What define a company size?

Employee count Total assets Annual revenues Market presence

Small business defined by IRS

Assets under $10M

Key financial forensic differentiators of company size

Accounting system/ERP system used Size of accounting team # of bank accounts # of credit cards/company cards Higher SG&A expenses/Soft costs

Accounting system/ERP system used

Smaller companies: - quick books - less custom - fewer staff Larger companies: - SAP, oracle - more customizable - more staff

Size of accounting team

Business owner -> Dedicated AP, AR, payroll employees -> Hire CFO or controller -> Existing teams grow -> Executive-level CFO

# of bank accounts

Single operating account: - 1 GP as managing member - 1 LLC/LP as operating entity Opp account, line of credit, savings: - x # of operating locations Opp account, escrow, sec deposit acct: - x # of entities/properties

# of credit cards/company cards

Debit cards Corporate cards vs personal cards Virtual cards Personal charges? AR- employee & owner distribution YES

Higher SG&A expenses/Soft costs

ex. payroll, marketing exp, etc Soft costs = where fraud is likely hidden

How does fraud exist in companies as they grow in size?

<100 employees = 22% 10K+ employees = 26% <$50M revenue = 37% $1B+ revenue = 29% Employees increase -> increase Revenue increases -> decrease

Larger companies have opportunities for...

Corruption Non-cash schemes Skimming

Sarbanes-Oxley act of 2002 penalties

Knowingly certifying a false report -> 10 years in jail & $1MM penalty Willfully certifying a false report -> 20 years of jail & $5MM penalty