Tag Archives: enron

Employee Theft

Employee Theft: Is It Happening To You?

Employee theft is rampant in small to mid-sized businesses. It never ceases to astound people that a trusted employee could steal from you. It angers you and makes you sad, but it is happening every day. Large amounts are being stolen from businesses both small and large.

After the Enron debacle, Congress passed the Sarbanes-Oxley Act (SOX) to tighten the responsibility of the accountant to detect fraud. Talk to someone in the accounting community about SOX and they will roll their eyes and heave a large sigh. In all levels of the attest function performed by accountants (compilation, review and audit), SOX has had an effect. The result of this increased testing is that more employee theft than ever before is being uncovered.

In fact, the American Institute of Certified Public Accountants (AICPA) released a recent study that has some astounding statistics. According to their survey of members, up to 82 percent of small- to mid-market businesses have or will experience employee theft. Of the incidences of theft uncovered, the average theft amount equals $125,000. And believe it or not, most of these thieves are not prosecuted.

Are you a victim? Most of us would immediately say, “No, all my employees are completely trustworthy.” But, what about the next employee you hire? What about the employee who has had an unexpected life change (divorce, death or other experience) that has affected his/her financial stability? What about that employee’s spouse who you might not quite trust? Could that person have undue influence to convince your employee to do something?

Employee theft can come in many forms. Look at the following ways employees can steal from you:

Cash

Does the employee who collects the cash also make the deposit and reconcile the bank statements?

Payables

Does the employee who makes the vendor payments reconcile the bank statement? Does this employee have access to online accounts or a signature stamp?

Time

Do your employees steal time by running personnel errands or spending excess time on the phone as you are paying them for doing the company work?

Company credit cards

Do your employees have company credit cards? Are the expenses charged to these cards reviewed by someone other than that employee?

Computer access

You would be amazed at how many employees run a small business on your computer and on your company time.

How can you stop this? First of all, have a policy that strictly forbids the above activities (and other similar activities). Second, look at your business functions and determine where you are vulnerable. Third, make sure there is a separation of duties between employees who handle areas where theft could occur. Fourth, consider monitoring where employees spend their computer time.

There are many ways an employee can steal from their employer; it isn’t always financial theft. There are also many ways an employer can prevent this activity. Being aware is the first step.

Interested in learning more about employee theft? Download B2B CFO’s free, 27-page book “Top 10 Ways Your Employees are Stealing From You” at B2BCFO.com.

Enron

Enron: 10 Years Later

Enron.

Similar to “Black Tuesday,” “Watergate” or “9/11,” the term has encapsulated a series of events into a single word or phrase. It is arguably the most well-known, and most scrutinized, financial collapse in U.S. history. This is evidenced by the multitude of books and movies that have rehashed and referenced the collapse.

December 2, 2011, marks the 10 year anniversary of the company filing for Chapter 11 bankruptcy protection. Ten years later, the term is still synonymous with fraud and is, perhaps, more relevant than ever before.

The scandal that was brought to light triggered a domino effect that can still be seen today. Most notably, Enron ignited the Sarbanes-Oxley (SOX) Act. This act resulted in the largest overhaul of the financial markets since the Exchange Act of 1934. This overhaul intended to prevent, discourage and/or identify future collapses.

One of the many significant SOX requirements was believed to be strict whistle-blower protections and protocols for public companies. These protections and protocols were included to safeguard and encourage whistleblowers who found themselves in the midst of Enron-like situations.

Ironically, these future whistleblowers started to use Enron as a reference point in their own claims.  Having worked as a forensic accountant in a post-Enron environment, I have seen multiple instances where the whistleblower actually cited Enron in their anonymous letter or hotline report. This practice has led to the inclusion of Enron as a keyword for investigations alongside terms like “illegal,” “cheat” and “hide.” Many of the vulnerabilities that led to the company’s collapse are now “red flags” for fraud.

Enron has become the ultimate example for whistleblowers to point to and for forensic accountants to measure against.

In response to events in more recent years and even larger corporate failures, including the fall of Wall Street heavyweights and the surfacing of multiple Ponzi schemes, many of the SOX whistleblower protocols have been amended or replaced by the Dodd-Frank Act.

The most recent changes, which went into effect earlier this year, encourage direct reporting to the appropriate government entity, extend the anti-retaliation periods and also provide greater incentives in the form of cash rewards. Theoretically, the current environment will result in more whistleblower reports and presumably more references to Enron allowing the term’s relevance to live on.

[stextbox id="grey"]For more information about the Sarbanes-Oxley (SOX) Act ignited by Enron, visit soxlaw.com.[/stextbox]