The British Columbia Court of Appeal recently upheld a lengthy prison sentence for a bookkeeper who defrauded her employer of over $700,000.
What struck me was that this fraud went on for four years. During that time, the elderly owners of the business blindly trusted this bookkeeper to take care of the accounting of the company. The couple’s children similarly were involved with the daily bookkeeping, only getting involved once the fraud was discovered and they realized that as shareholders, they could be in trouble with the Canada Revenue Agency (CRA) for tax liabilities.
More specifically, for four of those years, the bookkeeper defrauded the family-owned business of $712,282.78, using many schemes, including:
- The unauthorized issuance of company cheques
- The unauthorized use of shareholder credit card accounts
- The use of a credit card in the name of one of the shareholders
- The diversion of cash payments
- The use of her landlord’s credit card which she repaid with fraudulently issued company cheques
It’s interesting that the elderly couple and the children all blindly trusted this bookkeeper for years. It was not until the fraud was discovered and the children realized that they could be in trouble for tax liabilities that they decided to take a closer look.
I’m no accountant, and I delegate taxes to someone with training in accounting, but I think that, for businesses, playing an active role by keeping an eye on things and regularly asking questions is essential and can go a long way in preventing this type of recurrent fraud.
Accounting may seem like a foreign language, but it is imperative that organizations take an active role in accounting procedures. Fraud is far too common, and apparently too difficult to notice, for organizations to avoid understanding at least the basics of accounting principles. And this is your money we’re talking about, the profits that you and your employees work so hard to earn. At the very least, an executive should check the figures that the bookkeeper reports. This and other controls should be set out clearly in accounting policies and procedures.
Unfortunately, this company appears to have had no such controls in place. The shareholders abdicated their responsibility for accounting, and effectively allowed the bookkeeper to take advantage of the company for several years.
What do you think?
Christina Catenacci
First Reference Human Resources and Compliance Editor
Christina Catenacci, BA, LLB, LLM, PhD
Latest posts by Christina Catenacci, BA, LLB, LLM, PhD (see all)
- Security considerations for organizations’ websites - January 4, 2022
- Ontario’s Right to Disconnect—Bill 27 Royal Assent - December 7, 2021
- What is Zero Trust? - November 2, 2021
That is a great point, Clyde. I think that this may be the way of the future for all businesses, including small to medium sized businesses.
Christina
For small firms, using a virtual bookkeeper can provide a real safeguard against fraud. If you cannot physically access the cheques, you cannot steal.
I would also recommend hiring an independent bookkeeper to review your books, at least annually. This is not the same as hiring an accountant at year-end, as they normally just review the printouts. But rather, an examination of the actual data, to see if it has been manipulated.
Hi Dave,
Thanks for your comment. That sounds like a really good idea to keep things under control financially. Too bad these measures were not taken in the case above…
Christina
There needs to be controls in place to monitor accounting practices. In my firm, each Friday I provide the owners of the company with a complete report of all financial transactions for the previous week. All checks and balances are verfied and signed off. In this way, they and I are in constant control of our financial affairs and should there be any descrepancies in any form, we are immediately aware, preventing errors and possible effors from manifesting themselves.