Forensic Accounting Helps Metal Recycler Salvage $650,000 Insurance Claim

Client Profile

Annual Revenue: $25 million
Industry: Construction
Ownership Structure: S Corporation
Footprint: Domestic

CBIZ uses forensic accounting to investigate suspected fraud.Issue

Through an employee tip, a metal recycling company learned high-value recycled materials were being removed from the premises under suspicious circumstances. It hired a private investigator who provided a report to the insurance provider, but a claim for the lost inventory was denied because the company did not present enough evidence to establish the amount of recycled material that had been stolen. The company did not maintain beginning inventory and had poor internal controls that made the scope of the theft difficult to prove.

Solution

Our forensic accounting team assisted the metal recycling company in quantifying the missing scrap material so the company could receive the appropriate insurance recovery. We reviewed the private investigator’s report and conducted site visits and interviews with the company’s personnel. Our team also analyzed historical and current inventory receipt and sales processes and accounting procedures.

We found that the theft was concealed by classifying the stolen recycled metal as dirt in the company’s inventory system. The company sold its dirt to a third party. By comparing the company’s dirt inventory reports to the invoices from the third party dirt purchaser, we could estimate the amount of lost material.

Outcome

The company’s weak internal controls and inventory processes made finding evidence of the theft challenging. Our forensic accounting team helped substantiate the company’s loss. We also negotiated the final payout, resulting in a $650,000 insurance recovery for the company.

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CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

Forensic Accounting Helps Metal Recycler Salvage $650,000 Insurance ClaimCBIZ's forensic accounting services uncovered a fraud scheme involving missing scrap material....2016-10-20T19:58:00-05:00CBIZ's forensic accounting services uncovered a fraud scheme involving missing scrap material.Risk MitigationCorporate Recovery Services