Top Accounting Scams This Year: How They Work
As a business owner, you face many risks on a daily basis. One of those is the possibility of being victim of accounting scams. It is the case of many readers who wrote us over the last few months signalling this type of financial scams. Let’s take a look.
Accounting scams are becoming more and more common, and they can have a devastating effect on your business. However, the good news is that there are some steps you can take to protect yourself from these scams.
The first step is to be aware of the most common accounting scams. Here are a few of the most common scams. First, we’ll talk about what accounting scams are.
Accounting Scam: What Is It?
An accounting scam is a fraudulent scheme involving the misrepresentation of financial information in order to deceive investors or other interested parties. This can involve inflating or cooking the books to make it appear that the company is doing better than it actually is.
Also, those perpetrating the fraud may use creative accounting techniques to hide expenses or income in order to make the financial statements more favorable. Upper-level executives often perpetrate accounting scams to make the company look more successful and increase their own bonuses or compensation.
However, lower-level employees may also engage in fraud to hide their financial problems or generate extra income.
There are several ways to detect an accounting scam, including a keen analysis of the financial statements, red flags in company expenditures, or tips from whistleblowers. Once detected, these frauds can have severe consequences for the company, its employees, and shareholders. In some cases, the scam may be so widespread that it leads to the company’s collapse.
There are a few accounting scams that business owners should be aware of. These include:
1. Invoice Fraud
This fraud occurs when a business owner is presented with an invoice for goods or services they did not receive.
The scammer may create a fake invoice using the businesses’ branding, or they may hack into the businesses’ accounting system and alter existing invoices. This type of fraud can be challenging to spot, as the invoice may look legitimate.
There’s a way to avoid this type of scam, however. Business owners should always carefully review invoices before paying them and contact the vendor directly to verify the invoice is legitimate.
2. Payroll Fraud
Payroll fraud can occur in many ways but usually happens when an employee or contractor alters their hours worked or rate of pay in order to receive a higher salary.
This type of fraud can be difficult to detect, as it often requires a close review of payroll records.
To avoid payroll fraud, business owners should regularly audit their payroll records and report any suspicious activity to their accountant or bookkeeper.
3. Expense Reimbursement Fraud
This type of fraud occurs when an employee submits false or inflated expense claims to receive higher reimbursement from their employer.
Again, this type of fraud can be challenging to spot, as the expense claims may look completely legitimate.
Avoid expense reimbursement fraud by requiring employees to submit receipts for all expenses and carefully review claims before reimbursing them.
4. Tax Fraud
Tax fraud can occur in a number of ways but usually happens when a business owner or employee tries to claim false or inflated expenses on their tax return.
This type of fraud can be difficult to detect, as it often requires a close review of tax records.
To avoid tax fraud, business owners should carefully track all expenses and receipts throughout the year and consult with a tax professional before filing their returns.
5. Accounts Receivable Fraud
This type of fraud occurs when a business owner or employee alters the accounting records to make it appear that the business has more money coming in than it does.
This type of fraud can be difficult to detect, as it often requires a close review of the accounting records.
It can be avoided by carefully reviewing accounts receivable records regularly and reconciling them with bank statements.
While these are some of the most common accounting scams, business owners should be aware that many other types of fraud can occur.
If you suspect your business has been the victim of any accounting fraud, you must immediately contact an experienced accountant or fraud investigator. They will be able to help you identify the signs of fraud and take steps to recover any lost funds.
How To Report Accounting Scams
Let your family and friends know about these accounting scams by sharing this article on your social media channels. You can also officially report financial scammers and any other suspicious activity in this niche to the Federal Trade Commission (FTC) using this link, below:
How To Protect Yourself More
If you want to be the first to find out other notorious scams on a regular basis, feel free to subscribe to the Scam Detector newsletter here. You’ll receive periodic emails – we promise not to spam.
Meanwhile, educate yourself with some other financial fraud-related articles right under this paragraph, so that you know how to stay safe online. Last but not least, please use the comments section below to expose other accounting scammers.
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