5750 Old Orchard Road, Suite 200
Skokie, IL 60077
847.982.0333 (Phone)
847.982.0219 (Fax)
www.msco.net
Who's Minding the Store? Small Steps Equal Big Protection By Ron Miazga, Partner, CPA, CVA 5750 Old Orchard Road
Suite 200
Skokie, IL 60077
Main: 847-982-0333
Fax: 847-982-0219
www.msco.net
February 2015 – During the course of my 35 years in public accounting, I have been involved in the detection of many embezzlements and the recovery of assets. Through this short article, I hope you will benefit from my experiences and recognize opportunities where it's possible to prevent theft from occurring. $1,000,000 Embezzled By Unscrupulous Accountant The prior outside accountant instructed the owners to sign blank checks so they could pay federal and state payroll taxes on a timely basis. This accountant deposited all of the checks (written to the bank) into his personal account or dummy corporate account for his own benefit. The theft was discovered when the owner happened to come across a payroll tax notice. My investigation resulted in the discovery of a million dollars that had been stolen over a period of two years. This embezzlement could have been prevented by implementing the following actions: 
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Never signing a blank check Always having accompanying documents that agree with the checks, showing the vendor’s name and the amount owed Segregating duties; the individual that prepares the checks should never be same the person who opens the mail The Art of A Forgery The company’s new bookkeeper prepared the checks; she also had her boyfriend (an artist) recreate a perfect forgery of the owner’s signature. Our client was smart, and had the monthly bank statements and canceled checks mailed to me. During my monthly perusal of these documents, I noticed checks totaling about $100,000 to unfamiliar vendors. I immediately called the owner and she confirmed the checks were forgeries. Being acutely aware that the bookkeeper might "skip town" if she had the slightest hint that we were on to her, we acted quickly. We were able to have her arrested before she got away with almost $100,000. We later discovered that the bookkeeper had been successful with similar thefts in other states (there were numerous warrants out for her arrest). This theft could have been prevented by implementing the following actions: ‐ 2 ‐ 
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Checking references from previous employers Conducting background investigations on any person that has direct access to your bookkeeping records, bank accounts, checks, and physical assets Obtaining employee dishonesty bond coverage Copper Is Much More Than Pennies As vice president of finance for a manufacturing company, I kept close watch on the monthly financial results, including ratios, percentages, and profit margins. I noticed that the company’s material costs were rising and I was determined to find out why. A major part of our material cost involved copper, and I suspected theft; as my raw material cost was relatively stable, we decided to check with a nearby scrap dealer. As we suspected, the dealer confirmed that our inventory control manager was selling our copper. The dealer helped us set up a "sting operation" and we caught the inventory control manager in the act. The thief admitted his guilt and was prosecuted. This theft was discovered relatively quickly; similar thefts can be detected or prevented by: 
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Preparing key financial ratios Conducting a timely review of key financial ratios Determining the cause for changes in key financial ratios Being suspicious of unexplained variances that may be the result of fraud As the owner or the company officer, it’s important to protect the company you’ve built, along with its profits. A few small but important steps can result in significant additional protection for your company. Please contact Michael Silver & Company CPAs to learn more how we can assist you in protecting the value of your business. Partner Ron Miazga, CPA, CVA, serves closely‐held businesses and their owners in manufacturing and other service‐related industries, including real estate. He specializes in all areas of taxation, as well as in delivering audits, reviews, and compilations. He is an accredited CVA (certified valuation analyst) and is a key member of the Firm's Valuation Services team. Manager Andrea Farr Capizzi, CPA, ABV, CFF, also contributed to this article. ©Michael Silver & Company CPAs
The information contained in this article is intended as general information only and not as specific legal and/or
financial advice. Accordingly, the information in this article is provided with the understanding that the author and
publisher is not herein engaged in rendering financial or any other professional advice or services. As such, it should
not be used as a substitute for consultation with an accounting professional or other competent advisors.