(Based on a True Case)
Your client knows his bookkeeper, Miss A, embezzled money from the company because the profit margins are way below historical and industry norms. He does not know how or how much but could be anywhere from $1m to $10m. Your client is not English literate but has been in the business for over forty years. The lawyer tells him to come back with concrete evidence that the bookkeeper took money. The auditor says that the financials were provided by Miss A and there is no way to check because the company does not use a digital bookkeeping system instead relying on handwritten entries. Miss A has been working in the company for more than 10 years and there is no one else who knows about the accounts.
The client wants you to tell the lawyer how much was taken.
Available Documents
You have forty boxes of handwritten ledgers for over twenty years – the company is a trading company so there are a lot of documents including sales invoices and LCs. Some documents don’t even seem that relevant (school kids’ math homework) and some are so faded you can’t really tell. The SEC set up a team to look at Enron and it still took them years to comb through the information. You know the three banks that the company uses. Money can be transferred out of the company by Telegraphic Transfer (TT), cheque and cash.
What do you do?
Suggestion #1: Look for the Professionals (who you think can help)
You go to the Big 4 and ask to speak to the forensic accounting team. They say you have to find the transactions first then they verify if these are authorized transactions. Well if you already had the transaction records then you wouldn’t have to go to them, duh. The other Big 4 firm was more helpful because they can go through transaction records but analyzing each round-trip transaction costs $100. It does not sound a lot until you realize you have millions of line items because this is after all a trading company with twenty years of records. Your client will be broke before finding out any useful information.
To be continued… remember to subscribe if you want to find out what happened next