How to conduct an appropriate fraud investigation
Would your company be ready to handle this type of examination?
Imagine that your company is being investigated for fraud. One of your employees is caught forging documents, or another is involved in a grand money laundering scheme or "cooking" the financial reporting books. A team of forensic accounting and fraud investigators enters your workplace to conduct a review and investigation. If you found your company under investigation -- how would you handle it?
If you are unsure, then you should know how Deloitte's forensics specialists conduct a comprehensive fraud investigation. It is a carefully planned and thorough undertaking that has to be done right. A poorly executed investigation can make a delicate situation for your company much worse.
Fraud takes on many forms. The Canadian Institute of Chartered Accountants defines fraud as "an intentional act, by one or more individuals among management, other employees, those charged with governance or third parties, involving the use of deception to obtain an unjust or illegal advantage." These activities can include misappropriation of cash or inventory, fraudulent financial reporting and money laundering.
In looking at these activities, Deloitte's fraud investigators take a three-step approach in their investigation:
These stages normally involve using the technology of computer forensic analysis, data analytics and conducting interviews.
Securing and collecting the evidence: computer forensics
Computer forensics allows fraud investigators to uncover more of the facts, support otherwise unsubstantiated information, confirm or refute allegations, and analyze competing theories in relation to those facts. It involves identifying, collecting, analyzing large numbers of data. But without the correct presentation or codification of data, it may not be admissible in a legal proceeding.
Typically, the forensic group would search and analyze:
However, electronic evidence is not limited just to laptop and network computers at the workplace. Offsite computer files, servers, and even the head accountant's BlackBerry can prove valuable in an investigation.
If your company is being investigated, it is wise to be as cooperative as you can during the "electronic" phase of the investigation. Computer forensic analysts use sophisticated tools and laboratories to conduct a thorough and accurate investigation. There's really nowhere to hide your data anymore, and any attempts to do so merely create additional evidence pointing toward an attempted cover-up.
Gathering additional evidence through interviews
The interviewer carefully organizes the structure of the interview, including its location, attendees, and the series of questions that will be asked. Questions are designed so that they draw out the best possible information from the interviewee. For instance: What will be gained from the interview? What should be known about this individual's activities? Is the interviewee a suspect or just a lead? As well, the interviewer often takes into account body language and certain words and phrases which could indicate deception.
The bottom line
Going through a fraud investigation can be a stressful time for your company. But you can get through it with cooperation, patience and the right knowledge.