Controller Fired for Embezzling Millions


“Controller fired for embezzling millions. Refused to use automated bank reconciliation system in company software!”

“Employee disappears after writing an electronic check to himself for $20,000!”

“Employee discovered embezzling thousands from Petty Cash fund by improper bank reconciliation.”

Could this be you? We hope not!

In each of the cases, the company broke the primary rule — “Trust but verify.” The economic news these days is scary. As people feel the crunch, they may be more tempted to cut corners than in the past. Another accounting adage is “The intersection of Greed & Opportunity is Embezzlement!”

No one wants this to be the headline about your company. No system is fool proof, but there are ways to make it more difficult. There are a number of high tech solutions but there are also some simple procedures within your accounting system & functions:

10 Simple (Cheap) ways your accounting system can help:

1. Set up each of your Peachtree users with their own user name & password and remind the user to keep the password secure & confidential. When each user logs in using his/her own password, the accounting system creates an audit trail that you can review.

2. Review each user’s access rights… Users should have only the rights they need – and no more. In Peachtree “Full Access” allows user to “Delete”. Delete should be used in rare situations. So, limit who you give these rights to.

3. All procedures should be in writing. These should be in “checklist” format so they are easy to follow. Written procedures, that everyone can follow, ensures critical functions get done when someone gets “hit by the bus” or falls off the roof (as I did).

4. Enforce vacation policies… if you have someone who never takes time off, it could be because they are embezzling & must catch the mail everyday. Make sure they don’t have remote or internet access to the system while they are away.

5. Separation of duties – this means that the person who issues the check should not be doing the bank reconciliations; or the person issuing the sales invoice should not be the person receiving customer payments. In small business, where everyone wears many hats, this is difficult. The way to cover it is to have written procedures, job sharing & rotation, regular, detail review of financial reports by management.

6. Company policies on Security, Confidentiality & Non-compete ensure that employees are not using company resources to start their own business.

7. Consistent pricing, quoting & discounting procedures using inventory items & services. If you have special pricing for each customer, an employee could be in collusion with the customer for kickbacks.

8. Watch customer returns and bad debt write-offs. Increase in these areas could indicate funds being siphoned off by employee or sales not being recorded.

9. Up-to-day inventory management using inventory functions within accounting software helps prevent your inventory from disappearing.

10. Watch for the “phantom vendor”. Specific procedures & approvals for selecting vendors, making purchases & approving payment.

Need help implementing these recommendations…

Ask JCS Computer Resource!

By Miracle