Asset misappropriation (misappropriation of assets)

Asset misappropriation is the fraudulent use of a company's assets for personal benefit by a director, employee or related party — including embezzlement, expense fraud, fictitious supplier payments and theft of inventory. It is the most common form of occupational fraud, and its detection is a key objective in financial due diligence and forensic accounting reviews. In the context of a company acquisition, undetected misappropriation inflates reported earnings and reduces the quality of EBITDA, directly affecting the valuation and the accuracy of financial warranties. Typical schemes leave patterns detectable through data analytics: duplicate payments, vendors sharing bank details with employees, round-amount expenses or dormant supplier accounts suddenly reactivated. Interviews, whistleblowing records and internal control reviews complement the quantitative work in forensic reviews, and quantified findings feed price adjustments or warranty claims in transaction contexts.

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Example: due diligence on a Swiss wholesale distributor uncovers CHF 320,000 of personal travel expenses systematically charged to a fictitious supplier over three years. These are classified as non-recurring charges and excluded from normalised EBITDA, reducing the valuation base by CHF 320,000 and triggering specific warranty provisions in the SPA covering undisclosed management fraud.

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Hectelion identifies asset misappropriation through analytical and forensic procedures integrated into our financial due diligence engagements.