March 2012
Recent Case:
"Embezzlement
of Company Funds"
Summary
of Issue:
Members of the board of directors contacted Arxis Financial, Inc. to discuss a
strange pattern of information and lack of information being provided to
the board. The conference call revealed that once the board began asking
questions of management, the CEO resigned. After an initial discussion it
was determined that the pattern suggested more than incompetence. Several
facts pointed towards potential fraud.
Money
involved:
Over $200,000 was found to have been misappropriated.
Arxis'
work:
We proposed a multi-stage engagement. Phase 1 was designed to establish
whether there was evidence confirming fraud rather than simply incompetence
or sloppiness by management. Phase 2 was designed to quantify a preliminary
loss given specific parameters determined in phase 1. In simple terms,
phase 2 was designed to pick the "low hanging fruit" and
establish the basis for the board to determine a legal course of action, if
any. Phase 3 was designed to complete the investigation and prepare for
civil or criminal prosecution.
Phase 1
established that indeed there was evidence of both management sloppiness
that allowed for unauthorized financial transactions, as well as evidence
that such transactions had taken place. On the first day that Arxis was
on-site the CFO resigned. The board was completely unaware that there were
no internal controls.
In phase,
2 Arxis reviewed several years of bank reconciliations and traced cancelled
checks and deposit slips back to the accounting records. This process
exposed unauthorized payments as well as a sophisticated attempt to cover
the payments so that reports to the board would not reflect the actual
economic activity. Arxis presented the findings to the board and
recommended that phase 3 was not necessary as there was no insurance to
cover the loss and the board had determined that there would be no prosecution.
Result:
Arxis assisted in assuring the security of the computer network and
establishing a system of internal controls and reporting that, if
maintained, would eliminate the possibility of continuing problems. The
board of directors terminated several members of senior management and the
outside audit firm. Arxis assisted the company with the identification and
hiring of qualified accounting staff and replacement auditors.
Speeches:
Upcoming
Speaking Engagements for Chris Hamiltion
March: Forensic Accounting Academy in
Chicago. 8 hours of presentations on Behavior Detection,
Interviews, and Interrogation.
April:
Business Valuation Training for the Franchise
Tax Board in Sacramento, CA
April:
"Forensic Accounting Issues in Wildland Fire Cases" presented at
the 2012 Wildland
Fire Litigation Conference in Sacramento, CA
April:
Online/Webinar Business Valuation Fundamentals, Techniques, and Theory for
the Internal Revenue
Service.
Practice
Profile:
Litigation
Consulting Services for Business Valuation
Every
month, we profile a different service offered by Arxis Financial.
This month, we invite you to learn more about our Litigation Consulting Services for
Business Valuation.
Arxis Financial's "Litigation
Consulting" practice provides objective and independent
evaluation of business valuations, in particular, the economic and
financial issues involved in commercial and civil litigation. Business
valuations can be prepared by Arxis
Financial personnel, and supported in litigation
proceedings by our "Litigation
Consulting " personnel. We can also evaluate valuations
prepared by experts hired by opposing counsel.
Our
specialists have extensive experience in presenting and defending our
findings in litigation proceedings, including depositions and trial at local,
state and federal court levels, as well as mediation and arbitration. We
assist attorneys in interpreting the valuation, and help counsel to
understand and analyze events or issues. This level of support can be a key
asset in determining a legal strategy as well as reaching a reasonable and
efficient conclusion.
Our
clients benefit from having valuation professionals who understand the
realities of market valuations much better than the purely theoretical
practitioners, resulting in very defensible and clear valuations. A key
reason that attorneys engage Arxis
Financial is our ability to analyze, explain and present
financially complex valuation issues, which is an important asset in
determining a legal strategy as well as achieving your client’s goals. Our
experts are well-known in the industry and highly respected for their depth
of knowledge and resources
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