Embezzlement and the Employer
As an employer, your first desire is to hire the best employees and hopefully honest ones to work with you. Finding out later that one of them has potentially been embezzling funds can have personal, as well as legal ramifications. That's why it's always a great idea to conduct thorough background checks for anyone who handles cash, checks or involved in related accounting matters.
If you find yourself a victim of embezzlement, you have two options to consider: you can try to take care of it internally or you can report it to law enforcement and let the authorities handle it. Regardless of the path you pursue, your goal should be the return of all if not most of the embezzled funds.
Things to Remember:
Notify your insurance company immediately. There are time requirements and documents that will need to be submitted.
Employees have rights too, so it’s advised to contact your company attorney for their recommendation on how to proceed.
Have a forensic accountant conduct a thorough audit. The embezzlement may have started several years back.
Disclose the Diversion of Assets to the IRS using Form 3949-A. Keep your audit report as proof of the loss.