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Forensic Investigations: Not a Do-it-Yourself Proposition

If an organization suspects that an employee, officer or trustee is embezzling, misusing organization assets or committing fraud…do-it-yourself forensic investigations can be a logistical and legal minefield.

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It is important for organizations to work with both an attorney and a forensic accountant to ensure that the investigation is conducted thoroughly, facts are collected and documented properly, and that evidence is ultimately admissible in court. The information within is meant to provide some guidance on the investigative process, including how forensic experts conduct interviews and gather evidence.

Interviewers skilled in forensics and the detection of fraud detection know how to spot fraud warning signs, detect deception and confront suspicions by talking with suspects and others within an organization. Specific interviewing questions that an expert may ask depend, in part, on the circumstances and individuals involved. Experts also rely on various financial and accounting standards to develop their line of questions and understand methodologies and psychology related to fraud and the way in which perpetrators conduct themselves and cover up their crimes.

Co-workers can also provide a valuable perspective that may be different from those of management, officers or overseers of the financial reporting process. Their responses might corroborate suspicions or indicate that there is more to the case than meets the eye.

The interview itself begins with general introductions, an explanation of the purpose of the meeting and the building of rapport. The interviewer will also start off by asking questions to which the answers are already known, so he or she can observe the subject’s demeanor and degree of candor and so he or she can develop an emotional baseline.

The interviewer will later transition to more detailed and specific questions. The interviewee is encouraged to do most of the talking with the use of open-ended questions and the interviewer will often use silence as a tool, as people being interviewed frequently try to fill conversation gaps if there is awkward silence. Using this method, the subject may unintentionally disclose relevant information, try to change the subject or steer the interview in a different direction, provide additional clues, or in some cases, even provide an impromptu confession.

Before ending the interview, the expert will confirm the information elicited and offer the opportunity for the interviewee to expand on their answers or offer alternate scenarios to the issues at hand.

During a fraud investigation, another key task performed by the forensic expert is the collection of evidence from the company’s internal documents, including:

  • Financial records
  • Personnel files
  • Emails
  • Telephone logs
  • Security camera recordings, and
  • Physical and IT system access records

The locating of this evidence often requires the expert to perform computer forensic procedures. Forensic experts also consider external sources of evidence, such as public records, customer and vendor information and social media information.

Forensic accounting experts are trained and skilled on how to gather, analyze and categorize internal and external evidence, conduct computer-assisted data analysis, and test both facts and theories. It is imperative to remain in constant communications with your expert to understand the status of the investigation and ensure that they are documenting and tracking every step of their investigation.

When the forensic expert is finished conducting interviews and gathering evidence, he or she will determine the appropriate format for reporting and consider additional issues such as protecting legal privileges and avoiding any potential defamation of the interviewed subjects.

Despite the best prevention efforts and internal controls, organizations still become victims of white collar crime every day. When fraud or the suspicion of impropriety does occur, the engagement of an outside forensic expert, along with an understanding of the investigative process, will facilitate matters and minimize potential losses or other legal obstacles.

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