Fraud Is Everywhere — And It Comes in Many Forms

Fraud is not confined to one industry, one type of business or one method of deception.

It can involve enormous health care billing schemes, government programs, fraudulent credentials, stolen checks, manipulated invoices, compromised email accounts, dishonest employees or criminals impersonating legitimate vendors. The amounts involved can range from a few thousand dollars stolen from a small business to alleged schemes involving hundreds of millions or even billions of dollars.

Recent fraud cases receiving national and local attention demonstrate just how broad the problem has become. While the circumstances surrounding these cases are very different, they share an important characteristic: someone relied upon information, documentation, credentials or financial transactions that appeared legitimate but allegedly were not. For business owners, that should serve as an important reminder that fraud prevention is not simply a cybersecurity issue or something that concerns only large corporations. It is an accounting, management and internal-control issue that affects businesses of virtually every size.

Fraud Can Hide Behind Legitimate-Looking Transactions

In September 2026, federal prosecutors announced an indictment involving an alleged $1.3 billion health care fraud scheme. According to the U.S. Department of Justice, Erekle Gugava was charged with conspiracy to launder proceeds connected with the alleged scheme. Prosecutors allege that a durable medical equipment company submitted approximately $1.3 billion in fraudulent claims to Medicare and private insurers, with millions ultimately paid before authorities intervened. As with all criminal indictments, the allegations must be proven in court and the defendant is presumed innocent unless proven guilty.

Another major case announced earlier in 2026 involved an alleged $30 million Medicaid billing scheme in Ohio. Federal authorities accused individuals associated with behavioral health organizations of billing Medicaid for services involving children and young adults that prosecutors allege were medically unnecessary, misrepresented or never actually provided. Again, these are allegations subject to the criminal justice process, but the case illustrates an important accounting reality.

Fraud involving substantial amounts of money generally creates a financial trail. There are invoices, payments, claims, deposits, withdrawals, transfers, payroll records, vendor accounts and supporting documentation. Individual transactions may appear perfectly ordinary when viewed separately. When the records are examined collectively, however, inconsistencies and unusual patterns may begin to emerge. This is one of the fundamental reasons forensic accounting can be so important.

Fraud Does Not Have to Involve Millions of Dollars

The enormous numbers associated with federal fraud prosecutions naturally attract attention, but small businesses rarely need to experience a multimillion-dollar fraud before the consequences become serious. A fraudulent $10,000 payment, a $20,000 altered check or a $40,000 wire transfer sent to a criminal can create an immediate financial problem for a small company.

Recent reports of check washing provide a good example of how traditional fraud remains effective even while businesses increasingly worry about sophisticated cybercrime. Criminals steal legitimate checks from mailboxes, alter the payee or dollar amount and attempt to negotiate the modified checks. Businesses that regularly mail checks can be particularly attractive targets because their payments may be substantially larger than those of individual consumers.

Technology has not eliminated these older forms of fraud. Instead, businesses now have to protect themselves against both traditional financial crimes and increasingly sophisticated digital schemes. A company may have excellent cybersecurity protections and still lose money because someone mailed a check from an unsecured mailbox or approved an invoice without verifying that the expense was legitimate.

Business Fraud Often Exploits Routine Procedures

One of the most effective characteristics of business fraud is that it frequently attempts to look ordinary. A fraudulent invoice may resemble every other invoice arriving in the accounting department. A request to change banking information may appear to come from a vendor the company has worked with for years. An employee reimbursement may look reasonable. A payroll change may appear administrative. A small recurring charge may remain unnoticed because nobody considers the amount significant enough to investigate.

Consider a company that routinely pays a supplier $40,000. An employee receives an email that appears to come from that supplier explaining that the company recently changed banks and providing new wiring instructions. The email contains the correct company name, references an actual invoice and may even appear within an existing email conversation. The employee updates the banking information and sends the payment. Several weeks later, the legitimate vendor contacts the company asking why its invoice remains unpaid.

The business may now have a serious problem. The original $40,000 could be gone, while the legitimate vendor may still be owed $40,000. What appeared to be a routine accounting change has potentially become an $80,000 financial problem.

This is why businesses should never rely upon the appearance of legitimacy when changing payment instructions. Vendor banking changes should be independently verified using contact information already known to the company rather than telephone numbers, links or contact information contained in the request itself.

Artificial Intelligence Is Making Impersonation More Convincing

Artificial intelligence adds another layer of complexity because criminals increasingly have access to tools capable of producing polished communications, realistic documents, cloned voices and convincing impersonations. Businesses can no longer depend upon poor grammar, unusual phrasing or an obviously fraudulent-looking document as their primary warning signs.

A fraudulent email can now be professionally written. A fake invoice can closely resemble a legitimate document. A criminal may be able to imitate an executive’s voice during a telephone call or create convincing correspondence based upon information gathered from websites, social media and compromised email accounts.

The appropriate response is not to expect employees to become experts at identifying artificial intelligence. Businesses should instead establish procedures that remain effective even when the attempted fraud looks convincing. Verification, separation of responsibilities, transaction limits and independent review become increasingly important when appearances can no longer be trusted.

A Forensic Accountant Can Help Prevent Fraud Before There Is a Loss

Many people associate forensic accountants exclusively with investigations that occur after money has already disappeared. Investigating suspected fraud is certainly an important part of forensic accounting, but businesses can also use forensic accountants proactively to identify vulnerabilities before those weaknesses are exploited.

A forensic accountant can examine how money moves through a business, who has authority over financial transactions, how vendors are created and modified, who can approve payments, how payroll changes are processed, how refunds are authorized and how bank accounts are reconciled. The objective is to determine where one individual may have too much control, where documentation is inadequate or where a transaction could occur without meaningful independent review.

This process can be particularly valuable for small and closely held businesses. Large organizations may have separate accounting departments, compliance personnel, internal auditors and dedicated fraud-prevention teams. A smaller company may have one bookkeeper handling accounts payable, payroll, deposits and reconciliations while the owner provides occasional oversight. That arrangement may be operationally convenient, but it can also create significant vulnerabilities.

A forensic accountant can help the business establish practical controls appropriate for its actual size rather than imposing procedures designed for a multinational corporation. Something as straightforward as requiring independent approval for payments above a certain amount, reviewing new vendors, verifying changes to banking information and having someone other than the person issuing payments review bank reconciliations can substantially strengthen financial oversight.

Forensic Accounting Can Find the Patterns That Ordinary Bookkeeping May Miss

Bookkeeping is designed primarily to accurately record financial activity. Forensic accounting approaches those records from a different perspective. Instead of simply determining whether a transaction was properly categorized, a forensic accountant may ask whether the transaction makes sense in the first place.

An expense category that suddenly increases may deserve examination. A vendor receiving substantially more money than historical averages may warrant additional review. Refunds that repeatedly originate from the same employee, payments consistently falling just below an approval threshold, unexplained payroll increases, unusual after-hours transactions or vendor information matching employee information can all represent circumstances requiring further investigation.

None of those conditions automatically proves fraud. Businesses naturally experience changes, unusual expenses and accounting mistakes. The important distinction is whether there is a reasonable explanation supported by documentation. A forensic accountant looks for relationships between transactions and attempts to determine whether financial activity is consistent with the legitimate operations of the business.

This is particularly important because fraud frequently develops gradually. Someone may begin with a relatively small unauthorized transaction to determine whether anyone notices. If nothing happens, the transactions may become larger or more frequent. A business that reviews only its overall profit and loss statement may not recognize the pattern until the cumulative loss becomes substantial.

Internal Controls Should Protect the Business and Its Employees

Effective internal controls are sometimes misunderstood as evidence that an employer does not trust its staff. That should not be their purpose. Good controls protect honest employees as much as they protect business owners because they establish clear responsibility and create documentation showing who authorized and processed transactions.

Whenever possible, the same individual should not control every stage of a financial transaction. The employee creating a vendor should not necessarily have unrestricted authority to approve payments to that vendor. The individual issuing checks should not be the only person reviewing the bank reconciliation. Significant payroll changes should receive independent review, and changes to employee direct-deposit information should require additional verification.

Smaller businesses may not have enough employees to completely separate every accounting responsibility, but that does not mean meaningful controls are impossible. An owner, outside accountant or other authorized individual can periodically review bank reconciliations, vendor changes, payroll reports, credit card activity and unusual transactions. The system should be designed around the resources of the business while preserving independent oversight wherever reasonably possible.

When Fraud Is Suspected, Preserve the Financial Evidence

If a business owner suspects fraud, the immediate reaction may be to confront the employee, vendor or other individual believed to be responsible. That can sometimes make an investigation more difficult. Records may disappear, electronic information may be deleted, explanations may change and individuals may have an opportunity to coordinate their stories.

A forensic accountant can help determine what financial records should be preserved and begin reconstructing what occurred. Depending upon the circumstances, that may include bank statements, canceled checks, accounting-system records, vendor files, payroll information, credit card statements, invoices, electronic payment records and other supporting documentation.

The investigation may then follow transactions across multiple accounts or accounting periods to determine when questionable activity began, how much money may be involved and whether additional transactions share similar characteristics. When necessary, forensic accountants may also work alongside attorneys, law enforcement, insurers and other professionals involved in the matter.

The objective is not simply to identify a suspicious transaction. It is to understand the complete financial story supported by records and evidence.

Fraud Prevention Is Usually Less Expensive Than Fraud Investigation

Once substantial fraud has occurred, the original stolen money may represent only part of the financial damage. A business may incur legal expenses, forensic accounting costs, insurance deductibles, bank disputes, regulatory obligations and significant management time attempting to reconstruct events. Relationships with vendors, customers and employees can also be damaged.

Preventive financial controls rarely seem urgent when everything appears normal, which is exactly why they are often postponed. Business owners are busy running their companies, and reviewing approval procedures or examining accounting permissions can easily fall behind more immediate operational responsibilities.

Unfortunately, the weaknesses that nobody reviews are often the weaknesses fraudsters exploit.

Having a forensic accountant periodically evaluate financial procedures can provide an independent perspective that people working inside the business every day may not have. Familiarity can make unusual procedures seem normal simply because they have existed for years. An outside forensic review can ask a much more important question: if someone wanted to steal money from this company, manipulate its records or conceal unauthorized transactions, where would the opportunity exist?

The answer can be extremely valuable when discovered before someone takes advantage of it.

Trust Is Important. Verification Is Essential.

Businesses depend upon trust. Owners trust employees, employees trust managers, companies trust vendors and customers trust businesses. Commerce could not function without those relationships.

Trust, however, is not an accounting control.

A well-designed financial system does not begin with the assumption that everyone is dishonest. It recognizes that mistakes occur, credentials can be compromised, employees can be deceived and trusted individuals can sometimes abuse their authority. Independent verification protects everyone involved.

The fraud cases appearing in the news may involve radically different circumstances and dollar amounts, but they repeatedly demonstrate the same fundamental weakness: something false was accepted as legitimate long enough for money, services or access to change hands.

Businesses cannot eliminate every possibility of fraud, but they can make fraud substantially more difficult to commit and much easier to discover. Establishing appropriate internal controls, reviewing financial patterns, separating critical responsibilities, independently verifying payment changes and periodically examining the accounting system from a forensic perspective can dramatically improve a company’s ability to recognize problems.

If something in your financial records does not make sense, there may be an innocent explanation. There may be an accounting error. There may be a procedural problem. There may also be something more serious occurring beneath the surface.

A forensic accountant’s job is to follow the financial evidence and determine what the numbers are actually telling you.

Your taxes, your business and your financial future deserve professional oversight, experience and accountability.

Pivotal Forensic Accounting & Audits
2602 N Proctor Street, #201
Tacoma, WA 98407

(253) 752-3920

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