Skoda Minotti was contacted by an IT consulting company that believed that they were the victim of an embezzlement scheme and needed assistance quantifying the amount of loss.
Six months prior to coming to us, this company believed that they “caught” their independent respected CPA stealing corporate funds by overbilling their company. Our clients believed that the CPA had advanced himself approximately $300,000 over the past three years.
The Company’s CPA had complete check writing and banking authority and was engaged to pay the Company’s bills, handle all payroll functions, maintain the banking relationship, and prepare the internal financial statements and income tax returns.
At the time of their unfortunate discovery, rather than terminating and thus losing their “trusted CPA”, they mutually agreed to retain the CPA and that he would reduce his monthly fees by $10,000 per month until the unauthorized disbursements were repaid. Later that year, they were tipped off by a former employee of the CPA firm—previously assigned to their account—that there were many financial irregularities. Learning this, they terminated the CPA firm.
Beginning with the client’s QuickBooks, we reconstructed seven years of the client’s general ledger with an emphasis on the Company’s check disbursements and outgoing wire transactions. The client chose for us to go back to the date when they first retained this CPA firm to serve as their outsourced accounting department.
In an effort to maintain his scheme, at times, we noticed that the CPA had to deposit his personal funds into his client’s corporate checking account in order to cover the company payroll and other legitimate disbursements. As a result of this discovery, we analyzed three years of depository detail in order to identify any payments that the CPA firm made to the client’s checking account.
Through our analysis of chronological and payee data sorts, we were able to create a timeline establishing in excess of $3,000,000 of disbursements paid to the CPA firm and the CPA individually. In the last two years of our analysis, we identified in excess of $2,500,000 of payments to the CPA firm.
The CPA was arrested and convicted. His firm has since closed. Today, the Company is thriving and they have established proper internal controls to safeguard their assets.