CPA Steve Sorensen: Embezzlement and Why Checks and Balances Are Needed

Investigative, litigation support, and security consulting firm Marquet International Ltd, 2012 saw the biggest corporate and municipal embezzlement cases in US history. According to its report on embezzlement, companies suffered an average loss of $1.4 million. Common embezzlement schemes have been studied by CPA Steve Sorensen. Embezzlement, contrary to popular belief, doesn’t just mean stealing money. It may also involve theft of products, intellectual property, and other company assets.

Security measures must always be in place. It’s not that business owners don’t trust employees, but business owners in general should want to protect themselves and further, their other employees whom they provide a livelihood. The effects of embezzlement are far-reaching, damaging even the rank-and-file employee.

Here are systems of checks and balances that business owners can put in place to minimize opportunities for embezzlement:

  • Rotate jobs among employees – Small business owners may be able to rotate jobs among employees more so than larger firms, but even when this isn’t possible, there are other ways to diminish an employee’s control or power. Because no single person will hold the same position for the duration of his/her stay in the company, he/she may feel less temptation to embezzle as the fraudulent activities could be discovered later down the line. Rotating jobs is especially critical with roles that are connected to finance and accounting.
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  • Separate financially related job functions – The Marquet report found that financial institutions and non-profits were among those hardest hit. If rotating jobs isn’t feasible, try to separate duties at the very least. For instance, two different people should handle vendor invoicing, billing, and authorization of payments, or two different people should issue checks that are recorded and reconciled in the books.


  • Conduct irregular audits – As much as possible, business owners should be hands-on and involved with the day-to-day operations of their businesses. It would greatly help if they are well-versed in accounting as well. However, they may also enlist the help of auditors and other accountants to inspect the books for them. Never announce when these audits will be conducted, and when embezzlement is discovered, contact and file a report with the appropriate investigative agency immediately.
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Embezzlement is widespread across the nation. The most important thing business owners can do is to say vigilant. Reading the news is advised by CPA Steve Sorensen, as embezzlement methods are getting more creative by the minute, hence it’s always a good idea to stay informed.

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