25 Feb 2024
0

Early Revenue Recognition: Not Just Bad Accounting, But Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Early Revenue Recognition: Not Just Bad Accounting, But Fraud

Although financial statement fraud is the least common form of occupational theft (9% of incidents), it costs organizations the most in financial losses, according to the Association of Certified Fraud Examiners. Businesses defrauded by financial statement schemes had median losses of $593,000. Early revenue recognition, which distorts profits and can artificially boost a business’s financial profile, is popular among financial statement fraud perpetrators. To comply with Generally Accepted Accounting Principles and preserve your company’s reputation, you must prevent such activities on your watch. It’s also important to be able to detect them in the financial statements of business partners, including acquisition targets and customers applying for credit. Schemes and warning signs Owners, executives and others with access to financial statements might recognize revenue improperly by delivering products early,...

18 Feb 2024
0

Keep Fraud Off Your Restaurant’s Menu

Roger Rossmeisl, CPA
Fraud Briefs
Keep Fraud Off Your Restaurant's Menu

The restaurant business is notoriously tough — even without the many fraud threats. The fact is, when you’re operating on very thin profit margins, you can’t afford to lose a cent to thieves. To protect your business from ill-intentioned employees, customers and vendors, take steps to fortify your restaurant against fraud. Gaps for exploitation Your restaurant may have high transaction volumes but lack the technology linking point-of-sale, inventory and accounting systems. This leaves gaps for fraudsters to exploit. Employees could, for example, provide food and drinks to friends without entering the sales — or ring up only a portion of their friends’ bills. They might issue voids or refunds when there was no original sale and pocket the proceeds. Or they could overcharge customers by, say, charging...

18 Feb 2024
0

Generative AI Can Help Prevent, Detect and Investigate Fraud

Roger Rossmeisl, CPA
Fraud Briefs
Generative AI Can Help Prevent, Detect and Investigate Fraud

You may already be familiar with artificial intelligence (AI) and even use it in business applications. What about generative AI (Gen AI)? Gen AI typically is used to create new content (such as text, images, code and video) from raw data and includes such popular systems as Grok, ChatGPT and DALL-E. Gen AI can also help reduce, uncover and combat fraud. However, there may be ethical and legal implications of using these applications. Digital decisions Fraud can occur when a perpetrator finds one or more weaknesses in a company’s defenses and exploits them, creating patterns of activity. Finding these patterns quickly is critical to minimizing losses. Traditional fraud detection engines rely on rules to detect suspicious activity. Once the technology detects a transaction that fits a pattern, the...

04 Feb 2024
0

How Forensic Accountants Use a Lifestyle Analysis to Find Hidden Assets

Roger Rossmeisl, CPA
Fraud Briefs
How Forensic Accountants Use a Lifestyle Analysis to Find Hidden Assets

Sometimes divorcing spouses or sparring former business partners illegally hide assets to prevent their fair division. And fraud perpetrators almost always try to hide their ill-gotten gains. In such cases, sociological information — gathered as part of a lifestyle analysis — can be almost as revealing as financial data. Here’s what forensic accountants examine when they’re on the hunt for hidden assets. Starting with numbers Forensic accountants usually start with numbers. For example, an expert typically reconstructs the subject’s income by analyzing bank deposits, canceled checks and currency transactions, as well as accounts for cash payments from undeposited receipts and non-income cash sources, such as gifts and insurance proceeds. A forensic expert also usually analyzes the subject’s personal income sources and uses of cash during a given time...

01 Jan 2024
0

Fraud Prevention Strategies for Entrepreneurs and Small Businesses

Roger Rossmeisl, CPA
Fraud Briefs
Fraud Prevention Strategies for Entrepreneurs and Small Businesses

Fraud occurs in companies of every size. But small businesses, especially new ones, have special risks because they generally can’t invest in expensive fraud-prevention programs. Thankfully, there are simple yet effective strategies that can reduce the likelihood of fraud, however small or new your company is. Understand the risk Fraud schemes can involve employees (occupational fraud) or third parties (including vendors, customers and cybercriminals). And sometimes, workers and outsiders collude to commit fraud. Fraud perpetrated by third parties includes identity theft, credit card scams, bank fraud and cyber-related schemes, including ransomware attacks. Occupational fraud usually falls into one of three major categories: asset misappropriation, corruption (such as bribery) or financial statement fraud. Although these potential fraud threats may feel overwhelming, know that they all have the same objective:...

31 Dec 2023
0

Are Vendors Cheating Your Company?

Roger Rossmeisl, CPA
Fraud Briefs
Are Vendors Cheating Your Company?

Every year, U.S. companies lose millions of dollars to vendor fraud. These schemes can be complex and usually involve collusion of multiple suppliers or suppliers and employees of the defrauded business. Small businesses that don’t use sophisticated vendor software or don’t have other anti-fraud resources are particularly vulnerable. But knowledge is power. Learn what vendor fraud is and the simple steps you can take to prevent it. Predetermined outcomes Vendor fraud can take one of several forms. Price fixing, for example, is a common scheme in which competitors agree to set the same price for goods or services or jointly establish a price range or minimum price. Bid rigging is similar. It involves two or more suppliers agreeing to steer a company’s purchase of goods or services. Potential...

25 Nov 2023
0

Beware of Disaster Charity Scams

Roger Rossmeisl, CPA
Fraud Briefs
Beware of Disaster Charity Scams

As reported via IR-2022-119 on 8/4/2022 People should donate carefully after a disaster After an emergency or disaster, people rally to help victims by donating money. Unfortunately, this can give criminals an opportunity to prey on them by soliciting donations for fake charities. Scammers may also pose as federal agencies to dupe disaster victims trying to get disaster relief. People should always be suspicious of unsolicited contact. Scammers often contact their possible victim by telephone, social media, email or in person. Make sure your money is going to a reputable organization Thieves may pose as a representative of a charity to ask for money or private information from well-intentioned taxpayers. Scammers may set up bogus websites using names that sound like real charities. When a taxpayer searches for a...

25 Nov 2023
0

What is Residual Fraud Risk – and What Can Your Business Do About It?

Roger Rossmeisl, CPA
Fraud Briefs
What is Residual Fraud Risk - and What Can Your Business Do About It?

By regularly analyzing risk, business owners and executives can better understand and manage the likelihood and potential impact of fraud. In general, there are two types of business risk: inherent and residual. Inherent risk is what exists before management takes steps to mitigate the organization’s exposure. Residual risk is what remains after management has implemented internal controls to reduce and manage threats. Because no program of internal controls can possibly eliminate all threats, residual risk is always a reality. But there are ways to mitigate it. 4 types of internal controls Internal controls generally fall under one of the following categories: Detective. This type is designed to detect fraud already occurring. For example, you might generate a report that lists checks issued twice for the same invoice. Preventive....

14 Nov 2023
0

What to Tell Your Employees About Your Anti-Fraud Efforts

Roger Rossmeisl, CPA
Fraud Briefs
What to Tell Employees About Your Anti-Fraud Efforts

Surveillance is common in many workplaces, yet companies monitoring employee activities may keep the practice under wraps. This may be a mistake, because when workers know they’re being watched, they’re generally less likely to be dishonest. For example, several surveys have shown that clearly visible security cameras discourage employees from stealing inventory. The challenge is to disclose enough information, without revealing too much. Frequently used controls and policies Honesty and trust are essential to a healthy, productive workplace. So you need employees to know you’re taking actions to prevent fraud. On the other hand, you don’t want to provide so many details about anti-fraud controls that thieves can work around them. Following are a few frequently employed anti-fraud policies and how you might communicate them to workers: Surprise audits....

12 Nov 2023
0

How Some Taxpayers Get Snared by Tax-Avoidance Scams

Roger Rossmeisl, CPA
Fraud Briefs
How Some Taxpayers get Snared by Tax-Avoidance Scams

Although most tax preparers are ethical and help ensure their clients file timely and accurate tax returns, a small percentage abuse their position of trust. They may, for example, engage in fraudulent activities that harm taxpayers. The IRS has warned about tax “promoters,” which the agency defines as entities that “undermine voluntary compliance by marketing improper methods to reduce the amount of taxes legally owed.” Such promoters can expose businesses and individuals to financial and legal risk. Wide variety of schemes Some shady tax preparers and promoters encourage clients to submit fraudulent returns and engage in aggressive tax-avoidance schemes. Some tax schemes that you should be aware of include: Employee Retention Tax Credit (ERTC) claims. In September, the IRS announced an immediate moratorium through at least the end...

ROGER ROSSMEISL, CPA

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

(714) 325-0442
roger@khopatel.com

RECENT BLOG ENTRIES

JOIN OUR E-NEWS

LET’S GET SOCIAL

Twitter
Facebook
LinkedIn
logo ©2019 Roger Rossmeisl | Effusion