Larry’s Laws of Larceny- Law 3: Double Entry Bookkeeping Doesn’t Produce a Double set of Books

Larry Beebe, CPA

This statement is a play on words. Double entry bookkeeping is the type of accounting used in the business world by everyone.

A double set of books has nothing to do with double entry bookkeeping. An entity would have two sets of books to avoid paying taxes or for some other criminal purpose. In an employee benefit plan, the second set of books might be used to avoid the obligations called for by the collective bargaining agreement signed by the employer.

I was performing a payroll audit of a contributing employer to a benefit fund. The accounting records were immaculate, but when I asked the bookkeeper questions, it was obvious she knew nothing about the books. I told my young associate “we are not going to find anything. We are looking at a double set of books.” In speaking to a plan trustee the following day I expressed by suspicion. He said “I am not surprised. That company is owned by the mob.”

What can the trustees do if confronted with a possible double set of books? Probably very little. Trying to prove anything would be prohibitively expensive and the chance of success in unmasking the scheme would probably be slim.

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