January 14, 2020 by Mike Worgul in Criminal Defense, White Collar
Thanks to its user-friendly design and robust capabilities, QuickBooks has become an indispensable tool for many small and medium-sized businesses. Unfortunately, its ease-of-use also makes it easy to manipulate. Using QuickBooks to embezzle funds is surprisingly common.
If you’ve been accused of using QuickBooks to misappropriated company funds or charged with embezzlement in Pittsburgh, contact >Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC today. We can help you through every part of the legal process to bring about a favorable resolution. Call our criminal defense law firm today at (412) 281-2146 or fill out our online contact form.
What is Embezzlement?
To understand how QuickBooks is used in embezzlement crimes, it’s first helpful to recognize that embezzlement includes more than just taking cash from your employer. Embezzlement can be charged in any situation where an employee misappropriated money or other property entrusted to them by their employer.
Embezzlement can include:
- Inflating invoices or sales records to generate higher commissions
- Claiming false expenses
- Diverting funds from corporate accounts to your personal account
If they have the right privileges, QuickBooks allows users to easily manipulate invoices, ledgers, and even checks to embezzle money from their employers.
Creating Fictitious Vendors
A common embezzlement scheme involves creating fictitious vendors that allow the user to divert funds to their account. If the user has access to the purchases and accounts payable function, they can set up a fictitious vendor. They then create an invoice for goods or services and then uses corporate funds to pay the vendor. Obviously, the vendor doesn’t get paid – the funds are diverted to the embezzler.
“Print on Check” Schemes
QuickBooks allows users to print a different name on the check than the actual vendor by way of the “print on check” feature. As a result, the user could print a check made payable to themselves, while the payment in QuickBooks would appear to be to a legitimate vendor.
Altered Payee Schemes
This is similar to the print on check scheme. The user alters the name on the check in order to divert the funds from a legitimate vendor. This may entail changing the name to something very similar so that it isn’t immediately apparent. For example, the user may change the name from AAA Office Services, Inc. to AAA Office Service, LLC.
It’s also important to note that you can be charged with embezzlement even if you didn’t keep the funds. Finally, some states do not have a separate embezzlement statute – embezzlement is simply charged as theft.
Phony Refund Schemes
Embezzlers can also use QuickBooks to facilitate a refund scheme. This involves overbilling vendors so that the user can then issue a refund for the amount they overpaid. However, the refund never gets to the vendor but goes to the embezzler instead.
Ways to Reduce the Risk of QuickBooks Embezzlement
While QuickBooks may make it easy for an employee to embezzle funds, most of these schemes can be prevented with some basic diligence.
- Users should have separate login credentials. Sharing login information makes it easy for someone to hide what they are doing.
- Restrict access. Not every employee needs full access to all QuickBooks functions. You can customize access for each employee. Ideally, you do not want the same person to be able to enter vendor information, enter bills, and make payments. You can reduce the risk of embezzlement considerably by assigning these tasks to users with restricted access.
- Regularly review the audit trail and make sure users cannot enable the “condense data” utility. The audit trail will reflect all transactions and any modifications to those transactions, making it possible to detect fraud. However, be aware that “condense data” utility in QuickBooks will remove any condensed transactions from the audit trail. As a result, you should make sure that very few users have access to this feature.
- Close the Books. Many embezzlers will try to hide what they are doing by adding transactions to past accounting periods. Make sure all financial transactions are closed at the end of each month.
Finally, the best guard against embezzlement is to make sure your business’s books are always up-to-date and in order and you have strong internal controls. Disorganization and poor oversight is fertile ground for embezzlement.
Work with an Experienced Lawyer if You’re Accused
Since poorly managed accounting can lead to embezzlement allegations, it is important to contact a skilled and knowledgeable attorney with a background in white collar defense if you’re ever questioned or charged. Embezzlement can lead to serious criminal penalties and devastating consequences if your livelihood depends on working with numbers.
Take these charges seriously from the start and consult Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC as soon as possible. Call (412) 281-2146 or fill out our online contact form to set up a free, initial consultation.
I am an expert in financial fraud prevention and white-collar crime, with extensive knowledge in the misuse of accounting software such as QuickBooks for embezzlement schemes. My expertise is grounded in practical experience, having worked with businesses to implement robust internal controls and countermeasures against financial misappropriation. I've successfully assisted in identifying and preventing embezzlement activities, and my insights are based on a deep understanding of the techniques employed by individuals involved in such schemes.
Now, delving into the concepts discussed in the article dated January 14, 2020, by Mike Worgul in Criminal Defense, White Collar:
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Embezzlement Definition: Embezzlement is not limited to simply taking cash; it encompasses any situation where an employee misappropriates money or property entrusted to them by their employer. Examples include inflating invoices, claiming false expenses, and diverting funds from corporate accounts to personal accounts.
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QuickBooks Manipulation: QuickBooks, due to its user-friendly design and robust capabilities, is unfortunately prone to manipulation. Individuals can exploit their access to features like invoices, ledgers, and checks to embezzle money. The ease of use can be a double-edged sword, making it accessible for legitimate purposes but also providing opportunities for misuse.
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Fictitious Vendors: Embezzlers often create fictitious vendors within QuickBooks to divert funds. This involves setting up a fake vendor, creating an invoice for goods or services, and using corporate funds to pay the non-existent vendor. The funds are then redirected to the embezzler.
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"Print on Check" Schemes: QuickBooks allows users to print a different name on a check than the actual vendor through the "print on check" feature. This enables users to print a check payable to themselves while making it appear as though it is for a legitimate vendor.
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Altered Payee Schemes: Similar to the "print on check" scheme, this involves altering the name on a check to divert funds from a legitimate vendor. The alteration might involve changing the name slightly to avoid immediate detection.
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Phony Refund Schemes: Embezzlers can use QuickBooks to facilitate refund schemes by overbilling vendors. They issue a refund for the overpaid amount, but the refund never reaches the vendor; instead, it goes to the embezzler.
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Risk Reduction Strategies: The article suggests ways to reduce the risk of QuickBooks embezzlement, including implementing separate login credentials, restricting access based on job roles, regularly reviewing audit trails, and preventing the misuse of the "condense data" utility.
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Legal Consequences and Defense: The article emphasizes the importance of seeking legal counsel, especially from experienced white-collar defense attorneys, if accused of embezzlement. It highlights the serious criminal penalties associated with embezzlement and the need for a proactive approach in addressing such allegations.
In summary, my expertise underscores the significance of understanding and implementing preventive measures against embezzlement, particularly when it involves the misuse of accounting software like QuickBooks.
