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Accounting & Audit

CARES Act PPP Loan Forgiveness

By Accounting & Audit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized $349 billion in forgivable federal loans (“PPP loans”) to small employers to provide incentive to keep employees with an additional $310 billion of funding on April 24, 2020. Most lenders are now accepting PPP loan forgiveness applications, and L&B is ready to provide assistance to your organization during the process.

PPP loans are structured similarly to most interest-bearing loans, but are forgivable either in full or in part if spent during a covered period on certain eligible costs. Covered periods can either be 8 or 24 weeks in length beginning at the loan disbursement date, and forgiveness applications must be completed within 10 months after the last day of the covered period. The unforgiven portion of the loan bears interest at a rate of 1% per annum over 2 years (if the loan was received before June 5, 2020) or 5 years (if the loan was received after June 5, 2020).

There are three types of PPP loan forgiveness applications: Form 3508S, Form 3508EZ, and Form 3805. Form 3508S is for borrowers with PPP loans equal to or less than $50,000. Form 3508EZ is for self-employed individuals, or organizations in which employee levels, salary, wages, or hours were not reduced during the covered period compared to employee levels, salary, wages, or hours of a comparison period elected by the borrower. The comparison periods are January 1, 2020 through February 29, 2020 or February 15, 2019 through June 20, 2019. Form 3805 is for all other borrowers.

To qualify for forgiveness, PPP loan proceeds must be used on certain payroll costs, rent, business mortgage interest, and utilities during the specified covered period. Non-payroll costs may not exceed 40% of total eligible PPP loan forgiveness. Additionally, to qualify for full forgiveness, organizations must have retained 100% of full-time equivalent employees over the course of the covered period and have not reduced the total wages or salary for any employees by more than 25% of their wages or salary compared to the first quarter of 2020. There are several safe harbors and exemptions available in the event a borrower had to reduce their employee levels, salary, wages, or hours.

The Small Business Administration has made public a list of appropriate documentation recommended to support the aforementioned items on the application, however, it is important to note that additional information may be requested from your organization’s lender. Sufficient recordkeeping is critical.

L&B is available to help prepare or review your PPP loan forgiveness application as well as to answer any general questions. For assistance related to the PPP loan forgiveness application, please contact your L&B professional at (858) 558-9200.

Preparing Your Organization for a Financial Statement Audit

By Accounting & Audit

While an approaching audit can be intimidating, proper planning can make for a smooth and successful audit experience. Whether your organization already participates in annual audits or is approaching the audit requirement threshold for the first time, there are best practices to consider when preparing for a financial statement audit.

There are several steps your organization can take throughout the year to effectively plan for an audit. A great first step would be to establish an audit committee. An audit committee’s responsibilities include oversight of the audit and the financial reporting process, monitoring accounting policies and principles, as well as the organization’s system of internal control. If your organization is a nonprofit, each state has requirements for the constitution of the audit committee and related responsibilities. For instance, in the state of California, an audit committee must be established for all audits of nonprofit organizations, and the committee cannot include the CEO, Treasurer, Finance Committee Chair, any employee of the organization, or any person with a material financial interest in an entity doing business with the organization.

Once an audit committee is established, an organization should go through four main steps to prepare for their audit.

Risk Assessment & Internal Control Environment

An audit will always start with a review of their client’s system of internal control and perform a risk assessment.  To prepare for this process, organizations should perform their own annual risk assessment.  Performing an annual risk assessment is a great way to identify weaknesses in internal control, as well as accounting processes susceptible to error or even fraud.  By documenting and updating a narrative of your processes, you are taking the first step to evaluating your internal control environment. If you happen to identify an error or weakness during this process, you will have the ability to implement new or improved processes to mitigate these issues in advance of your audit.

Accounting in Accordance with U.S. GAAP

Accounting throughout the year should be prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Make sure that you have researched and understand accounting standards updates issued to determine if there are new standards that you should be following. Following an old accounting standard that has been recently updated could lead to a misstatement in the financial statements, audit adjustment, and if large enough, a management letter addressed to those charged with governance describing this significant deficiency or material weakness in the organization’s internal control.

Supporting Documentation

Maintaining proper documentation to support accounting transactions is imperative. Auditors will issue a request list for support to substantiate specific transactions during an audit. This means that they will be looking for “verifiable audit evidence” to support that the transaction meets audit assertions.  Having a well-maintained system for retaining and filing this documentation will not only substantiate the transaction, but will help you to do so in a timely manner.

Year End Financial Statement Close

Closing your organization’s books is usually a task performed monthly.  The annual financial statement close is a similar process, yet this process can get more involved for a period-end under audit.  Where should you start? The Balance Sheet.  Each account balance should be reconciled to the underlying accounts and supporting detail. Preparing rollforward schedules or annual reconciliations is a great way to ensure that your ending account balances are correct and in accordance with U.S. GAAP.  Investigate significant or unusual items and unreconciled differences; propose adjustments as appropriate.  Assess the need for adjustments to the financial statements related to management’s estimates such as reserves, write-offs, commitments, contingencies, fair value, accrued liabilities, and many others. Auditors will test these year end account balances, so be prepared to provide to them these schedules, reconciliations, and other support.

The key to a successful audit is preparation. For assistance in preparing for an audit, please contact your L&B professional at (858) 558-9200.

Business Advisory Services: Budgeting and Forecasting

By Accounting & Audit

Budgeting and forecasting are tools that assist us in meeting our financial goals. Companies can use budgeting to establish a plan regarding what the company expects to achieve for a specific period. Financial forecasting assists a company in establishing future outcomes based on historical data and trends as well as estimated sales. Although the creation and implementation of a comprehensive budget and forecast for your business or personal finances can seem overwhelming, it is the most effective way to set financial expectations and achieve success in your financial affairs.

The budgeting and forecasting process is especially helpful in providing you or your business financial stability. The process of understanding where you are and whether you are heading in the right direction is pivotal in achieving financial success. There is no better feeling than realizing the achievement of long-term financial goals such as; purchasing a home, moving your start up from Angel investors to an IPO, or exceeding your nonprofit’s fundraising goal.

Those who can benefit from budgeting and forecasting:


Developing a personal budget helps align your aspirations and financial values with reality, and is essential if you’re hoping to gain control over spending and begin working towards your financial goals. A budget can take you to a lifestyle you desire, but it also can keep you within a lifestyle you currently enjoy. Understanding where you are spending your money helps drive your spending in a direction that aligns with your personal financial values. The ease of one-click online purchasing and small purchases in the moment seem inconsequential but can quickly add up. Tracking the totality of your spending helps you understand where all of those swipes are going and what your spending looks like as a whole. This big picture view allows you to see your entire financial picture and is crucial to ensuring you are spending in alignment with your goals.

Start-up Companies

For many small-business owners and start-ups, managing funding and seed money is crucial to staying afloat. Oftentimes, there are a variety of financial fires to put out at any point that is difficult to find time to do financial planning, thus tracking spending and cash flow falls to the wayside. Budgeting is a powerful tool that enables business owners and start-ups to control their cash flow rather than having it control them. Robust budgeting and frequent analysis of projected vs. actual cash flow will give your start-up the fuel it needs to keep reaching your business goals and growing your start-up to its fullest potential.

Established Companies

If you wonder how well established companies continue to thrive and have financial success, it is most likely due to the adherence to a sound budget and forecast. Proper forecasting will help to minimize the role of luck or chance in determining business success or failure. Financial estimates can be calculated based on estimated sales and the related cost thereof. How much capital is needed for expansion, new product design or development, or additional infrastructure all depends upon accurate forecasting for success.


Nonprofits can greatly benefit from budgeting. One way that a nonprofit board and management plan for future revenue and expenses is by creating a budget. Approval of an annual budget is one of the fundamental elements of sound financial management. Budgets are often referred to several times throughout the year and may even be requested by parties involved in financial transactions with the nonprofit organization, such as banks, or by donors/grantmakers considering a gift to the organization. A strong and constantly updated budget allows nonprofits to ensure they are spending as expected and to achieve the greatest potential positive impact.

Success is when preparation meets opportunity. Being prepared with a focused budget and forecast that meets your needs, invites success and opportunity to come knocking on your door. For assistance with the development of your budgetary needs, please contact your L&B professional at (858) 558-9200.

Advisory Services: Improving Internal Control Processes

By Accounting & Audit

Internal controls play an essential role in the operations of an entity and in preventing and detecting fraud. These controls should be properly documented and regularly evaluated to ensure that they are operating effectively. As part of our advisory services offered at L&B, we can perform a review of existing internal control procedures for your business and assist in the implementation of procedural improvements!

The purpose of internal controls is to provide reasonable assurance about the reliability of an entity’s financial reporting, effectiveness of operations, compliance with laws and regulations and prevention or detection of fraud. Management is responsible for ensuring that the entity has established processes to identify and evaluate business risks which could influence financial reporting practices and implement processes to mitigate these risks. Important aspects to consider when performing an evaluation of controls includes:

  • Control Environment – This area of internal control relates to the overall culture of an entity and provides a basis for carrying out internal control across an organization. Set by senior management and the board of directors, the control environment emphasizes the importance of ethical values and expected standards of conduct.
  • Risk Assessment – The evaluation of all activities and associated risks in an organization is referred to as risk assessment. There are internal and external risks associated with any type of business. Your company should assess its business risks and fraud risks, create objectives surrounding how the risks can be mitigated to an appropriate level, and implement appropriate processes and procedures.
  • Control Activities – This area of internal control relates to procedures put in place to mitigate risks, particularly those considered too risky during the risk assessment process, to ensure that management’s control objectives are achieved. Examples of control activities include segregation of duties, required authorizations, and operational performance reviews.
  • Information and Communication – How management of an entity communicates the culture of compliance and standards of conduct, as well as sharing the policies that need to be followed, is referred to as information and communication. This area of internal control stresses the importance of a broad understanding of internal control processes among employees at every level. This is essential for implemented controls to be effective in an organization.
  • Monitoring – This area of internal control refers to the activities used to monitor processes within an organization. It is necessary to review the performance of internal control processes regularly to determine if the controls in place are successful and sufficiently mitigating organizational risk factors.

It is essential to properly document the internal control procedures in place at your organization. Documentation and communication of the areas described above will ensure that employees understand their roles, the importance of their participation, leading to sounder internal control environment.

We are happy to assist you in answering any questions regarding documentation or implementation of internal controls, or any of our Advisory Services. For more information, please contact Kristi Yanover, Audit Partner, at (858) 558-9200, or any member of our Assurance & Advisory Team.

Implementation of ASUs: Leases and Revenue Recognition

By Accounting & Audit

Understanding the effects of Accounting Standard Updates (“ASUs”) on your organization can be a daunting and complex task. The requirements for implementation may seem intimidating, but we offer advisory services in the arena of technical accounting to determine the best way to adopt and implement necessary changes. Two of the most significant ASUs affecting businesses and organizations requiring implementation over the next two years are: the new lease accounting standards and revenue recognition criteria.

The Financial Accounting Standard’s Board (“FASB”) issues ASUs in order to communicate changes to the FASB Codification. Each ASU explains the following: 1) how the FASB has changed United States Generally Accepted Accounting Principles (“U.S. GAAP”), including each specific amendment to the FASB Codification, (2) why the FASB decided to change U.S. GAAP and (3) background information relate to the change and when the changes will be effective and the transition method.


In February 2016, the FASB released ASU 2016-02, Leases, a highly anticipated leasing standard for both lessees and lessors. Under this update, a lessee will recognize right-of-use assets and related lease liabilities on the balance sheet for all lease arrangements with terms longer than 12 months. Both finance and operating leases recognized on the balance sheet will be measured at the present value of the lease payments.

Lease accounting for lessors remains largely consistent with previous U.S. GAAP, but has been updated for consistency with the new lessee accounting model and with the new revenue standard, ASU 2014-09 (see below).

For public entities, this new standard is effective for periods beginning after December 15, 2018; for all other entities, it takes effect for periods beginning after December 15, 2019.

Revenue Recognition

In March 2014, the FASB released ASU 2014-09, Revenue from Contracts with Customers. Under this new standard, revenue from contracts with customers is recognized based on the application of a principle-based model. The new, five-step model is as follows: (1) identify the contract, (2) identify the performance obligations, (3) determine transaction price, (4) allocate transaction price to performance obligations, and (5) recognize revenue as performance obligations are satisfied.

Public entities are required to apply the new revenue recognition standard for annual reporting periods beginning after December 15, 2017. For nonpublic entities, this new standard must be adopted for annual reporting periods beginning after December 15, 2018. If you have not yet implemented this ASU, we are available to assist you in implementing the necessary changes.

These are just two examples of ASUs that require updates to your company’s accounting policies. We are happy to assist you in answering any questions regarding technical accounting issues such as implementation of accounting standards updates or any of our other assurance and advisory services. For more information, please contact Kristi Yanover, Partner, at (858) 558-9200, or any member of our Assurance & Advisory Team.

Making the Right Choice For Your Business: QuickBooks Desktop vs Online

By Accounting & Audit

Many new businesses often find themselves asking which version of QuickBooks is right for them and unfortunately the answer isn’t always simple. When deciding whether to use QuickBooks Desktop or QuickBooks Online, there are several important factors that should be considered including accessibility, features and cost.


Depending on who, where and when you will be accessing your company file, you may be able to easily determine which version will work best for you.

QuickBooks Desktop – This is a software program that needs to be downloaded on each computer you wish to use to access files. Once you have downloaded the software, you can create and access as many company files as you need for no additional charge. Software is available in both Mac and PC versions, however features and data can be lost when converting to and from Mac and PC backup copies. These backup copies will be necessary if your bookkeeper or accounting professional does not use the same software version and requires access to your company information. Lindsay & Brownell offers a cloud-based file sharing service called Qbox in order to sync real time changes to a company file without having to use backup copies. This service can also be useful if your business is not storing data on a shared server. Unfortunately, Qbox is not available for Mac users.

QuickBooks Online – This is a completely online platform that requires no download installation. You can access your company file from anywhere, anytime, and from any computer with only an internet connection. You are required to pay a separate subscription fee for each company file you create, which could get expensive. Your company file can be accessed from a Mac or PC without the need to convert or prepare a backup copy. Accountant access can be added by simply sending a one-time email invitation.


Both versions of QuickBooks share many similar features making it difficult to know which to choose. Here are some of the major differences.

QuickBooks Desktop – Companies with inventory and job costing needs typically work better with the desktop version. There are more reporting options and you will also be able to customize these reports to your specific needs more easily than in the online version. Additionally, payroll, payroll tax and sales tax functionality can be more easily controlled and adjusted in the desktop version.

QuickBooks Online – When dealing with more complex business transactions you may experience some “feature gaps” in QuickBooks online. Many features that are not offered in the online version are supported by third party applications (“apps”). These apps can be integrated with the online version to fill some feature gaps. The more popular apps can assist with employee expense reimbursements, payroll timesheets, customer billing and bill payment processing. Many of these apps have their own fees, but some free apps are available as well.


If features and accessibility don’t sway you towards one side or the other, maybe you would be more interested in how this decision will affect your bottom line. Both versions of QuickBooks are often offered with discounts or promotional rates through

QuickBooks Desktop – QuickBooks Pro version 2019 costs $299 while QuickBooks Premier version 2019 costs $499 for a single user login. Additional user licenses are available for an extra fee. The software is supported by Intuit for the first three years for no additional charge. After three years, supported features will no longer be accessible but you can still use the software for many more years without those features (i.e. payroll and bank feeds). If you require these features, you will need to update your software when this support period expires and purchase the latest software version. Additional payroll fees may apply depending on the level of service you require.

QuickBooks Online – There are four subscriptions levels offered for QuickBooks Online ranging from $25-$150 per month, which include anywhere from 1-25 users, plus two accountant users. The subscription price will be locked in annually and is likely to increase with each renewal. Additional payroll fees may apply depending on the level of service you require.

Understanding the pros and cons between QuickBooks Desktop and QuickBooks Online is important when determining which version is right for you and your business. For assistance in this decision making process, please contact your L&B professional at (858) 558-9200.

Audit Requirements for Employee Benefit Plans

By Accounting & Audit

Does your employee benefit plan require an audit? The U.S. Department of Labor (“DOL”) generally requires all large plans file audited financial statements with the plan’s tax filing of Form 5500. A large plan is defined as a plan with 100 or more eligible participants at the beginning of the plan year, unless certain exceptions apply.

Who is considered a plan participant?

A plan participant is an employee eligible to participate in an employer’s retirement plan when certain eligibility conditions stated in the plan document are met. A participant is any employee or former employee of an employer who is or may become eligible to receive a benefit from an employee benefit plan.

 When is a plan’s initial audit required?

The key to determining if an employee benefit plan requires an audit is determining whether the plan is classified as a large or small plan. A large plan is defined as a plan with 100 or more eligible participants at the beginning of the plan year. In contrast, a small plan is defined as a plan with fewer than 100 eligible participants at the beginning of the plan year.

For small plans, audited financial statements are generally not required. For large plans, an audit may be initially deferred but not eliminated. A large plan may elect to defer the audit for plan years of seven months or less (due to initial year of the plan, merger, or change of plan year). The election does not eliminate the audit requirement; it only defers the audit requirement until the following year.

In the year in which the audit will be required, the audit will cover the full plan year and the short period. Additionally, Form 5500 must still be filed for the short plan year.

 The 80–120 Rule

As provided in DOL regulations, a plan that covers between 80 and 120 participants at the beginning of the current plan year may elect to complete the current year return, Form 5500, using the same category (i.e., large or small plan) that was used in the previous year.

A plan that has not filed as a large plan in the year prior to reaching 100 eligible participants has the option to continue filing as a small plan as long as the number of eligible participants does not exceed 120. Once it exceeds 120 eligible participants, it must file as a large plan and is subject to the audit requirement. If a plan has filed as a large plan and drops below 100 eligible participants in the following year it should continue to file as a large plan until the number of eligible participants drops below 80. Once it falls below 80 eligible participants, it can file as a small plan again and then no longer subject to the audit requirement.

Filing Requirements

The following types of employee benefit plans are subject to audit requirements:

  • Defined contribution plans (i.e. 401(k) and 403(b), and ESOP plans)
  • Defined benefit pension plans
  • Health and welfare plans

The filing deadline for submitting audited financial statements with Form 5500 is the last day of the seventh month after the plan year end with an option to extend for two and a half months.

Goal of an Employee Benefit Plan Audit

An audit of an employee benefit plan fulfills the fiduciary responsibility of the plan sponsor’s compliance requirements. In addition, an audit provides great insight into the plan sponsor’s control environment and internal control processes. Knowledge of weaknesses in the plan’s internal controls can assist plan management in identifying operational errors and potential fraud risks, implementation if new processes and internal controls, which leads to more effective management of the plan.

Becoming familiar with employee benefit plan audit requirements is important for business planning and compliance monitoring purposes. For assistance with your employee benefit plan audit, please contact your L&B professional at (858) 558-9200.

Risk Assessment: Have You Considered Risk in Your Business Decisions?

By Accounting & Audit

There are pivotal decisions made in our lives and careers that can lead to undesired consequences. Often, these undesired consequences can be mitigated by assessing risk on a regular basis before decisions are made. Risk assessment is a great tool to aid in making risk informed business decisions. The following questions remain: What is risk and how can risk be identified and mitigated?

Risk is comprised of two parts: (1) the possibility of losing something of value, and (2) the impact if an event does occur.

There are two general types of risks that face businesses, internal and external.

Internal risk is the threat that something or someone within your business is going to compromise business operations. Types of internal risks include human, physical, and technological.

• External risk is the threat that something outside the business is going to compromise business operations. Types of external risks include economic, natural, and political.

Assessing internal and external risk can be accomplished by performing the following procedures:

1) Identifying risk:
Internal risks are inherently easier to identify and control. Identification of internal risk is best assessed by integrating internal controls into business operations and then identifying weaknesses in those controls. The focus of these controls are effectiveness, efficiency, and reliability of reporting. Examples of internal business risks include the following: the departure of a key employee, dishonest employees, ineffective management or leadership, theft and embezzlement, outdated operating systems and computer equipment.

External risks are events that cannot be controlled by one person or forecasted with a high degree of reliability. As a result, it’s difficult to reduce external risks. Events considered to be external business risks include: economic downturns, new competitors, changes in consumer behavior, natural disasters, and changes in the political environment or governmental policy.

2) Valuing risk:
The next step is to assign a value to each risk. This value represents the impact on the business should the identified risk occur. To value each identified risk, gather as much data as possible to accurately assess the consequences of each event occurring. The risk value is equal to the probability of the risk multiplied by the cost to the company if the risk were to occur.

3) Managing risk:
There are several ways to manage risk, including:

o Mitigating the risk: This involves putting contingency plans in place. Having a contingency plan will allow a company to move forward with minimal downtime in the event a risky situation occurs. For instance, if your company is hosting a promotional event that is held outdoors, such as a festival, there is a risk that it might rain. If it were to rain, attendance is likely to decrease, and in turn, decrease the potential profit from the event. Possible ways to mitigate the risk of rain would be to rent a large tent to provide shelter from the rain or provide umbrellas for attendees.

o Avoiding the risk: In drastic circumstances, if the risk value and consequences are too high, risk could be avoided completely by cancelling or stopping the high-risk business initiative. For example, if a new product launch could cripple the company financially, you could pull the launch until the company’s finances stabilize.

o Sharing the risk: In this case, the risk could be shared with, or transferred to, another party. This applies mainly to financial risks and situations that can be identified and written into contracts. One example is insuring yourself against the risk of fire. The insurer carries the financial risk if a fire destroys the company’s office building.

o Accept the risk: Of course, you can always do nothing. You should, though, make a conscious, informed choice to accept the risk. Do not opt for it by default because other options have not been carefully examined. This strategy works best for minor risks where the impact is small, or for risks that are unlikely to occur, such as floods and earthquakes.

4) Review regularly:
To ensure that risk mitigation techniques are working properly and that you are aware of risks that may pose threat, review the work environment and controls in place at regular intervals throughout the year, as deemed necessary.

Knowing how internal and external risk factors affect your company can protect it and help it thrive. Increasing your awareness of business risks and adopting a thorough risk assessment process as discussed above, will lead to increased readiness resulting in a more favorable outcome should an event occur. For assistance in application of risk assessment procedures, please contact Kristi Yanover, Audit Partner, at (858) 558-9200, or any member of our Assurance & Advisory Services team.

Detecting and Preventing Cash Fraud

By Accounting & Audit

Whether you are a non-profit organization collecting cash donations or a for-profit business collecting cash for sales, you may be susceptible to cash theft or fraud. Increasing awareness of the most common types of cash theft and fraud schemes and implementing controls to deter them is essential to their detection and prevention.

There are several different types of cash theft and fraud schemes. Some of the most common schemes are counterfeit currency, cash larceny, and skimming.

Counterfeit Currency

Counterfeit currency is the act of printing paper cash without the legal sanction of the U.S. government. The most frequently counterfeited bills are one-hundred-dollar bills, whereas the least are one-dollar bills. In essence, the only way to prevent counterfeit cash is to detect it. Some counterfeit bills are incredibly convincing; however, there are proven methods to validate authenticity. Using a black light can reveal special security features embedded in all valid U.S. currency. Additionally, holding a bill up to the light can help you to locate the unique government watermark. A counterfeit bill will often fail to replicate the original watermark or use the wrong watermark for the bill. (Researching what security features and watermarks are included on each bill is the best way to familiarize yourself with the unique characteristics that should be present.) Training your organization’s staff on the different currency characteristics is essential to implementing the control throughout your organization. If your organization handles large amounts of cash at a time, purchasing a two-in-one bill counter, which also detects counterfeit currency, may serve as a solution to help detect counterfeit currency.

Cash Larceny

Cash larceny is the removal of cash from the system after it has been recorded. It can involve taking cash from the register or reversing a cash transaction to attempt to hide the theft. Larceny is an easier scheme to detect as you will notice that more cash is recorded than is on hand. Some preventative measures include proper segregation of duties, mandatory holidays and vacations for employees, and surprise cash counts.


Skimming is the act of removing cash from the system before it has been recorded. An example of skimming would be if an employee receives a cash donation for your organization but pockets the money instead of recording it. Skimming is more difficult to detect because it does not leave an audit trail, which would ordinarily reveal the source of the theft. Skimming is most often detected by accident. Monitoring for lower-than-expected revenue during the financial reporting process may serve as a tool for detecting skimming. Installing video monitoring in all areas where employees handle cash can also serve as a preventive and detective measure. Reconciling the physical inventory count with the perpetual inventory records to reveal shrinkage without corresponding cash receipts can also help to detect skimming schemes.

Designing and implementing sufficient internal controls around the cash cycle can help to prevent and detect most cash frauds that your organization may encounter. For assistance in determining the risk of cash theft and fraud to your organization, please contact your L&B professional at (858) 558-9200.

Cyber Fraud: An Increasing Threat

By Accounting & Audit

If someone told you there is a new, rapidly growing, billion-dollar industry that has a target market bigger than that of Apple and Microsoft combined, you might be tempted to get in on the action. Here’s the catch, you’re the target market, and the business is cyber fraud.  

Cyber fraud is a form of fraud committed over the internet that targets your data and covers a wide range of criminal activity. There are several things you want to know about cyber fraud and need to consider the types of cyber fraud, what criminals are trying to accomplish, and what you can do to prevent these attacks.

Types of cyber fraud:

Cyber fraud is most commonly committed three ways. There is hacking, malware, and phishing.

  • Hacking: This a type of cyber fraud where “hackers” gain unauthorized access to a computer, phone, or other technological device. Once access into the operating system is gained, the criminal is then free to do as they wish, often without victims aware of what is happening.
  • Malware: This is software that is intended to harm your computer and data. Hackers often install malware after gaining access to your system to hijack control of the computer allowing freedom to do as they please.
  • Phishing: Phishing, like fishing, is a baited hook that is trying to gain unauthorized access to your computer through fraudulent links that inconspicuously appear in your email inbox as a normal email would appear. Once engaged, the link often downloads malware and gives the creator of the link access to your data.

What cyber criminals are trying to accomplish:

  • Steal: Cyber-criminals are often trying to steal sensitive data once they have access to your operating system. For individuals, your personal information is at risk including social security, credit card numbers, routing numbers, and other information that could be of use to a criminal. For businesses, criminals may try to steal trade secrets, algorithms, client data, and whatever else would be useful to thieves or your competition.
  • Destroy: Hackers have been known to destroy data when given the chance. This may be done out of spite, attempts to ruin your business, and desire to use your computer for their own purposes.
  • Ransom: It is not uncommon to hear about cyber fraud criminals gaining control over your computer and then charging you a fee (generally paid with cryptocurrencies) before giving you back control…if they’re honest.

Though the threat of cyber fraud is intimidating, you can reduce the risk of being a victim to attacks.

What you can do to prevent cyber fraud:

  • Make yourself aware: Think through vulnerabilities you may have. Are you running old software? Is all your information stored in one location? Do you have backups of your data? Constantly be learning about cyber fraud and what actions you can take to build up your cyber defense as the nature of the crime changes alongside technology.
  • Create internal controls to prevent/detect: It is a good idea to install software that is designed to protect your operating systems from cyber-attacks. If you’re a business with an IT team, check in with them to see what they are doing to combat this issue and always bee alert to the possibility. Make sure to exercise professional skepticism when dealing with websites and emails that you’re not familiar with.

Cyber fraud is a billion-dollar business and has grown to the point where certain malwares have tech support that you can call to get help breaking into someone’s computer. As a growing concern, it’s important to make yourself aware of the issue to lower your risk of falling victim to an attack.

The most common victims are those who lack prevention systems. For assistance in fraud prevention or detection, please contact your L&B professional at (858) 558-9200.

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