Comstock's magazine 1117 - November 2017 | Page 51

about $1,000. Then in the accounting software, she substi-
tuted the owner’s name for hers, as the recipient. That in
itself wouldn’t raise suspicion, since the owner often wrote
checks to himself. Then she’d get back to work.
There was a remaining step — the riskiest. She’d always
volunteer to collect the mail, meaning she’d be the first to
get her hands on the bank statement. That was crucial be-
cause it showed copies of her self-dealing checks.
Statement in hand it was back to her office, where she
kept a folder with an X-ACTO knife, whiteout and tape. On
the damning checks, she’d surgically remove her name and
implant the owner’s. Next, she went to the copy machine to
remove the traces of her doctoring. It helped that the owner
never checked the statements.
Fast-forward three years and more than $200,000 later.
One month, the employee got behind on her name-trans-
plant duties. Unfortunately for her, it was tax time, and an
outside accountant in the office asked for the latest state-
ment. It wasn’t in the files because it was on the employee’s
desk waiting to be doctored.
The owner called the bank, which helpfully faxed over
the missing statement. The wayward staffer tried but failed
to intercept the fax, and it was soon in the hands of the
owner and tax accountant. “What’s this?” the owner asked
the employee when he read the checks.
She had no answer, and he fired her on the spot.
(Real names omitted per Barrett and Stalker's CPA profes-
sional code of conduct, including a duty to maintain client
confidentiality.)
HOW NOT TO BE A VICTIM
Small companies assume they can’t afford expensive
control measures to stop cases like these. The fraud ex-
aminers survey found bigger companies far more likely to
have sound anti-fraud controls like external audits, fraud
hotlines and fraud training — all of which detect and stop
theft faster and so cut the losses if it does happen, accord-
ing to the report.
In fact, small firms can afford prevention, says Stalker.
In 2010, she and Conrad Davis, a partner at accounting firm
Crowe Horwath, wrote a white paper on inexpensive steps
that small- and medium-sized organizations can take.
For example, business owners should check bank state-
ments before bookkeepers do. They should look at all
canceled checks to make sure the payees are legitimate
and that signatures and endorsements are authentic.
Is your family business
struggling with growi