Description
Book SynopsisA fraud investigation is aimed at examining evidence to determine if a fraud occurred, how it happened, who was involved, and how much money was lost. Investigations occur in cases ranging from embezzlement, to falsification of financial statements, to suspicious insurance claims. Expert Fraud Investigation: A Step-by-Step Guide provides all the tools to conduct a fraud investigation, detailing when and how to investigate. This guide takes the professional from the point of opening an investigation, selecting a team, gathering data, and through the entire investigation process. Business executives, auditors, and security professionals will benefit from this book, and companies will find this a useful tool for fighting fraud within their own organizations.
Table of ContentsPreface xv
Acknowledgments xvii
Chapter 1 Finding Fraud 1
Signs of Fraud 1
Looking for Suspects 9
Evaluating Fraud Tips 11
Should You Investigate? 12
Confronting Suspects 13
Skills of a Fraud Investigator 14
Differences between Audits and Investigations 16
Conducting a Fraud Investigation 19
Notes 19
Chapter 2 Beginning the Investigation 21
Assessing the Engagement 22
Making Recommendations 26
Budgeting and Cost Control 28
Fees 30
Billing Practices 35
Engagement Letters 36
Chapter 3 Managing the Case 39
Assembling the Team: Where to Start 40
Assembling the Team: Company Insiders 41
Assembling the Team: Key Participants 43
Assembling the Team: Outside Consultants 44
Importance of Credentials 45
Management and Supervision of Staff 46
Work Programs and Checklists 47
Document Management 48
Preserving Evidence 50
File Maintenance 52
Investigative Software 54
Professional Standards 54
When to Stop Investigating 57
Chapter 4 Searching for Fraud 59
Analytical Review 60
Key Financial Ratios 61
Write-offs, Adjustments, and Miscellaneous 65
Manual Disbursements 67
What about Financial Statement Audits? 68
Looking for Fraud in Little Things 70
Chapter 5 Sources of Information 73
Who Acquires Information 73
Internal Records 75
Private Records 77
Public Records 82
The Internet and Search Engines 91
Chapter 6 Investigative Techniques 93
Corporate Background Checks 94
Individual Background Checks 94
Searching for Friends, Family, and Associates 95
Surveillance 96
Digital Data Analysis 97
Computer Forensics 99
Interviewing Witnesses and Suspects 99
Confirmation with Customers and Vendors 104
Creativity and the Fraud Investigator 106
Chapter 7 Investigation of Asset Misappropriation Schemes 107
Cash Receipts Schemes 108
Disbursement Schemes 113
Noncash Schemes 129
Chapter 8 Investigation of Financial Statement Fraud 133
Revenue Overstatement 134
Channel Stuffing 137
Round-Tripping 138
Asset Overstatement 139
Liability and Expense Understatement 143
Reserve Manipulation 147
Misrepresentation or Omission of Information 148
Improper Recording of Mergers and Acquisitions 149
Off-Balance-Sheet Items 150
Accounting Involves Judgment and Estimates 151
Earnings Management 152
Note 152
Chapter 9 Investigation of Corruption Schemes 153
Bribes 154
Kickbacks 155
Extortion and Conflict of Interest 156
Related-Party Transactions 156
Money Laundering 158
Foreign Corrupt Practices Act (FCPA) 160
Prevention and Detection 161
Note 162
Chapter 10 Investigation of External Fraud Schemes 163
Corporate Espionage 163
Investment Schemes 165
Pyramid or Ponzi Schemes 167
Securities Fraud 169
Hidden Income or Assets 170
Insurance Fraud 173
Bankruptcy Fraud 174
Note 175
Chapter 11 Reporting and Litigation 177
Stick to the Facts 178
Keep It Simple 178
Background Information 179
Investigation Procedures 181
Opinions 182
Attachments 183
Draft Reports 184
Unfavorable Opinions 185
Follow-up to the Fraud Investigator’s Work 186
Being an Expert Witness 189
Preparing for Testimony 189
Deposition Testimony 191
Trial Testimony 194
Note 195
Chapter 12 Other Issues 197
Moving Forward as a Company 197
Preventing Future Frauds 199
Marketing a Fraud Investigation Practice 201
Competing with Other Firms 202
Conducting a Global Investigation 203
Professional Liability Issues 204
Reducing Fraud with Investigations 206
Note 207
Appendix 209
Index 215
