Dec 22, 2015
Law Firm Financial Management – Protecting the Firm from Employee Embezzlement
Question:
I am a partner in a eight attorney firm in downtown Chicago. Last week you participated in a discussion at an Illinois State Bar Association meeting where you indicated that four out of ten of you law firm clients have had an employee embezzlement at some time or another. I would appreciate any thoughts you may have on how we can protect ourselves.
Response:
Even though a firm trusts their accounting staff segregation of duties is appropriate and should be implemented in firms of all sizes. Here is an overview of such a system that we generally suggest:
Internal Control is the plan of organization and all of the coordinate methods and measures adopted within a business organization to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.
The four basic elements considered essential in a satisfactory system of internal control are:
- A plan of organization that provides appropriate segregation of functional responsibility and duties.
- A system of authorization and record procedures adequate to provide reasonable accounting control over assets, liabilities, revenues, and expenses.
- Sound practices to be followed in performance of duties and functions of each of the organizational areas.
- A degree of quality of personnel (competency) commensurate with responsibilities.
Here is a link to an article outlining specific steps:
The goal is not to catch an employee that is stealing but to have a system of checks and balances in place so they will not even consider stealing.
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John W. Olmstead, MBA, Ph.D, CMC
Posted at 07:43 PM in Financial Management
Tags: Embezzlement, Employee, Financial, Firm, From, Law, Management, Protecting, the
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