Monster Tires are Hot

January 5, 2016
SDC CPA Hot Topics

The auto parts industry has historically experienced one of the highest frequency rates of employee theft. Why? It’s easy. Auto parts are easily stolen and sold for cash. eBay and PayPal have made it simple to obtain a larger distribution market for the employee to sell the stolen auto parts. Recently, in 2014 and 2015, there was an increase in the frequency in the misappropriation of custom parts and monster truck tires. Headlines like these hit the news: Tri-Cities Tire Store Manager Embezzled Thousands, Auto Parts Store Employee Accused of Stealing Nearly $70,000, and 3 Plead Not Guilty to Theft of $11,000 Worth of Tires.

The Method

Employees are placing special orders for tires that are subsequently deleted from service tickets and repair orders. The special orders are not entered into inventory and, thus, are not discovered missing during physical inventory counts. In recent cases we have investigated, we have found the tires and parts are often ordered by the employee and delivered directly to the employee’s home. We have also seen evidence of employees in parts departments using a single repair order for multiple special orders.

The Solution

Just as the method of misappropriation is relatively easy, so is the solution. There is often a lack of reconciliation between purchasing invoices, customers’ sales and receipt of goods. To mitigate these types of losses, a randomly selected special order should be traced to the corresponding service ticket or repair and customer payment and signature of receipt. With this control in place, employers can try to detect misappropriation before it goes too far. And, with diligence, they can prevent their employees and businesses from being featured in headlines like those above.

Related Hot Topics