Oct 9, 2020
During the last couple of decades, the big 4 accounting firms had at least 2 dozen scandals with multi-billion dollar corporation. Hundreds of millions of dollars were cooked by huge corporation that were supposed to be audited by the top CPA’s of Deloitte & EY.
To be honest, most accountant -and CPA’s- care more about looking “professional” than catching fraud. And to be more honest, they can’t catch fraud even if they looked it in the eyes. That is because to catch a thief you have to think like one, and a Harvard graduate who is paid a salary of 150 thousand dollar a year can’t really put himself in the shoes of someone who needs to steal to stay alive.
(of course there are exceptions for every rule)
For example, an accountant sees a recurring revenue of $50,000 while doing the books for a Dry Clean Chain. He might get suspicious enough to ask himself:
What type of business spends so much money on dry cleaning? And then –if he was good- he might link that transaction to a corporation and get its information. But do you really think that he would investigate it any further, in this example it’s clear that this corporation is most likely a shell company. But our “professional” accountant will dismiss that possibility after he sees a professionally built landing page for that corporation –which can be done in 2 days by a $100 freelancer-. If only he thought to call the number on that landing page he would see that there is something wrong, but he won’t, why? Because he could never do such fraud himself, so he doesn’t think that anyone else would be able to do it.
“I won’t trust a CPA to audit the items in my fridge”
With all said and done, a junior accountant expects to be paid around 70 thousand dollars a year. I am talking about a fresh graduate here who can’t even work a printer. The problem is not the accountant him/herself, but the culture of accounting in general. Even the Big 4 knows for a fact that this way of doing things can’t last forever. Accountants are just too slow and too inefficient to have any major benefit that justifies the costs. That 70k can be justified when we are talking about a big company, but for a small business it certainly would be a huge mistake to spend such amount on an accountant.
Do you know that small businesses earn $56,000 per year on average.
What works for a small business is for the owner to learn how to use an accounting software, it can be complicated a bit especially in the beginning. But it pays to do so, an accounting software costs on average around 200 dollars a year. There are also free solutions out there that won’t costs you a dime. Plus if you work the system yourself you will learn more about where your money if going and what you should spend your money on. And with time, more patterns will start to emerge in front of your eyes. Of course you need to have a basic understanding of accounting to work that system successfully, especially as your business grows, or you will have to hire a part-time accountant to help you when the need be.
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