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Deposition Designation Station

A married couple, who owned a business in a small town, called me to investigate some curious items found on their company's bank statements. There was a DISH Network bill being paid through their account, but they didn't have DISH Network as their cable TV provider. When they called the company to ask whose account it was, they were given the name of their bookkeeper. They dug a little deeper into the bank statements and noticed that each month there was a Verizon Wireless bill being paid by them, even though they both used AT&T. Finally, they confronted their beloved bookkeeper, Sienna. A woman in her mid-twenties, Sienna had worked for them since graduating high school, eventually working her way up in the Company to managing the office. Sienna reacted the same way most fraudsters do when they are initially caught, she lied and said that she didn't know anything about it. When pushed, she explained that it was an accident and apologized for the oversight.

The couple called their accountant, who directed them to me. I pored over their bank statements and found $1,250 in losses. When I showed this to the owners, they were shocked.

"It must be an accident, right? She must have done this accidentally."
I asked, "Have you ever paid a bill online, or bought anything on Amazon?"
They said yes.
"Walk me through what you have to do when you check out."
"Well," they said, "you have to put your name in, plus the address, which has to match the billing address for the card."
"Exactly," I said. "What else?"
"You type in the credit card number, the expiration date, and then flip the card over for the three-digit code on the back."

I nodded. At each and every step, Sienna had to know my clients' names, addresses, the credit card number, expiration date, and CVC code. The bookkeeper did this with multiple different vendors: her utility bills, her cable television bill, and her cell phone bill. Taking that tedious process into consideration, I asked them, "At what point is this an accident?"

The wife began crying. She said, "I never thought of it that way. You are right. This wasn't an accident. So, what is wrong with us, that we let this happen? She stole $1,250 from us and we believed her story. We just wanted her to pay it back and then give her a second chance."

When another client, a medical doctor, received his annual 401(k) reports and found that his beloved office manager had paid herself $20,000 more in payroll, he assumed it was an oversight or error. His beloved office manager is now in prison for stealing nearly $300,000 from his practice by paying herself more and skimming his cash receipts.

Linda, the long-term Accounts Payable clerk for my client, was often questioned on the "double paid" bills or amounts coded to the wrong expense account. Linda was affable, would laugh it off and tell them she would fix it. When a $2,200 check to American Express was found on her desk and noted to be for an account belonging to her, she cried and said she was sorry, admitting to taking "thirty or forty thousand." When our investigation was complete, Linda went to prison for 4 years for taking $550,000.

Fraud almost always looks like bookkeeping errors or accidents when they are stumbled upon. And, when confronted, the affable fraudster will always have a plausible explanation. In fact, fraudsters almost always are some of the brightest people I've met. After all, they figure out ways to steal money, hide it, and are able to act completely normal at work each day.

What can we business owners, auditors, accountants and other professionals do?

1. Listen to Your Gut

When you are faced with a situation when documents don't match verbal statements made to you, or when something just doesn't "make sense" - follow your hunch. Don't blindly rely on the statements made by someone.

2. Obtain Corroborating Documents

Depending on the situation, there will be documents, preferably from external sources, which can prove or refute the statements being made to you. From bank statements and canceled check images, to audit trail reports, to vendor invoices, to customer payment data, to employee travel records - there are typically numerous avenues where corroborating information can be collected.

3. Be Confrontational

Nice, kind people often shy away from being confrontational. After all, they don't want to "offend" someone who has offered a plausible explanation. But when the corroborating documents don't match the statements the person has made, the situation often needs to be dealt with head-on. Confrontation does not have to equate to unkind behavior. Confrontation really is just an attempt at getting to the truth of the matter in a direct and matter-of-fact manner.

Tiffany R. Couch, CPA/CFF, CFE has more than 20 years of experience in the field of Accounting, with the last 13 years focused completely on Forensic Accounting related engagements. Ms. Couch holds a Bachelor of Science in accounting degree cum laude from Central Washington University. She is a Certified Public Accountant (CPA), Certified in Financial Forensics (CFF), and is a Certified Fraud Examiner (CFE).

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