When you’re a business owner, your business partner can be your best friend or your worst nightmare. Your business partners are the people you should be able to trust the most, because they are the individuals who stand to lose or gain the most if the business fails or succeeds, right? So why would an owner steal from his own business? For the same reasons anyone steals from a business! Business owners who steal from their partners have a real or perceived, unsharable need; they have the opportunity; and they are able to rationalize their actions.
When you compare employee theft to business owner theft, there are several key differences that lead to increased opportunity for the fraudulent partner, including:
- Partners may have little or no supervision.
- Partners may be able to easily hide their actions because of their position.
- Partners have the authority to transact business on behalf of the company.
One of the most common schemes I’ve seen is partners abusing their expense accounts. Fraudulent partners run personal expenses such as car payments, club memberships, vacations, and other non-business entertainment through their expense accounts and–get this–no one is in charge of reviewing their expense reports. If a fraudulent person does this in a firm with five partners, the other partners are picking up 80% of the tab.
The possibility of this type of activity can be reduced by using a Certified Fraud Examiner to review partner expense reports. Using a Certified Fraud Examiner to make periodic reviews of partner expense reports is a logical choice for the following reasons:
- An internal staff person may fear retaliation and therefore be reluctant to voice concerns over partner expense reports.
- Partners don’t want a staff person to know the details of partner spending.
- A partner expense review should not be done by the same outside accounting firm that prepares the tax and audit duties for the business, because that firm may fear losing the tax/audit/consulting work by angering a partner.
- Partners don’t want to feel like they have to babysit one another–they’re busy building a business.
The trained eye of a Certified Fraud Examiner can help to alleviate these concerns and help business partners to build trust while growing their business.
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