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Forensic Accountants Can Bring Value in Termination, Discrimination Cases

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.

Among the many duties a forensic accountant may be asked to undertake in a typical work cycle is calculating damages for wrongful termination and employment discrimination lawsuits.

“Whether you are dealing with wrongful termination or employment discrimination, the methodology for calculating damages is similar,” 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.

“The key basis for calculating damages is the difference between what the plaintiff would have earned over his/her lifetime had the wrongful termination or employment discrimination not occurred, and the actual and expected earnings of the plaintiff after having experienced the wrongful termination or employment discrimination,” explained Anderson, a forensic accounting expert in Philadelphia and the Delaware Valley.

Anderson outlined the steps of the damage calculation this way:

  • To begin with, the date the damages started is determined. This typically is the date that the plaintiff was allegedly wrongfully terminated or the date that the employment discrimination allegedly began.
  • Next, the wage or salary rate and associated benefits as of the beginning date of damages are identified.
  • Then, these rates and benefits are extrapolated through the normal date of retirement, or another date if there is a reasonable basis to assume that the plaintiff would have retired earlier or later than normal retirement age.
  • This is followed by identifying the actual wage or salary rate and associated benefits earned by the plaintiff from the beginning date of damages until the date of the damages calculation.
  • The forensic accountant must then extrapolate these rates and benefits through the normal date of retirement, or another date if there is a reasonable basis to assume that the plaintiff would have retired earlier or later than normal retirement age.
  • Finally, the difference between the two different extrapolations are calculated.

Anderson, a forensic accounting expert in Philadelphia whose full range of forensic accounting services in Philadelphia and the Delaware Valley includes litigation support services and expert witness testimony in Philadelphia, said the extrapolations rely upon several assumptions, including:

  • What the expected career path of the plaintiff would have been had the wrongful termination or employment discrimination not occurred.
  • What the actual and expected career path of the plaintiff is due to the wrongful termination or employment discrimination. Typically, the wrongfully terminated person will have a period of unemployment and is likely to have to take a lower-level position or a position paying less, etc. Similarly, the person experiencing employment discrimination will either have a harder time finding employment or, if already employed, will have a slower or lower career path.
  • What the associated wage or salary and benefits growth rates would have been for each of the above.
  • What the associated benefits would have been for each of the above. This includes insurances, pension or profit-sharing benefits, 401-K contributions and company matches, etc.
  • What mitigating steps the plaintiff has taken or is expected to take to obtain employment, and the reasonableness of those steps. For example, if the plaintiff previously was a high-powered executive, what is the plaintiff doing to find alternative employment? Also, what is a reasonable amount of time for finding a new job? If the plaintiff has found a new job, is it comparable to what would be expected?
  • The rate to use to discount the differences back to present value. Please note that under Pennsylvania law, neither inflation-based wage increases nor discounting to present value are allowed.
  • Any applicable permitted interest on past differences.

Anderson, a forensic accountant whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley, including expert witness testimony in Philadelphia, said the forensic accountant/expert witness generally will rely on an associated report by a qualified employment and compensation expert regarding the expected career paths and associated salaries over time, unless the forensic accountant/expert witness also is a qualified expert in that area.

If you need help in calculating damages for wrongful termination or employment discrimination cases, or if you require the services of a forensic accounting expert in Philadelphia and the Delaware Valley for any other reason, 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 services, 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.

 

Forensic Accountants Can Help Effectively Referee Family Inheritance Battles

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.

Any parent, grandparent, aunt or uncle, or other guardian is quite familiar with the squabbling that can take place among young siblings fighting over toys, chores, or family rules.

Sadly, in more situations than you might think, these individuals grow up and end up in similar internecine arguments; this time, however, over trusts, estates, or other inheritance issues.

This is where the services of a forensic accountant can come into play.

“Unfortunately, there rarely is a family member who can step in as the ultimate arbiter to settle the conflict,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm.  “Instead, the unhappy beneficiaries often turn to the courts to resolve the dispute, ending up in litigation that can be very contentious and very expensive.”

Anderson said, in many cases such as these, families turn to a forensic accounting expert to analyze the management and administration of the trust or estate and to account for the assets and transactions.

“Perhaps one or more beneficiaries, who often are siblings or other relatives, believe the fiduciary (trustee or executor) is mishandling the trust or estate’s finances, is improperly taking funds from the trust or estate, or has improperly or unevenly distributed assets or income of the trust or estate.

“A forensic accounting expert has no stake in the matter and is not a family member.  He or she is concerned only with the facts of the matter at hand,” said Anderson, who provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  “As a result, both the beneficiaries and the fiduciary can be confident that the forensic accountant’s report will be independent, fair and unbiased.  Engaging a forensic accounting expert to settle the conflict is less contentious and less expensive.”

Anderson said a forensic accountant’s report typically identifies the specific documents that govern the administration of the trust or estate and cites specific passages from those documents regarding management of assets, distribution of funds, payment of fees to and expenses of the fiduciary, and related matters.  The report identifies the period examined, provides a schedule of assets of the trust or estate at both the beginning and end of the period, and lays out (in either detail or summary form) the transactions of the trust or estate.

Anderson, a forensic accounting expert in Philadelphia and the Delaware Valley, said the report outlines the forensic accountant’s findings regarding the fiduciary’s management of the trust or estate relative to the trust documents, and whether any transactions conflict with the governing documents.  The forensic accountant will review the report with the beneficiaries and the fiduciary and answer any questions regarding the findings.

While the cost of engaging a forensic accounting expert to analyze the handling of a trust or estate is usually significantly less than the cost of actual or threatened litigation, it is the lessening or neutralizing of the emotional aspects of the dispute that can be even more appealing to families.

“A forensic accountant’s involvement reduces the contentiousness,” Anderson said.  “Family members tend to acknowledge that the dispute is in the hands of a professional whose independent analysis will bring peace of mind to everyone involved.  The forensic accountant is, in effect, the ultimate arbitrator we grew up with.  It’s the next best thing to Mom and Dad.”

Anderson recommends that beneficiaries and fiduciaries engage the services of a forensic accounting expert at the first sign of a dispute — before the matter escalates and family relationships are destroyed.

“Don’t let suspicions of mismanagement fester until things have gotten so bad that there is no hope of repairing the relationship,” said Anderson, whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley.  “Family is important.  Bring in a third party as soon as a conflict arises.”

If you require 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.

Charities and Non-Profits Might Be More Exposed to Fraud

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.

While charitable and non-profit organizations focus on serving the general good, they’re quite often themselves the focus of fraudsters who target their financial operations as potential low-hanging fruit that’s ripe for picking.

The leaders of these houses of worship, youth sports teams, volunteer fire companies, and other such groups, in most cases, focus on their mission and leave the financial operations to volunteers, said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

Since these volunteers, Anderson said, often have other commitments, they generally are able to devote only a limited amount of time towards these duties. This, he said, puts these organizations at a much higher than normal risk of fraud.

As a result, they must rely on a few trusted employees and volunteers to oversee their operations and to handle their finances. With such limited resources, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, most small- to medium-sized non-profits are not able to effectively implement the necessary internal financial and accounting controls to adequately protect against fraud.

Furthermore, he added, most organizations such as these are often unable to afford an audit or other external examination of their books and records.

The result is that certain unscrupulous employees and volunteers can take advantage of these weaknesses and embezzle funds.  Here are just three examples:

  • The bookkeeper for a Montgomery County, Pa., church was convicted of embezzling more than $150,000 from the church.
  • A 45-year non-paid member of a Chester County, Pa., volunteer fire company was convicted of embezzling more than $300,000 from the fire company.
  • The chief operating officer of a Philadelphia non-profit for the homeless was indicted for charging more than $75,000 in personal expenses on the non-profit’s credit cards.

So, what can a small to medium-sized non-profit organization do to protect itself from fraud?  Here are a few suggestions:

  • Create an internal financial review committee of three or more knowledgeable people – with backgrounds in forensic accounting, accounting and/or business finance – to review the finances of the organization on a regular basis, such as quarterly or semi-annually.
  • Arrange for at least two members of the internal financial review committee to receive copies of the organization’s bank statements directly from the bank before any reconciliation takes place;
  • Require all checks to receive two signatures;
  • Seek help from volunteers who are in government or law enforcement, or who are attorneys, to conduct background checks for new and existing employees (in accordance with the law).
  • Whenever large amounts of cash are collected (for example, weekly offerings collection or concession stand sales), require two or more people to jointly oversee the counting of the cash and preparation of deposit slips;
  • When employees of volunteers resign or leave their positions, immediately remove them from computer system access and from bank signatory cards/credit cards/debit cards, etc.

If fraud is suspected, immediately engage outside counsel. Such counsel can best advise the organization as to the steps to take to protect itself from potential litigation and to properly investigate the suspected fraud, which may include retaining a forensic accountant to conduct the investigation.

If you require the services of a Certified Fraud Examiner in Philadelphia 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 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.

Using “The Fraud Triangle” To Help Stave Off Nefarious Employees

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

There are myriad ways employees can defraud their companies, but there’s one easy approach that can help keep fraud out of your business or organization: Understanding “The Fraud Triangle” and using it to your advantage.

“When forensic accountants mention the ‘The Fraud Triangle,’ they are referring to the three elements that are necessary for fraud to occur — pressure, opportunity and rationalization,” says David Anderson, a Certified Fraud Examiner and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

“If those three elements are not in place, then fraud cannot occur,” he continued. “It then goes to reason that if successfully eliminate one of the elements, fraud will not be a problem for you.  It’s really a rather straightforward, proactive approach to fraud deterrence.”

Pressure, the first element of The Fraud Triangle, is the motivation or incentive to commit fraud, Anderson said.  Pressure often comes from one’s personal life, such as the expensive illness of a loved one, a spouse’s unemployment, a gambling or drug problem, the practice of living beyond one’s means, or other situations that carry a heavy financial burden.  In these cases, Anderson said, an employee may feel extreme pressure to find more money, and that can open the door to fraud.

The second element of The Fraud Triangle, opportunity, indicates the ability of the employee to carry out the fraud through the misappropriation of cash or other company assets, Anderson explained.  Opportunity arises when a company lacks critical anti-fraud controls, such as separation of duties, dual signature requirements for checks over a certain amount, management review of bank accounts and financial statements, and other necessary controls.  Opportunity also can occur when excessive trust is placed in employees with the ability to override or circumvent anti-fraud controls.

The third element of The Fraud Triangle, rationalization, refers to an employee’s justification for committing fraud, Anderson said.  It can start as an employee’s simple rationalization the theft is just a temporary loan that will be paid back before anyone ever finds out about it.  That type of thinking, however, can quickly mushroom into grander rationalizations, such as “I’m underpaid and just getting my due.” or “My boss is stealing; why can’t I?” or “They’re making a lot of money and won’t even miss what I have taken.”

“If you’ve got all three elements,” Anderson said, “you’ve got a potential fraud brewing. Remove one of the elements and the potential for fraud evaporates.”

Anderson recommends employers learn more about their employees so they are more aware of any high-pressure financial situations the workers may be dealing with in their private lives.  Prevent opportunity, he said, by enacting comprehensive anti-fraud controls and establishing a strong fraud deterrence program, he said.  Send a clear message, as a part of your fraud deterrence program, that there is absolutely no acceptable rationalization for committing fraud.

If you have reason to believe fraudulent activity has infiltrated your business — or if you believe “The Fraud Triangle” exists with any of your employees — Anderson recommends you act immediately by hiring a Certified Fraud Examiner from a firm that provides forensic accounting services in Philadelphia and the Delaware Valley.  A comprehensive fraud investigation will determine the extent of your losses, if any, and an experienced Certified Fraud Examiner will identify weak spots in your internal anti-fraud controls and set up a strong fraud deterrence program.

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.

Why Business Owners Should Have a Transition Plan

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

The statistics are astounding.

Over the next 10 years, more than 4.5 million privately owned businesses will transition . . . but only about 20 to 30 percent of them will sell.  This means more than 3 million business owners will have to find another way to transition their business. Unfortunately, many of those 3 million-plus business owners could realize much less from their businesses if they don’t have a transition plan in place.

Simply put, a business transition plan is a well-thought-out and defined roadmap for transitioning ownership of the business.  But, it’s not a simple as it sounds. A business transition plan includes the following key elements/questions which must be addressed:

What financial results does the business owner want to realize from the transition of the business? – For example, does the business owner expect to realize a specific annual income from the business during the transition period and after the transition is completed?  How about perquisites and other benefits?  How about a lump sum payment versus periodic payments if the business is sold?  These are critical decisions that must be made to help the business owner determine how the business is to be transitioned.

How the business is to be transitioned? – There could be a significant difference if the business is to be sold to a third party, gifted to one or more family members, sold to one or more key non-family managers, sold to an ESOP (Employee Stock Option Plan), liquidated. Each of these options carries different implications for how the business is to be transitioned as well as how the business owner’s expectations regarding income, benefits, and payment are to be realized.  Additionally, the form of transition can have significant implications for taxes. For example, does the business owner sell the stock of the business (realizing capital gains which are taxed at a lower rate) or does the business owner sell the assets of the business (tangible asset sales are taxed at higher ordinary income tax rates)?

How much is the business worth today? – This key question has several implications.  For example, it might be worth considerably less than the business owner believes it to be worth.  This can significantly affect the expected financial results from the transition; the length of time until the business owner transitions the business; and the way the business is transitioned.  If the business is worth less than expected, the business owner may have to devote more time and effort to grow the business to the desired value or accept a lower financial realization.  If the business is worth more than expected, this could shorten the time frame that the business owner expected to make the transition.  It can also affect the form of transition.  For example, if a business owner is expected to make annual tax-free gifts of ownership to family members, a higher valuation will require either a longer period for the gifts or the business owner would have to either pay gift taxes or use up the unified credit faster than expected.

How will key employees, customers, and vendors be affected by the transition? – In many cases, the business owner has relationships with certain key employees, customers, and vendors.  The business owner needs to investigate how the transition to new ownership will affect these relationships.  For example, suppose one or more key managers expected to purchase the business upon the business owner’s retirement, but because of the previously discussed factors the owner intends to sell the business to a third party?  Or suppose the business owner is planning to transition the business to a family member who doesn’t get along with one or more key managers?  Suppose the relationship between the owner and a major customer could be adversely affected by the retirement of the business owner?  All these factors need to be considered in the transition plan.

Addressing the above issues and questions may be more complex than most business owners can handle.  In such cases, the business owners need to seek out qualified, experienced professionals who can help them develop their business transition plan.

Additionally, business owners need to understand that once developed, the business transition plan cannot be set in concrete.  It must be constantly revisited due to changes in technology; changes within the business’s industry; changes in the personal circumstances of the business owner (for example: A divorce, change in family relationships, or a significant illness); change in other business circumstances (for example: Death or departure of a key manager, loss of a key customer or vendor, etc.); change in the regulatory or tax environment (for example: The impact of the Tax Cut and Jobs Act); and/or changes in the economy.

Those business owners who create and maintain an effective business transition plan will be the ones who can successfully realize their financial expectations from the transition of their business.

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.

Divorced or Considering Divorce? You Need to Know About These Tax Changes

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.

Prior to the December 2017 Tax Cuts and Jobs Act (TCJA), when one spouse paid alimony (or separate maintenance payments) to the other spouse in a divorce, the paying spouse could deduct the alimony payments on his/her Federal income tax form.

At the same time, the spouse receiving the payment was required to report the alimony payment as income.  This arrangement tended to encourage larger alimony payments because the paying spouse typically was in a higher tax bracket and the spouse receiving the payment was in a lower tax bracket.

According to David Anderson, a Certified Valuation Analyst who has served for many years as a marital dissolution accountant in Philadelphia and the Delaware Valley, the TCJA potentially changes all of this.  Here’s how:

For Alimony Agreements currently in effect (as of the date of this blog posting): 

The TCJA won’t change the deductibility of alimony by the paying spouse and requirement for the spouse receiving the payment to report the alimony payment as income if the following requirements are met:

  • The alimony payment must be part of a written divorce or separation decree/agreement that is currently in effect;
  • The alimony payment must be made to the ex-spouse or on behalf of the ex-spouse;
  • The payment cannot be specifically stated in the written divorce or separation decree/agreement as not being alimony nor can the written divorce or separation decree/agreement state that the payment is not deductible by the paying spouse or not reportable as income by the spouse receiving the payment;
  • After the couple is considered divorced for Federal income tax purposes (divorced or legally separated), they cannot file a joint Federal income tax return and cannot live in the same household.
  • The alimony payment must be in cash or in a cash equivalent (the definition of cash equivalent for tax purposes could fill another blog);
  • The payment can not be stated in the written divorce or separation decree/agreement as being for child support.

Additionally, Anderson – whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley – said the paying spouse must list the receiving spouse’s social security number on his/her Federal income tax returns going forward, and, except for delinquent amounts, the written divorce or separation decree/agreement must not provide for ongoing payments after the receiving spouse dies.

For Alimony Agreements executed after the date of this blog up to and including through December 31, 2018: 

The TCJA won’t change the deductibility of alimony by the paying spouse and requirement for the spouse receiving the payment to report the alimony payment as income if the above requirements are met.

For Alimony Agreements executed after December 31, 2018: 

Under the TCJA, alimony will not be deductible by the paying spouse and will not be reportable as income by the spouse receiving the payment.

Based upon the above, Anderson – a divorce accountant and business valuation expert whose full range of forensic accounting services in Philadelphia and the Delaware Valley includes marital dissolution and business valuation services in Philadelphia – strongly recommends the following: Any divorced or legally separated couple currently under a written divorce or separation decree/agreement should check with their attorney(s) to make sure the paying spouse can continue to deduct the alimony payments (and that the spouse receiving the payment can continue to report the payment as income).

Additionally, Anderson said, any couple currently going through a divorce should work with an attorney(s) to complete execution of their written divorce or separation decree/agreement by December 31, 2018, if they want the paying spouse to be able to deduct the alimony payments (and the spouse receiving the payment to report the payment as income).

If you need 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.

“Tricks of the Trade:” Look to The Numbers for Clues to Fraud

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, fraud deterrence, business valuation, and marital dissolution in Philadelphia and the Delaware Valley.

This is the final blog in a series of four posts that will examine the so-called “Tricks of the Trade” that forensic accountants use when conducting fraud investigations.

As part of the normal procedure of analyzing financial and accounting information, a forensic accountant will look closely at the numbers themselves.

Such tight scrutiny can help unearth potential fraud or other abuse of financial information, according to David Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

A prime example that proves the value of this practice, Anderson said, is the analysis of auto mileage claimed on small business tax returns, typically Schedule C. In one marital dissolution case, the husband was a physician who operated out of two offices located eight miles apart and regularly claimed over 20,000 miles per year in deductible auto mileage, explained Anderson, a Philadelphia forensic accountant who also is a Certified Fraud Examiner in Philadelphia. (NOTE: The IRS allows deductions for mileage between offices when both are visited on the same day).

“If I assumed the physician visited both offices every day, and worked six days per week with no vacations or holidays, the maximum mileage he would have had in any year would be eight miles a day times six days per week times 52 weeks per year = 2,496 miles, which is considerably fewer than the 20,000-plus miles claimed each year,” said Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley.

In another instance, Anderson said the husband claimed to have driven exactly 30,000 miles each year. Statistically, he noted, it is very unlikely that someone can hit the same exact round number of miles each year. For each of the previous four years, explained Anderson, a Philadelphia forensic accountant whose firm provides a full range of forensic accounting services in Philadelphia and the Delaware Valley, the husband claimed to have driven this number of business miles in his four-year-old Chrysler, in addition to normal commuting mileage which he estimated to be about 20,000 miles per year.

“When I visited his office, I asked to check the odometer in his car, which he still had at the time, and the odometer showed fewer than 70,000 miles,” Anderson said. “Based on his claims, the total mileage should have exceeded 200,000 miles.”

Another area that Anderson, a Certified Fraud Examiner in Philadelphia, said a forensic accountant can analyze is the numbers associated with non-descriptive general ledger accounts. These can include such accounts as: Exchange, Transfer, Reserve, Miscellaneous Expenses, Other Expenses, Other Services, Cash Over and Short, and Consulting. Depending on the name of the account, Anderson said a forensic accountant will analyze the transaction detail and period-ending balance.

For example, the first three accounts – “Exchange,” “Transfer” and “Reserve” – typically are used to temporarily balance a transaction entry which requires further research to determine the correct account to be used, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

This means a forensic accountant will expect to see amounts come into these accounts from other transactions, and corresponding amounts come out of the account as the company determines the correct account to use, said Certified Fraud Examiner and forensic accounting expert Anderson. If a forensic accountant sees significant balances at the end of the year, or significant differences in amounts going into and out of the account, he said it could indicate fraud.

Accounts with “Miscellaneous” or “Other” in their title should typically be used for relatively small amounts that cannot reasonably fit any other expense category. Again, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, if a forensic accountant sees significant balances in these accounts, it merits further detailed analysis because of the potential for fraud or abuse.

The categories “Cash Over” and “Short” are used by retail businesses, said Anderson, a Philadelphia forensic accountant who also is a Certified Fraud Examiner in Philadelphia, to account for the difference between the cash in cash registers versus what the point of sale accounting system says the cash balance should be. It is not unusual, Anderson said, to have small differences.

In one marital dissolution case, however, a restaurant regularly experienced large cash shortages (over $100 each time) two to three times a week. By the end of the year, total cash shortages exceeded $20,000. The husband, who owned this business, did not seem particularly alarmed by this shortage. Further investigation by Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley, revealed the husband regularly took cash out of the register and pocketed it to reduce his profits and, by extension, the value of his business.

If you have questions about any finance or fraud issues, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The Philadelphia forensic accounting firm of David Anderson & Associates can be reached by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com if you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley.

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.

“Tricks of the Trade:” Use Times and Dates to Catch Fraudsters

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, fraud deterrence, business valuation, and marital dissolution in Philadelphia and the Delaware Valley.

This blog is the third in a series of four posts that will examine the so-called “Tricks of the Trade” that forensic accountants use when conducting fraud investigations.

In conducting investigations, a forensic accountant often will analyze times and dates to determine if fraud or minority shareholder oppression may be present.

Date and time analysis can be used for a variety of purposes, explained David Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

For example, Anderson said many fraudsters with access to business accounting systems enter transactions after hours or on weekends, so no one can observe them. Hence, in analyzing the date and time of transaction entries, a forensic accountant will conduct additional analysis of transactions entered after hours or on weekends to determine the propriety of those transactions, said Anderson, a Philadelphia forensic accountant who also is a Certified Fraud Examiner in Philadelphia. He added that the forensic accountant also can investigate online off-hours access to systems to determine whether unauthorized outsiders have accessed the company’s systems.

In minority shareholder oppression cases, as well as in marital dissolution cases, a forensic accountant will analyze the date and time of reimbursable travel, meal, and entertainment expenses, Anderson said.

“In one recent case, I found that over a period of three years the majority shareholder had submitted reimbursable meal expenses for more than 100 meals on Friday nights, Saturdays, Sundays, nights before a holiday, and on the holidays themselves,” said David Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley.

When deposed, Anderson said the shareholder, whose company was a retail business, claimed each of these meals – some of which were for hundreds of dollars – were for entertaining customers. However, no customers were specifically identified with any of the meals.

Furthermore, when the shareholder did provide the names of specific customers that he claimed to have entertained, all but one of the customers had purchased less than $500 from the business over the three-year period, said Anderson, a Philadelphia forensic accountant whose firm provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.

In a marital dissolution case, Anderson – a Certified Fraud Examiner in Philadelphia – said he noted frequent travel, meal, and entertainment reimbursements that occurred over weekends and holiday periods. This travel included international travel even though the business was a local business. In analyzing the supporting documents, forensic accounting expert Anderson said he found that all the travel was for vacations for the business owner and his girlfriend.

Dates of birth can also be utilized by forensic accountants to verify the validity of employee social security numbers, Anderson said. Certain tables are available that provide approximate information regarding when an individual applied for his/her social security number, explained Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

Running these tables against the birthdates of employees can identify potential mismatches, such as a 30-year-old worker whose social security number falls in the range of numbers that were issued prior to 1950, said Certified Fraud Examiner and forensic accounting expert Anderson. These mismatches, he said, can then be further investigated to determine whether the employee has furnished a valid social security number.

If you have questions about any finance or fraud issues, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The Philadelphia forensic accounting firm of David Anderson & Associates can be reached by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com if you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley.

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.

“Tricks of the Trade:” Fight Fraud with Names, Addresses, Phone Numbers

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, fraud deterrence, business valuation, and marital dissolution in Philadelphia and the Delaware Valley.

This blog is the second in a series of four posts that will examine the so-called “Tricks of the Trade” that forensic accountants use when conducting fraud investigations.

A forensic accountant can use names, addresses and phone numbers when investigating potential minority shareholder suppression cases and when conducting a fraud investigation.

In minority shareholder suppression cases, a forensic accountant will look for employees, subcontractors and vendors having the same last name as that of the majority shareholders, explained David Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

“We also obtain information regarding the married names of female relatives of the majority shareholders and search for those names” said Anderson, a Philadelphia forensic accountant who also is a Certified Fraud Examiner in Philadelphia. “In several of my cases, I have identified significant payments being made to the majority shareholder’s daughter, her husband or her children, who performed little or no work for the company, as part of an effort to divert profits from the minority shareholder.”

When he is conducting fraud investigations, forensic accounting expert Anderson says he performs the same analyses.

“In one instance, the general manager of a division was found to be making referral payments to a seemingly unrelated third party,” said David Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley. “However, during my investigation, I found that this person actually was his wife – using her maiden name to appear to be unrelated to the general manager.

Anderson, a Certified Fraud Examiner in Philadelphia, said he made this discovery by Googling the general manager. One of the items he said he came up was the wedding announcement which contained the wife’s maiden name.

One final name analysis which Anderson said can be performed by a forensic accountant undertaking fraud deterrence in a fraud investigation is a search for vendor companies that use abbreviations in their titles (for example, ARH Enterprises or H & B Associates). Because of ego, many fraudsters and others use their own initials or those of their spouse and themselves in the names of companies they set up, said David Anderson, a Philadelphia forensic accountant whose firm provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. He said any companies he finds during such an investigation warrant additional analysis.

Addresses can also help identify potential fraud, forensic accounting expert, Anderson noted. When an employee sets up a phony vendor, Anderson said the employee often uses his or her home address as the address for the vendor. By running matches between the employee files and the vendor files, he said he has found numerous phony vendors.

“I also run the employee’s addresses against the company’s address or that of the corresponding subsidiary, division or group headquarters or facility address, said Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley. “In these instances, I am looking for employees who are using one of the company’s addresses as their stated home address.

Certified Fraud Examiner Anderson said follow-up investigations of those employees have revealed that they usually are doing so for one of several reasons, including:

  • hiding from the government because they are undocumented aliens or parole violators;
  • hiding from ex-spouses or debtors; or
  • trying to avoid paying state or local taxes . . . such as a Philadelphia resident working in Montgomery County who is trying to avoid having the Philadelphia wage tax withheld.

A final address analysis that can be completed when a forensic accountant is conducting a fraud investigation or a program of fraud deterrence is running employee addresses and looking for employees who have the same address as another employee. While some such persons may be relatives of the employee and could be living in the same household, forensic accounting expert David Anderson said he also has found ghost employees by performing this analysis.

Just as with addresses, telephone numbers also can be used to identify potential fraud in the same way, said Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley. During his investigations, he said he has identified phony vendors and ghost employees by matching employee phone numbers against those of vendors and other employees.

If you have questions about any finance or fraud issues, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The Philadelphia forensic accounting firm of David Anderson & Associates can be reached by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com if you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley.

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.

“Tricks of the Trade:” Benford’s Law Can Help Root Out Fraud

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, fraud deterrence, business valuation, and marital dissolution in Philadelphia and the Delaware Valley. 

This blog is the first in a series of four posts that will examine the so-called “Tricks of the Trade” that forensic accountants use when conducting fraud investigations. 

The business of forensic accounting is — most of the time — a very precise, highly detailed process. It might be surprising, then, to learn one of the tricks of the trade forensic accountants use in fraud investigation stems from the very inexact science of probabilities, specifically, Benford’s Law.

“Frank Benford was a physicist in the 1930s who essentially proved an earlier hypothesis by astronomer Simon Newcomb in the 1880s that numbers starting with 1 occurred more frequently than other numbers,” explained David Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley.

“Newcomb had noticed that when he looked up logarithm tables in a book he shared with colleagues,” Anderson continued, “the earlier pages (which contained numbers that started with 1) were much more worn than the other pages. Benford tested and expanded that work and the phenomenon was named after him.”

Benford’s Law, also known as the First Digit Law, states that the lower the first digit, the higher the probability that it will occur more often than higher numbers, Anderson said. Studies have confirmed the concept by showing the number 1 occurs as a first digit more than 30% of the time, the number 2 occurs as a first digit about 18% of the time, and so on, according to Anderson, a Philadelphia forensic accountant who also is a Certified Fraud Examiner in Philadelphia. The number 9 occurs as a first digit the least – less than 5% of the time, Anderson added.

Benford’s Law is one of the tricks of the trade forensic accountants use in analyzing financial transactions during fraud investigations, Anderson said. If the results of the financial analysis show a mismatch with Benford’s Law, it is a red flag to forensic accountants that fraud may be present.

In one case, Anderson said, senior management engaged him to determine if any of their divisions were circumventing spending authorization limits.

“The company had a policy that required higher levels of approval for expenditures in excess of $100,000,” according to Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley. “I analyzed all transactions between $10,000 and $100,000 for each division and found three divisions had a higher incidence of transactions between $90,000 and $99,999 than would be expected. Two divisions exceeded 10%, while the third division exceeded 8%.”

Anderson’s findings for the three divisions were out of sync with Benford’s Law and a further analysis of the transactions between $90,000 and $99,000 revealed the three divisions were “splitting” vendor invoices that exceeded $100,000 to avoid having to obtain higher level approval, explained Anderson, a Certified Fraud Examiner in Philadelphia.

In another case, Anderson said, management had a policy that employees did not have to submit copies of receipts for meal expenditures under $25. When a senior sales representative submitted six months of travel reimbursement requests at once, the corporate controller noted that more than 50% of his meal charges in more than 17 different cities were for the same amount – $24.73 – regardless of whether they were for breakfast, lunch or dinner.

As a result, senior management engaged Anderson to analyze travel reimbursement requests for all employees. Anderson, a Philadelphia forensic accountant whose firm provides a full range of forensic accounting services in Philadelphia and the Delaware Valley, found that more than 70% of all employee reimbursement requests for meals were for between $24.00 and $24.99. But under Benford’s Law, more than 70% of all employee meals with a stated cost of under $25.00 should have been less than $20.00, he said.

“The resulting conclusion was that employees were likely abusing the company’s policy,” explained Anderson, a forensic accounting expert in Philadelphia. “Management changed its policy to reimburse employees at the equivalent federal per diem rates. The only exceptions to this were for business meals at which customers or prospects were entertained. In these cases, the employee was required to provide a receipt.”

Two years later, management analyzed its travel meal reimbursements, and found that it was spending less than it had prior to the policy change, Anderson said. In this case, the fraudulent behavior was stopped, and the company realized material expense savings, he said.

If you have questions about any finance or fraud issues, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The Philadelphia forensic accounting firm of David Anderson & Associates can be reached by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com if you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley.

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.

New Supreme Court Ruling Affects Internet, Other Remote Sellers

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

Prior to the U.S. Supreme Court ruling last month in South Dakota v. Wayfair, most Internet and mail order sellers were not required to charge and remit state sales taxes.  However, the justices’ ruling in this matter has significantly changed this.  If you are an Internet or remote seller or if you have clients who are, then this blog is of critical importance to you.

States had been permitted, before this ruling, to require out-of-state sellers to charge and collect sales tax only if they had “nexus”.  Nexus is generally defined as having some form of physical presence in a state.  This could include having actual physical stores or other facilities, having commissioned resellers or sellers’ representatives, or actually delivering product into a state using the company’s own vehicles.  Some states have even defined nexus as resulting from in-state advertising or trade show attendance.

With the South Dakota v. Wayfair ruling, the Supreme Court has allowed states to require out-of-state sellers to charge and collect sales tax if they also have “economic nexus”.  Economic nexus arises from having a certain minimum level of sales revenue and/or sales transactions in a state, regards of whether a seller has physical presence or not.  This means virtually every out-of-state seller could be required to charge and remit sales tax in every state into which products are sold.

Fortunately, in the case of South Dakota, the state recognized that forcing every seller to charge and remit sales tax could be extremely burdensome on smaller businesses.  Hence, South Dakota established two possible minimums that must be met before an out-of-state seller is required to charge and remit sales tax: Either $100,000 in taxable South Dakota sales or 200 separate taxable South Dakota sales transactions in either the current or previous calendar year.  This would allow smaller businesses who did not meet these minimums to avoid the burden of charging and remitting South Dakota sales tax.

Several other states have passed similar laws:

  • Alabama, which applies to companies with more than $250,000 in taxable Alabama sales in the previous calendar year;
  • Connecticut, which applies to companies with at least 100 taxable Connecticut sales transactions within the previous 12 months;
  • Kentucky, which applies to companies with more than $100,000 in gross Kentucky sales. These companies do not need to charge and remit Kentucky sales tax, but must notify each Kentucky customer that the customer needs to pay Kentucky use tax on the purchase;
  • Louisiana, which applies to companies with either more than $100,000 in taxable Louisiana sales or more than 200 separate taxable Louisiana sales transactions in either the current or previous calendar year;
  • Tennessee, which applies to companies with more than $500,000 in Tennessee sales within the previous 12 months;
  • Vermont, which applies to companies either more than $100,000 in Vermont sales or more than 200 Vermont sales transactions within the previous 12 months.

Of course, because specific state sales tax requirements can be more complex than those summarized above, you shouldn’t just rely on this information without speaking to a qualified tax advisor.  Also, some of these state laws were on hold pending the Supreme Court ruling while others have not yet announced when their law will become applicable. Additionally, at least 15 more states are either in the process of passing similar legislation or are considering such.

Retail e-commerce sales in 2017 totaled more than $450 billion.  This means that states expect to collect millions more in annual sales taxes based upon the Supreme Court ruling.

If your business or your client’s business could be affected by this Supreme Court ruling, then you or your client should consult with a qualified tax advisor.  Such a tax advisor should have expertise in “SALT” – State and Local Taxes, including those states in which you or your client does business.

If you have questions about any finance or fraud issues, you should speak with a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley. The Philadelphia forensic accounting firm of David Anderson & Associates can be reached by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com if you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley.

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.

Don’t Let Fraud Take the Fun Out of Your Summer Vacation

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.

Another summer of fun and vacation is underway. Those employees with vacation homes at the shore or in the mountains have started their regular weekend visits.  Work likely has slowed down or fallen behind as employees take vacations, and employers scramble to cover their vacant positions.

While summer is generally fun for all of us, it is especially fun for fraudsters, according to Certified Fraud Examiner David Anderson of the Philadelphia forensic accounting services firm of David Anderson & Associates. That fun, he said, comes in two distinct areas: Workplace Fraud and Vacation Fraud. 

Workplace Fraud

As employers shift schedules to account for employees on vacation, Anderson said they can unwittingly open their operation up to increased risk of fraud.  This potential fraud arises from several sources:

  • Employees who do not normally perform sensitive financial jobs may be drafted to fill in for the vacationing incumbents;
  • These “fill-in” employees may not be familiar with fraud deterrence measures in place, and may fail to perform or enforce them;
  • These same employees may be provided with passwords and other access rights to computers and/or software to which they normally do not have access;
  • When incumbents return from vacation, they may not change their passwords and/or technical staff may not remove the access rights of the employees filling in for the incumbents;
  • Reconciling bank accounts and other fraud deterrence measures may be delayed due to backlogs created by vacations;
  • Management may relax fraud investigation and oversight as well as forensic accounting measures due to either employee vacations, their own vacations, or both.

To avoid these risks, Anderson said management must take steps to ensure:

  • “Fill-in” employees are properly trained not only in the incumbent’s job but also in the applicable fraud deterrence measures;
  • Technical staff sets up separate passwords and access rights for the “fill-in” employees, and promptly removes these access rights as soon as the incumbents return to work;
  • Bank reconciliations and other fraud deterrence measures should continue to be applied and performed on either an uninterrupted or a delayed basis; and
  • Management must exercise an increased level of oversight, or at least the same measure of oversight, as it does the rest of the year.

 Vacation Fraud

Fraudsters know people on vacation have relaxed vigilance regarding their debit and credit cards and other personal financial information.  Anderson said an increasing number of fraudsters are using skimmers and other measures to obtain this information.

In particular, the use of skimmers has increased.  Skimmers are electronic data collection devices that are placed over ATM card slots, credit card slots, and on credit card swipers.  They have become smaller in size and less noticeable to the point that it can be difficult to ascertain whether a skimmer has been placed on the device you are using.  In fact, the U.S. Secret Service just issued an alert about the increased use of skimmers on gas station pumps.

While Anderson said people generally are aware if something appears different in the ATMs and other devices they regularly use at home, relaxed vigilance on vacation and unfamiliarity with ATMs and other devices at vacation locations put individuals at greater risk of having their card and other personal financial information stolen. To emphasize this point, Anderson shared a personal experience:

Two years ago, Anderson was on vacation in Asheville, North Carolina.  On the Sunday his family was leaving, he went to the ATM at a local bank and withdrew funds.  Unbeknownst to him, fraudsters had placed a skimmer on the ATM machine. Anderson only learned of the theft of his debit card and PIN information on Monday night when he went online to check his bank account and noticed a strange charge made in Washington state approximately 12 hours after he had withdrawn funds from the ATM.

Anderson subsequently learned the fraudsters had used his debit card and PIN information to purchase an iPhone in Washington state.  When he contacted Ashville bank officials the next day, they checked the ATM and found there was no skimmer on it.  However, they later notified him they had had several complaints during the week about people who had used their ATM and had fraudulent charges appear on their debit cards.

Bank officials told Anderson they had instituted a new procedure to check the ATM at the end of their business day and first thing the next morning to see if there was a skimmer on it.  However, they admitted they would have no way of knowing that fraudsters had placed and then removed a skimmer outside of normal banking hours unless they reviewed hours of tapes from each ATM every day.

Now, when he is on vacation, Anderson said he only uses an ATM that is in a bank’s lobby and only during normal business hours.  He also said he only uses his debit card as a credit card to avoid entering his PIN number.  In addition, he said he maintains a higher level of vigilance whenever he uses his debit or credit card out of town . . . and he strongly recommends others adopt this same practice.  With regards to gas pump purchases, Anderson also said that he either pays cash or goes into the station to have his debit or credit card processed there instead of at the pump.

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.

David Anderson Article Featured on Collaborative Law Website

A recent article from 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, was posted last week as the feature article on the Collaborative Law Professionals of Southeastern Pennsylvania website.

The article by Anderson – entitled “Key Issues Regarding Marital vs. Non-Marital Assets in a Divorce” and which originally appeared on the David Anderson & Associates blog this past March 26 – details a professional discussion Anderson had earlier this year with Kathy Bloom, an attorney-mediator who serves as Managing Partner of the family law firm of Bloom Peters, LLC, with offices in Horsham, PA and Mount Laurel, NJ.

“I’m thrilled the Collaborative Law Professionals organization decided to share the information Kathy and I presented in the article with its members and visitors to its website,” said Anderson, a marital dissolution accountant in Philadelphia. “The more people who are considering or involved in divorce learn about the legal and financial assistance options that are available to them, the less costly, difficult, and stressful the process can be for everyone involved.”

In the “Key Issues” article, Bloom and Anderson describe how, in general, decisions are made as to what are marital assets and what are non-marital assets. The discussion also zeros in on specific laws in the tri-state Pennsylvania-New Jersey-Delaware area that can help guide local dissolution and divorce proceedings and smooth the path toward completion.

Among the key points made in the piece, Bloom explains 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. In addition, she notes non-marital assets that are “comingled” with marital assets can, more often than not, become marital assets.

However, explaining that “there are even exceptions to . . . exceptions,” Bloom and Anderson, in the article, strongly recommend working with a team of legal and financial professionals.

Here’s a link to the just-published version of the article.

The Collaborative Law Professionals of Southeastern Pennsylvania (visit the website) is not a law firm but is a multi-disciplinary network of professionals trained to provide an alternative to the traditional court process. The organization helps individuals work collaboratively, outside of court, to find balanced, respectful, lasting solutions and agreements. The Collaborative Law Professionals offer the skill and knowledge of a diverse group of independent professionals, including lawyers, financial specialists, child specialists, and communication coaches, who ensure client needs, and the needs of each family member are individually and collectively considered.

Bloom Peters LLC (visit the website) is a full-service law firm focusing on family law and business law. The practice works with clients as a team, to assess their legal needs, find solutions to their legal problems, and then implement those solutions. Bloom Peters provides superior legal services to clients and to rapidly respond to client needs, while striving to uphold the highest standards of integrity, expertise, and professionalism. The firm prides itself on a commitment to be available for consultation whenever possible.

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.