Recent Increase in Defalcations and Embezzlements
BY OLIVER W. SEIFERT Partner, Buffalo Office
Presented before Buffalo Control of Controllers
Institute of America — May 1960
ONE of the great problems confronting business arises from recent increases in defalcations and embezzlements. There are no statistics
available on the total amounts embezzled. They have been estimated
to range from one to three billion dollars annually. Contrast this with U. S. police reports to the F.B.I. that the total value of property stolen in a recent year by robbery, burglary, larceny and auto theft was only $272 million.
INCIDENCE OF THE PROBLEM
As long as human beings exist, frauds in some form will be found in business, and therefore, detection and prevention of fraud must be an important function of the controller and the auditor.
The 'why' of fraud may best be left to the psychiatrist. The 'how' is right up our alley.
When a fraud is reported, every one has an avid interest in finding out what motivated the embezzler to commit the crime.
An official from a surety association has classified the motives as the three "B's", namely, "bookies, babes and booze." A review of recent case histories of losses from dishonesty indicated that the three "B's" were applicable in about 75 per cent of the cases. Embezzlement to pay medical, hospital and similar expenses of relatives and family motivated approximately the other 25 per cent.
There are no set patterns that motivate embezzlement any more than there is a typical embezzler. They include officers of companies as well as stock clerks and office boys. There has been an increase in embezzlement by women as more have come to be employed in business.
The variety of motives and lack of pattern suggest that controllers
as well as CPAs must always be on the alert if they are to be successful in preventing embezzlement.