Oversight and Controls Need to Be Strictly Enforced
A huge global agricultural corporation with 150,000 employees, suffered not only a loss of $3.1 million due to embezzlement by a former employee but also reported revenue losses of at least $25 million as part of the same crime.
The former accounting manager not only diverted customer payments to her personal accounts but also sold grain products for millions less than the company paid for them. She used phony invoices and had payments directed to her local office instead of a financial institution, as required. To cover her tracks, she made false entries in the company’s accounting system.
The perpetrator pled guilty to the crime and faces the possibility of more than 11 years in prison.
Big Companies Can Lose Big Money to Embezzlement
Often, we assume that larger, possibly more business savvy, companies have the controls in place to avoid embezzlement situations. But, as evidenced by this story, that is not always the case. Although the losses appear huge, to a company such as the one above, that had over $100 billion in sales in their last fiscal year, these losses can go undetected for a long period. Plus, there is the possibility that smaller locations and operations garner less attention and oversight within a vast worldwide organization.
There are steps that every company should take, regardless of size or “sophistication,” to reduce the chance of embezzlement and/or detect it sooner:
Segregate the duties of invoice generation and receivables
Institute a strict revenue recognition process such as only accepting payments through one authorized and verified bank/account
Ensure accounting personnel take at least one vacation per year to allow other employees to verify correct processes and procedures are being followed
Utilize an outside accountant or independent unit/department to audit books and records on a regular basis
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