Finally, although the best result would be the return of any stolen money by the embezzling employee, the reality is that most of the embezzlers I have seen do not keep the stolen money in a savings account for a rainy day. Instead, they spend the money on frivolous services and items that are difficult, if not impossible, to recover.
In those instances, the companies and their counsel often seek to hold someone other than themselves responsible for their loss. The company's own contributory negligence sometimes makes this difficult. This path will require the company to corroborate the loss with the results of the forensic accountant's work. A good forensic accountant will be engaged to prepare a comprehensive report that systematically identifies not only the loss incurred, but the weaknesses and deficiencies identified in the company's controls.
The services of accountants may be useful in not only identifying a misappropriation that already has occurred but also in finding ways to prevent such activities in advance. The most important thing for a company and its in-house counsel to remember, though, is that the company must take action and fulfill its responsibility for protecting its own interests, no matter who may be assisting it.
Frank L. McElroy is a shareholder in the Forrest Law Group in Houston, representing accountants from claim prevention to litigation. He regularly sees what happens when companies misunderstand the scope of the services their accountants are providing them.
This article originally appeared in Texas Lawyer.