Answering Common Questions from Clients:
Has my employee embezzled money? 4 key steps to take
By Lauren de la Rosa, CPA, CFE
You suspect that someone you trust may be stealing from your business. Embezzlement is far more common in small businesses than most owners realize. The Association of Certified Fraud Examiners (ACFE) estimates that organizations lose 5% of revenue to fraud each year.
When your suspicion falls on an employee, the questions come quickly: Do you confront the employee? Call the police? Investigate it yourself? Call an attorney? Bring in a forensic accountant?
We suggest the following four steps based on our professional experience and training in fraud investigation:
1. Stay Calm and Get the Facts Straight
Your initial instinct may be to confront the employee immediately. Resist it. Confronting an employee without solid evidence tips them off and gives them the opportunity to destroy documentation or fabricate a story. Take time to gather facts and evidence before taking any action. If possible, do it while the employee is out of the office – over a weekend, during a holiday, or while they’re on vacation.
2. Preserve and Document Everything
In addition to the company’s accounting records, begin collecting source documents as evidence that supports your suspicion:
- bank and credit card statements
- expense reports and receipts
- vendor invoices and payment records
Source documents serve as evidence or proof of a legal claim. Without them, it becomes much more difficult to demonstrate it in court.
If possible, conduct an internal analysis using the source documents obtained. Look for common patterns, including duplicate payments, unusual vendors, or expenses that fluctuate significantly.
Common red flags include:
- reimbursements without receipts
- even-dollar amount disbursements
- high-volume use of company credit cards
Because confidentiality is essential, only discuss the investigation with employees on a need-to-know basis.
3. Consult Legal Counsel Before Taking Action
Before you terminate or confront the employee, speak with an employment or business attorney. Don’t try to handle the investigation without legal counsel. They can advise you on how to proceed without exposing yourself to wrongful termination claims or other legal liability. An attorney can also advise whether a forensic accountant should be brought in.
4. Engage a Forensic Accountant
If the dollar amounts involved are significant, or if the matter may be referred to criminal prosecutors, a forensic accountant can be crucial in an embezzlement case. A skilled forensic accountant has the expertise to trace the money, organize evidence and assess its relevance, analyze it to uncover misappropriation of funds, and present the findings in a clear, court-ready format. They can then testify as an expert witness, bringing credibility to your case in court.
How We Help
At Morones Analytics, our forensic accountants work with you to define the scope of our investigation and provide guidance from start to finish. We follow the money flow to determine what actually happened and trace it back to the source documents. After looking under the hood of financial data and other key evidence, we may also be engaged to perform interviews to bring transparency. When the investigation is complete, we can produce an expert report for use by leadership/the Board, law enforcement, or in the pursuit of civil claims.
Bottom Line
Discovering potential embezzlement inside your business is a painful experience — financially and personally. The most important thing you can do is move carefully, document thoroughly, and engage qualified professionals early. Rushing the process or reacting from emotion can compromise your legal standing and make it significantly harder to recover what was lost.
If you suspect embezzlement, early investigation and experienced guidance are crucial. Morones Analytics is here to help you – calmly, methodically, and with the investigative insight needed to get to the truth.
————————————————————————————————-
Lauren de la Rosa, CPA, CFE brings more than a decade of experience in auditing and financial analysis, both in public accounting and corporate settings to her role as a forensic accountant. She thrives on problem-solving and is dedicated to uncovering the truth.
Lauren works alongside our senior forensic accounting experts to deliver thorough financial analysis that helps clients make informed decisions. She approaches each case with curiosity and objectivity, focusing on facts and presenting findings with clarity.
[email protected] | 503.223.5179
