The bookkeeper made a decision not to notify the other partners. Cohen, a partner, spoke to the bookkeeper, an employee, and agreed to reimburse the firm. Cohen gave the bookkeeper when he was confronted. When they do try to steal funds, the scheme is usually exposed quickly.Ī disturbing question is why the bookkeeper didn't notify all of the partners when she discovered the first check in the fall. If everyone knows the owners are careful about the preparation and auditing of transactions, people are less likely to attempt to embezzle funds. Employees and other partners notice whether the owners are meticulous or complacent about handling funds and auditing accounts. The business owners, in this case, the partners, set the tone for the office. Takeaway 2: Office culture needs to emphasize accountabilityįirm culture needs to be an atmosphere of accountability at all levels. The dissent notes that it is unclear if this is an industry-wide practice. This is a basic level of review, and the bank does not do it. The bank does not even match the signature on the back of a check with the payee on the front for a check less than $50,000. One fact that jumps out in the dissent is the admission by the bank that it is not their policy to check the endorsement on checks of less than $50,000 that are deposited in ATMs. 1996), the court held that by providing the plaintiff with their financial records the bank gave the plaintiff the tools needed to police their own employee. Contrast that to a title insurance audit that is often limited to examining only transactions that involve the company doing the audit. At a minimum, the account owner has data for the entire account. Information that may be helpful includes internal bookkeeping records, external financial statements, invoices, and timesheets. The account owner is the only party with access to all of the information that may expose fraud.
Third parties may have policies or obligations that may help expose fraudulent activity, but they should only be relied on as a supplement to the account owner's vigilance. The owner is in the best position to police the account. Takeaway 1: The account owner is always the best line of defense against fraudĪn account owner, whether it's an individual or a firm, always needs to be the primary auditor of the account. The bookkeeper testified that she did not ordinarily scrutinize the check images unless she couldn't balance the account. The firm notified the bank of the potential fraud in March 2015. The audit determined that approximately twenty-nine checks totaling approximately $43,000 payable to third parties were endorsed and cashed by the partner. The scheme was discovered in January 2015, and this time the bookkeeper notified the other partners. In the next few months, the partner embezzled approximately $43,000 using the same method. The bookkeeper confronted the partner, who gave her an explanation and wrote two checks to reimburse the firm. The bookkeeper discovered that the check, made payable to the third party, was endorsed by a partner with his own name and cashed. In the fall of 2014 (the facts are unclear exactly when), the firm's bookkeeper received an inquiry from a third party about a check. This happened approximately twenty-nine times. The relevant facts for this discussion are as follows.Ī partner in a law firm embezzled funds from the firm by endorsing checks made payable to third parties and depositing them into his personal account using ATMs. The ultimate holding in the case, that the appellant law firm entered into a contract limiting their window to notify their bank of fraud, is not essential for this discussion. This law firm lost $43,000 as a result of poor fundamentals that allowed an employee to embezzle funds. I recently read a case that presents an opportunity to use real-world facts to review some of the fundamentals of proper bookkeeping procedures for law firms.
0 kommentar(er)
