07 Apr 2021
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When Divorcing Business Owners Minimize Profits

Roger Rossmeisl, CPA
Fraud Briefs
When Divorcing Business Owners Minimize Profits

Dividing a marital estate is rarely easy. But it’s made much harder if a divorcing spouse owns a private business and attempts to artificially deflate its profits or hide assets. If you or your attorney suspects this type of deception, engage a forensic accountant to investigate. Key questions When working on divorce cases, fraud experts ask several questions about private business interests. For example, does a spouse own a cash business that may have unreported income? Does the owner receive special (or excessive) perks or tax write-offs that affect the business’s profitability? Are numbers intentionally reported incorrectly to affect the business’s value? n addition, experts investigate whether the company has any subsidiaries or is part of any other business ventures. Sometimes, a business owner may be a silent...

02 Apr 2021
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The Ugly Side of the Precious Metals and Stones Industry

Roger Rossmeisl, CPA
Fraud Briefs
The Ugly Side of the Precious Metals and Stones Industries

All that glitters isn’t gold. This includes gold — and other precious metals, stones and jewels that are sometimes used to launder the “dirty” proceeds of criminal activities such as drug trafficking and terrorism. But several U.S. laws and regulations target these international money-laundering operations. Good as gold Precious metals, stones and jewels make ideal vehicles for money laundering for several reasons: Ownership and control. Precious metals are bearer instruments, meaning that like cash, the individual in possession of the precious metal owns and controls it. Readily transferable. There’s an active, global market that enables criminals to trade them. Because precious metals have many legitimate uses, criminals often can move them without attracting attention. Relatively stable. Although the price of precious metals fluctuates like those of any commodity, the value...

24 Mar 2021
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Deepfakes: The Newest Frontier in Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Deepfakes: The Newest Frontier in Fraud

Fraud perpetrators are constantly altering their methods to evade detection. Nimble cybercriminals, for example, are why IT security companies update their software so frequently. The use of deepfakes (a word derived from “deep learning” and “fake”) is one of the latest threats to emerge. Deepfakes are enabled by artificial intelligence (AI) and they’re something your company needs to have on its radar because if you haven’t seen a deepfake yet, you will. Spotting an imposter A deepfake involves the use of AI to create video, audio or static images that seem real. You may have seen them in viral videos of famous people, such as one in which Facebook’s Mark Zuckerberg is shown saying he has “total control of billions of people’s stolen data.” As realistic as...

14 Mar 2021
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Fraud Considerations When Making Business Acquisitions

Roger Rossmeisl, CPA
Fraud Briefs
Fraud Considerations When Making Business Acquisitions

The COVID-19 pandemic has often made the due diligence process for business acquisitions more complex and time-consuming. But if you’re buying a company, it’s critical to dedicate your full attention to this part of the M&A process — not only to confirm that the selling business is as valuable as you believe it to be, but to protect against fraud. Plan early to engage a fraud expert to review financial statements and other documents for signs that you could be dealing with a dishonest seller. Subtle warning signs When reviewing a seller’s financial statements, forensic experts look for subtle warning signs of fraud. These include excess inventory, a large number of write-offs, an unusually high number of voided discounts for returns, insufficient documentation of sales and increased...

09 Mar 2021
0

Fraud Potential When Factoring Receivables

Roger Rossmeisl, CPA
Fraud Briefs
Fraud Potential When Factoring Receivables

If your business struggles to generate steady cash flow from operations, factoring is a possible solution. With factoring, a business sells the right to collect on customer invoices to a factoring company in exchange for an immediate payment. If you have slow-paying customers, factoring accelerates the collections process. But some companies abuse factoring and use it to commit fraud.  The basics There are two forms of invoice factoring. With recourse factoring, the business selling invoices agrees to repay the factor the advance it received (a percentage of the invoice’s face value, minus a fee) if a customer doesn’t pay the full amount. Non-recourse factoring is less common because it involves more risk for the factor. The business doesn’t have to repay the factor if a customer becomes insolvent during...

28 Feb 2021
0

How to Reduce Receivables Fraud Risk

Roger Rossmeisl, CPA
Fraud Briefs
How to Reduce Receivables Fraud Risk

One of the most common routes for occupational fraud perpetrators runs through the accounts receivable department. Unless you’re aware of these schemes and take steps to prevent them, your business could face serious financial losses. Creative misappropriation Receivables fraud occurs when dishonest employees divert customer payments for their personal use. The most popular method is known as “lapping.” It involves the application of receipts from one account to cover misappropriations from another. For example, rather than credit Customer A’s account for its payment, a dishonest employee pockets the funds and later posts a payment from Customer B to A’s account, Customer C’s payment to B’s account and so on. Dishonest employees also often abuse discounts and write-offs. Instead of crediting a payment to the customer’s account, fraudsters might...

22 Feb 2021
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Avoiding Fraudulent Estate Transfers

Roger Rossmeisl, CPA
Fraud Briefs
Avoiding Fraudulent Estate Transfers

If you have an estate plan and also have creditors, you could be a fraud perpetrator — without knowing it or intending to defraud anyone. In some circumstances, creditors can challenge gifts, trusts and other strategies for leaving assets to heirs as fraudulent transfers. Here’s how to keep your estate plan from running into trouble. 2 types Most states have adopted the Uniform Fraudulent Transfer Act (UFTA). The law allows creditors to challenge transfers involving two types of fraud: Actual fraud. This means making a transfer or incurring an obligation “with actual intent to hinder, delay or defraud any creditor,” including current creditors and probable future creditors. Constructive fraud. This is a more significant threat for most people because it doesn’t involve intent to defraud. Under UFTA,...

19 Feb 2021
0

Put Employees to Work Fighting Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Put Employees to Work Fighting Fraud

You may have the best internal controls in the business world, but if your employees don’t follow them, your company is at serious risk for fraud. The same is true if workers aren’t aware of your company’s risks and can’t recognize red flags. The solution? Educate them. Training is critical A forensic accountant can conduct on-site, broad-based training for employees in the form of live or virtual presentations. This expert might use role-playing to help staff understand the various forms fraud can take, as well as how perpetrators think and identify their victims’ vulnerabilities and weaknesses. Enlisting the help of external experts is particularly important for smaller businesses. Not only are they more vulnerable to fraud, but they’re less likely to have in-house fraud expertise. Small-business training can...

17 Feb 2021
0

Startup Investments That May Be Too Good To Be True

Roger Rossmeisl, CPA
Fraud Briefs
Startup Investments That May Be Too Good To Be True

Many startup companies require access to large sums of investment capital to take on well-established competitors. The need to raise such funding may encourage a startup’s founder to paint an overly optimistic picture of the business and exaggerate its ability to succeed. In some extreme circumstances, founders may resort to deception to convince investors to back their ventures. That’s fraud. Silicon Valley warning A medical testing startup provides a cautionary tale of what can happen when an aggressive entrepreneur plays fast and loose with the truth. Based on the extravagant claims of the Silicon Valley company’s founder, the startup raised more than $700 million and secured a $10 billion valuation. When evidence emerged that it couldn’t conduct extensive medical tests on tiny amounts of blood as it...

12 Feb 2021
0

Make Your Fraud Contingency Plan a Blueprint for Swift Action

Roger Rossmeisl, CPA
Fraud Briefs
Make Your Fraud Contingency Plan a Blueprint for Swift Action

Over the past year, most businesses have been forced to contend with multiple crises, including COVID-19, social unrest and financial challenges. The last thing you need right now is a fraud incident. But if your company is defrauded, make your fraud contingency plan one that can help mitigate the damage. Identifying likely scenarios No contingency plan can cover every possibility, but yours should be as wide-ranging as possible. Work with your senior management team and financial advisors to devise as many fraud scenarios as you can dream up. Consider how your internal controls could be breached — whether the perpetrator is a relatively new hire, an experienced department manager, a high-ranking executive or an outside party. Next, decide which scenarios are most likely to occur given such factors...

ROGER ROSSMEISL, CPA

Kho & Patel CPAs
160 E. Arrow Highway
San Dimas, CA 91773

(714) 325-0442
roger@khopatel.com

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