Preventing And Detecting Employee Theft And Embezzlement: A Practical Guide

"If you don't think that some employees have figured out ingenious ways to steal from businesses, read this book. The real-life examples will change your mind." —Joseph T. Wells, CFE, CPA, founder and Chairman, Association of Certified Fraud Examiners
"An easy-to-read, but comprehensive step-by-step approach that covers every potential area for employee fraud and embezzlement. Great checklists at the end of each chapter show what steps to put into place for controls and protection. Includes real-life examples that really 'bring the story home.' " —Jean L. Conover, CPA, past CEO/CFO, Jefferson Radiology PC
"This book is a must-read for seasoned entrepreneurs as well as those considering entering their own business venture. While developed for small business, the risk detection and prevention methodologies presented by Mr. Pedneault are universal to all businesses. The concise checklists provide ready guidance for establishing a complete system of controls."—Denise H. Armstrong, CPA, Chief Financial Officer, Sea Research Foundation, Inc. d/b/a Mystic Aquarium and Institute for Exploration
"This book is a must for every individual owning their own business. Mr. Pedneault clearly articulates the fraud risks that occur in each business system. In the book, he offers practical advice for internal controls and illustrates the risks with real-life examples."—Leonard W. Vona, President, Fraud Auditing, Inc.

STEPHEN PEDNEAULT, CPA/CFF, CFE, is the founder and Principal of Forensic Accounting Services, LLC, a CPA firm specializing in forensic accounting, employee fraud, and litigation support matters. Steve is the author of Fraud 101: Techniques and Strategies for Understanding Fraud and Anatomy of a Fraud Investigation, and a contributor to Fraud Casebook: Lessons from the Bad Side of Business, all published by Wiley. Steve has also written numerous articles appearing in local and national media, and is a frequent speaker on the subjects of employee embezzlement and forensic accounting. For more information about Stephen Pedneault, go to www.forensicaccountingservices.com.

Preface.
Acknowledgments.
Introduction.
CHAPTER 1 Hiring the Right Employees.
Disclaimer.
Where Do You Start?
Advice of Counsel.
Application Policy.
Due Diligence.
Personal Information.
Past Employment.
Education.
References.
Criminal and Civil History Checks.
Credit Checks.
Hiring Time.
Hiring the Right Employees: Considerations.
CHAPTER 2 Know Your Employees.
Why Is Knowing Your Employees Important?
Open Communications.
What Should You Watch for in Your Employees?
Know Your Employees: Considerations.
CHAPTER 3 Sales, Cash Receipts, and Collections.
Here’s Where Everything Starts.
Recording and Tracking Sales.
Collections.
Debit Memos and Other Adjustments.
Accounts Receivable.
Sales, Cash Receipts, and Collections: Considerations.
CHAPTER 4 Credit Card Sales, Transactions, and Merchant Statements.
Processing Sales.
Reconciling Sales.
Processing Refunds or Credits.
Reviewing and Reconciling Refunds or Credits.
Reviewing and Reconciling the Merchant Statement.
Credit Card Sales, Transactions, and Merchant Statements: Considerations.
CHAPTER 5 Purchases, Cash Disbursements, Checks, and Petty Cash.
Purchases.
Cash Disbursements/Checks.
Unpaid Bills/Accounts Payable.
Petty Cash.
Purchases, Cash Disbursements, Checks, and Petty Cash: Considerations.
CHAPTER 6 Credit Cards and Debit Cards.
Credit Cards.
Debit Cards.
Credit Cards and Debit Cards: Considerations.
CHAPTER 7 Employee Expense Reimbursement.
Expense Submission.
Where Are the Abuses?
Payment Processing.
Employee Expense Reimbursement: Considerations.
CHAPTER 8 Electronic Banking.
Traditional Banking (In-Person Deposits and Manual Check Writing).
Check Processing and Clearing Changes.
Changes in Bank Deposits.
ATMs.
Online Banking.
What Can You Do?
Electronic Banking: Considerations.
CHAPTER 9 Payroll Processing.
Payroll Administration: Adding/Changing/Terminating.
Payroll Processing.
Payroll Tax Returns.
Payroll Processing: Considerations.
CHAPTER 10 Inventory Issues and Controls.
Prevention: Good News and Bad News.
Retail Businesses: Items Available for Sale.
All Businesses: Items for Use by Employees (Supplies, Tools, and Equipment).
Detection.
Inventory Issues and Controls: Considerations.
CHAPTER 11 Bank Statements, Canceled Checks, and Reconciliations.
Bank Statements.
Investment Account Statements.
Canceled Checks.
Bank Reconciliations.
Bank Statements, Canceled Checks, and Reconciliations: Considerations.
CHAPTER 12 Financial Reports.
Generate Financial Reports Regularly.
Why Is the Regular Review of Financial Reports So Important?
When to Consider Outside Advice and Assistance.
Financial Reports: Considerations.
CHAPTER 13 Safeguarding Your Bookkeeping or Accounting Systems.
Manual Bookkeeping Systems.
Computerized Bookkeeping and Accounting Systems.
QuickBooks Users.
Safeguarding Your Bookkeeping or Accounting Systems: Considerations.
CHAPTER 14 Prevention, Detection, and Insurance.
Timing Is Everything.
Adequacy of Coverage.
Responsibilities for a Claim.
Disclaimer.
Prevention, Detection, and Insurance: Considerations.
CHAPTER 15 Your Response to an Identified or Potential Issue.
A Dreaded Day of Discovery.
Due Diligence on the Discovery.
What If It Appears to Be Fraud?
Your Response to an Identified or Potential Issue: Considerations.
Appendix A: Embezzlement Controls for Business Enterprises.
Appendix B: Who Was Lester Amos Pratt?
About the Author.
Index.