How to Know If Your Bookkeeper Is Embezzling

The law defines embezzlement as the taking of property, including money, by someone in a position within a company or business. When bookkeepers are the culprits, embezzlement is difficult to detect since these professionals are experts at manipulating books and records to cover their crimes. Follow these steps to detect whether your bookkeeper is dipping into the till.

Instructions

Difficulty: Easy

Things You’ll Need:

• Computer with Internet access

Prevent or Detect the Crime

1. Perform a surprise audit to detect discrepancies in the accounting records.
2. Limit employee access to blank checks, signature stamps and cash on a need-to-have basis.
3. Divide financial responsibilities among your employees. For example, place different people in charge of ordering and receiving merchandise or require counter signatures on all checks.
4. Pay attention to inconsistencies in financial records, such as invoices that have been paid twice or outstanding balances.
5. Note any new work habits your bookkeeper may have acquired, such as working later hours than usual, coming to the office on weekends or working through vacations, anything that allows them private access to company books or products.
6. Check the Small Business Administration Web site (see Resources below) for additional pointers on recognizing signs of embezzlement in the workplace.

Investigate Embezzlement by Your Bookkeeper

7. To prove embezzlement, you must show that the bookkeeper intentionally took possession of money or property.
8. Note which employees may have had access to financial records or to missing property in order to demonstrate that a thorough investigation is being done.
9. Determine if you will pursue criminal or civil charges to recover lost funds, or if you will handle the situation internally with company lawyers.

Tips & Warnings

• Ask questions during your investigation rather than make accusations. You must avoid charges of defamation if you are incorrect.
• Keep employee rights in mind when investigating embezzlement. For instance, the Employee Polygraph Protection Act of 1988 prohibits employers from administering polygraph tests to employees. Exceptions can be made, but only if there is sufficient reason to suspect someone of embezzlement.