Introduction to Asset Misappropriations Fraud Examination

History of Asset Misappropriations

The Acts of Enclosure – England 

• Prohibited pilfering company assets 

The Carrier’s Case – Southampton, England (1473) 

• Defendant took bales of wool and textile products
• Precedent setting embezzlement case

The Norton Warburg Group Ltd.

• London, England (late 1970’s) 
• Investment management firm
• Primary client/business partner - Pink Floyd
• Pink Floyd pulled out assets (₤860,000) 

Deceived clients and embezzled investor funds (₤4.5 million)

• London, Inggris (1970's terlambat; almarhum) 
•  Manajemen investasi dengan teguh 
•  Mitra client/business utama -Floyd Merah Muda 
•  Floyd Merah Muda mencabut aktiva-aktiva (£860,000) 
•  Klien-klien ditipu dan jo dana pemodal yang digelapkan (£45 juta) 

The United Way of America (early 1990’s)

• President William Aramony
• $1.2 million for lavish lifestyle and a girlfriend  

Andrew Bellucci – New York

• “Pizza historian”
• Had embezzled from law firm of Newman Schlau Fitch and Lane
• FBI caught him on a TV commercial

Bank of Tokyo – (1996) 

• Hideki Nishiyama embezzled $9 million by forging loan applications

 Willis A. Carto – (1994)

• Founder of a controversial revisionist group
• Embezzled $7.5 million 

What is a Misappropriation?

Misuse of a company asset for personal gain

Includes more than theft or embezzlement

• Use of company computer to surf the net
• Company car for personal trips, etc.
• Steal cash
• False invoicing, etc.

Defining Assets 

Assets = resources owned by the organization

Two categories:

1. Intangible Assets
2. Tangible Assets

Intangible Assets

Not physically identifiable

Usually represented by contractual right

Examples: 

• Patents, trademarks, leaseholds
• Goodwill
• Trade secrets 

Tangible Assets

Five principal types: 

• Cash
• Accounts receivable
• Inventory
• Plant and equipment
• Investments

Most asset misappropriations involve tangible assets (especially cash)

How Asset Misappropriations Affect Books of Account

• Assets = Liabilities + Owner’s Equity
• Asset Misappropriation causes $ for $ set-off to owner’s equity
• Affects balance sheet via income statement
• Revenue – expenses = profit
• Asset misappropriation essentially an expense of doing business
• But we don’t know how big the expense is or when it occurs