Q&A: When management hanky-panky is suspected, should a board hire a forensic auditor?

News, Los Angeles TimesOctober 2016

Legal

In the Los Angeles Times, Hank Kahrs takes on a question about potential mismanagement of a board's finances.

As appeared in the Los Angeles Times, October 29, 2016.

By: Donie Vanitzian and Zachary Levine

Question: I just got elected to our association’s board of directors and was shocked that the management company would not let me look at our books and records after being appointed treasurer. I suspect that this might be due to some financial hanky-panky.

The past treasurer has given me some documents and said, “You must look into these and find out what’s going on.”

. . .

Something is definitely wrong and this accounting looks very suspicious. At what point should the board consider hiring a forensic accountant? How does the board choose one?

Answer: Boards should never ever lose control of the association’s bank accounts by allowing a company or manager to be the sole signatory. Even if a management company is handling the association’s finances, the board still needs access and control of everything to verify vendors’ actions. Frequent oversight and spot checks seem tedious but they can avoid larger expenses of time and money for things like forensic audits. 

Still, if a board believes that it needs a thorough review of an association’s books, Hank Kahrs, a partner at RGL Forensics, a worldwide forensic accounting firm with offices in Los Angeles and Orange County, says, “It is better to meet with a forensic accountant when you first suspect a problem rather than wait until it’s too late. The forensic accountant can assist in implementing controls to help curtail illicit opportunity.”

Read the rest of the article in the Los Angeles Times.

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