting all employees know that top management does not condone fraud, and that supervisors are actively watching out for it.

“Trusted” employees continue to be a problem for employers who provide reduced oversight to them.  However, Anderson said, by instituting relatively simple and relatively inexpensive fraud deterrence procedures, management can significantly reduce the risk of such “trusted” employees becoming untrustworthy.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.