Fraud Investigations Service In Houston
An experienced Houston accounting firm can provide litigation support and forensic accounting expertise during fraud investigations. Whether your organization suspects financial crime like fraud or embezzlement, or if it’s involved in ongoing fraud cases, an expert accountant can support your business with the following services:
- Transaction analysis
- Cash flow and financial statement analysis
- Asset tracing
- Developing or reviewing internal fraud controls
- Reviewing vendor or partner contracts
- Reviewing tax filings
- Conducting internal audits
- Conducting data analysis
- Actively monitoring for fraud or other financial criminal activity
- Assisting investigators with gathering evidence for litigation support
Fraud is an extremely common crime for businesses to contend with. The Association of Certified Fraud Examiners (ACFE) states that the typical business suffers fraud-related losses equivalent to 5 percent of revenue every year. Detection is difficult for these financial crimes and many fraudsters go unpunished. However, forensic accounting services can help uncover illegal fraud schemes and catch future theft sooner with better detection tools.
Signs That Your Organization May Be Losing Money Through Fraud
By the time fraud investigations result in arrest and charges, the suspect may drain tens of thousands in funds from the company. The ACFE estimates that a typical employee fraud case will result in an average of $125,000 in losses. To pull off such a scheme, fraudsters often engage in behavior or activity that would raise red flags to a forensic accountant. If any of the following are true for your business or employees, there may be an increased risk of fraud:
- Poorly enforced internal controls – If your business doesn’t have internal fraud controls in place, or if those controls are loosely enforced, a dishonest person will take notice. In fact, the ACFE has found that in half of fraud and embezzlement crimes, a lack of internal controls – or an employee overriding those controls – is a factor in the crime.
If your assets aren’t protected with accountable oversight, this exposes the organization to risk of fraud-related losses. Other risk factors include a lack of anti-fraud training or standards, no physical security for assets, and sluggish account reconciliation. These can all help a perpetrator avoid detection while committing a financial crime against your business. - Strange employee behaviors – Deception, and attempts to hide it, frequently drive people into acting strangely. Some of these strange behaviors may be signs that an employee is attempting to avoid detection.
Examples include resisting manager oversight, refusing to provide records of work for review, refusing to take sick days or use holiday time, engaging in conflict with coworkers, or exhibiting noticeable signs of distress or anxiety. Circumstantial factors, such as making unusually expensive purchases or taking on debt may also be a red flag, though this isn’t evidence on its own. - Unusual transactions – Forensic accounting experts spend most of their efforts analyzing the organization’s transaction and accounting history for any signs of fraud. Unexplained or unusual transactions are a red flag and are often the only “hard” evidence or information that a financial crime has taken place.
There are many contexts in which a transaction would be considered suspicious. Frequent transactions that are vaguely explained are one example. Other examples are transactions made near the end of financial reporting periods, accelerated payments, and purchasing transactions without associated requisition information.
Transactions that pass through several accounts first are a concern, as are vendor transactions involving parties without a physical address or business license. Essentially, if a transaction doesn’t make sense or isn’t immediately clear to the accountant – it is worth investigating.
How Forensic Accounting Experts Can Assist with Fraud Investigations
If your organization is involved in active fraud investigations or is just taking steps to prevent future losses through financial crime, a forensic accounting team can support your efforts through the following:
- Transaction analysis – During transaction analysis, forensic accountants comb through the company’s account history and check for any unusual or unexplained transactions. For example, the accountant will look for transactions that aren’t backed by necessary documentation, or transactions made to potential shell companies. Unexplained sales orders are another common smokescreen for fraudulent activities.
- Tracing assets – Forensic accountants can use the company’s financial and bank statements, along with tax filings, legal filings, public databases, credit card statements and ownership histories to identify and find misappropriated assets. Once discovered, a forensic accountant can assist investigators with evidence gathering and other forms of litigation support.
- Developing better internal fraud controls – A forensic accountant can recommend and assist with implementing a variety of internal fraud protection controls. These serve as the first line of defense against dishonest, would-be fraudsters. Examples include implementing mandatory annual leave policies, limiting access to accounts and assets, establishing multi-layered authorization for high-risk transactions, auditing regularly, reviewing access to company accounts, and monitoring accounts in real time.
- Executing internal audits – Regular, unannounced audits can serve as deterrence to fraud and dishonesty. Beyond deterrence, internal auditing can reveal potential red flags sitting in financial records. Internal audits can also review operational processes, vendor relationships, write-offs, customer credit accounts, travel and lodging expenses and inventory specifics. The goal is to spot unsupported transactions, unusual expense estimates, unpermitted changes to accounting information, and other accounting anomalies.
- Providing data analysis and real-time monitoring – Data analysis can be applied to a company’s financial dataset to uproot any unusual activity. This approach can be applied to external data sources, such as vendor payments, to also discover unusual patterns.
Real-time fraud monitoring can also be implemented on the company’s accounts to flag any unusual transactions as they occur. Real-time monitoring services can also be customized to target particular types of transactions or transactions from particular sources.
Forensic Accounting Experts Can Rapidly and Precisely Assist with Fraud Investigations
Corporate fraud is unfortunately rampant and difficult to detect, with businesses in every industry dealing with illegal activity to some extent. That means forensic accounting services can provide value to many organizations.
If your organization is among them, an accounting expert can help with a fraud investigation or help prevent your company from potential fraudsters. Forensic accountants do this with extensive transaction analysis, internal control improvement, internal auditing, asset tracing, data analysis and real-time monitoring, among other fraud prevention tools. Together, these measures will minimize risk and losses due to fraud, embezzlement or other financial crimes.