How to Know If Your CFO Is Embezzling

Not every company has a CFO, but the financial responsibilities of a chief financial officer are wide and comprehensive. Embezzlement is defined as the theft of property or money by someone in a position of trust within a company. Because of the exclusivity and trust inherent in a CFO position, detecting embezzlement is very difficult, given that your CFO has control over the majority of a company's money. However, there are signs that money or property is being taken by someone in the CFO position.

Instructions

Difficulty: Moderately Challenging

Things You’ll Need:

• Computer with Internet access

Know the Legal Requirements to Identify Embezzlement

1. A relationship of trust needs to be established between the CFO and the company or organization in order for the crime to qualify as embezzlement.
2. The property or money needs to come into possession of the CFO because of his or her position in the company.
3. The CFO must have fraudulently converted the property or money to his or her own use.
4. The appropriation of money or property needs to be intentional to qualify as embezzlement.

Look for Signs That Your CFO Is Embezzling

5. Increase the number of people responsible for financial transactions in order to establish a series of checks and balances to check for embezzlement.
6. Embezzlement may be occurring if there is a significant unexplained drop in profits.
7. Look for unexplained changes in budget from year to year or changes in financial records.
8. Conduct internal audits or have independent accountants work for the company to determine if there are any problems with accounts or financial reports at the highest levels.
9. Notice lifestyle changes that suggest your CFO is making more money than his or her salary provides.
10. Visit the Web site of the Small Business Administration (see Resources below) to read articles on protecting your company from embezzlement.

Conduct an Investigation to Find Out If a CFO Is Embezzling

11. Hire an attorney to handle an embezzlement investigation at the executive level rather than trying to handle it yourself.
12. Consider using a forensic accountant to investigate the financial records and accounts your CFO has access to. Even if these records have been deleted from a computer, a forensic computer specialist can often recover evidence of them.
13. Be sure to ask questions regarding embezzlement rather than accuse anyone of embezzlement in order to avoid a defamation suit against yourself.

Tips & Warnings

• Embezzlement can lead to criminal prosecution with jail time as well as a potential civil trial to repay lost funds.
• When investigating the possibility of embezzlement, be careful not to infringe on your CFO's right to privacy. In order to gather evidence from your CFO's personal property, you should work with the police to obtain a search warrant.