Valuation pitfalls / Common fraud schemes / Fraud checkup

• Valuation pitfalls: Business valuation is a continually evolving discipline. Over the last 15 years, the valuation arena has moved away from being primarily an art and has become a blend of art and science.

  Valuation and financial scholars have produced tudies and research over the years to provide a better foundation for discounts for lack of marketability and discounts for lack of control. These same theoreticians have provided new models on how to project a company’s financial performance and determine discount rates.

Despite these great strides, certain pitfalls can catch business appraisers. This article discusses a few of these many pitfalls.

• Common fraud schemes: Fraud is frequently in the news, and most of the press is given to very large publicly traded companies. In reality, the largest percentage of fraud cases occur in small privately held companies. Learning about the different fraud schemes that can take place within your company is the first step in working to prevent them.

• Fraud checkup: It is a discussion that many business owners have had but wish they could have avoided. The regretful business owner states, “He’s been an employee for 10 years. I had complete and total trust in him. It never occurred to me that he would be defrauding my business.”