How can they get so big?
Embezzlements are rarely large enough to be a cause of major concern for directors, officers and other members of management. However, under at least four circumstances embezzlements can prove almost as damaging as financial statement fraud in terms of financial or reputational risk:
- The financial impact, including costs to resolve and remediate the matter, is significant or even ‘material‘ to the entity as a whole
- A member of senior management or someone in the financial reporting chain is involved, which can draw into question management integrity, the ability to rely on certain management representations and potentially the reliability of current or previously issued financial statements or other key reports
- A key person is involved, such as a rainmaker or an invaluable creative person, drawing into question the company’s future performance if this individual is terminated
- The circumstances indicate a lack of effective risk management, leading lenders, investors, regulators or key counterparties to lose confidence in the entity, putting its survival at risk
Studying case examples of real case scenarios in these categories can help to show how these situations can occur and what can be done to help mitigate the risks of such fraud schemes.
Learn ten things employers can do to help mitigate the risk of embezzlement or to help detect it earlier if it occurs by reading Major embezzlements: How can they get so big?, available for download above.
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