Today’s Topics

1. Today’s Topics • Methods for Investigating Fraud • Theft Investigation Methods FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-1

2. Fraud Investigation • Evidence Square Approach • Testimonial evidence • Documentary evidence • Physical evidence • Personal observation • Fraud Elements Plus Inquiry Approach • Theft investigation • Concealment investigation • Conversion investigation • Inquiry investigation FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-2

3. Theft Investigation • Surveillance and covert operations • Invigilation • Physical evidence • Generally costly and time-consuming FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-3

4. Theft Investigation Bull’s-Eye • Check records • Interview former employees, vendors • Search public records • Interview employees, buyers etc. • Interview suspect FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-4

5. Coordinating the Investigation • Vulnerability Chart (spread sheet) • What was taken? • Who had the opportunity? • How were assets moved? • How was it concealed? • How were the assets converted? • What were the red-flags? • What were the possible motives? • What were the sources of rationalization? • What internal controls exist? FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-5

6. Surveillance and Covert Operations • Fixed, tailing or electronic • Legal, but subject to the 4th Amendment protection against unreasonable searches • Avoid fishing expeditions FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-6

7. Invigilation • Observation that takes away virtually all opportunities for fraud • Before and after comparisons • Use only with management approval • Costly FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-7

8. Physical Evidence • WTC example • Northern Exposure example FORENSIC ACCOUNTING - BA124 - Fall2011 Slide 7-8