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Welcome to Unit 3 . Introduction to Fraud Examination. DEBATE. Discount Plus Company has been concerned for some time about its cash flows. Since the company began five years ago, Discount’s business has increased steadily, yet cash flows have remained virtually the

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welcome to unit 3

Welcome to Unit 3

Introduction to Fraud Examination


Discount Plus Company has been concerned for some

time about its cash flows. Since the company began

five years ago, Discount’s business has increased

steadily, yet cash flows have remained virtually the

same every year. You have been hired by Discount

Plus to detect possible fraud within the company.

Discount’s management is almost certain that one of

its accountants is embezzling cash and has informed

you that it has already begun installing surveillance

cameras in possible “problem areas.” In addition,

management is considering some form of covert

operation to detect the fraud.

a. What problems or dilemmas is Discount’s management facing

by installing cameras and implementing a

covert (undercover) operation?

b. What privacy issues are there to consider?

cameras in the workplace
Cameras In the Workplace
  • Form of Electronic Surveillance;
  • Are normally legal as long as they do not invade a person’s reasonable expectation of privacy under the Fourth Amendment to the Constitution, which protects the right of a person against unreasonable searches;
  • Must be carefully regulated with strict protocol in place for their use;
  • Cannot be used for fishing expeditions
when are undercover operations used to detect fraud
When Are Undercover Operations Used to Detect Fraud
  • When large scale fraud is suspected;
  • When other forms of fraud investigation have failed;
  • A need for close monitoring of activity;
  • Fraud has continued for a lengthy period of time;
  • Laws and ethics are strictly adhered to;
  • Law enforcement is notified if fraud is detected
you are the investigator
You are the Investigator
  • Where do the cameras go?
  • Are all the cameras real or can we install mock cameras?
  • Are cameras visible to the accounting department workers?
  • Are the recordings preserved?
  • Do you have a control area?
  • Does camera have an audio feature?
quick reminder 4 th amendment
Quick Reminder / 4th Amendment
  • Protects individual from illegal search and seizure;

Applies to governmental agencies against an individual;

How does this fit in when we tackle the issue of private industry;

Do workers have rights? Let’s explore

rights and concerns of privacy
Rights and Concerns of Privacy
  • 1. We have a desire to control personal information about ourselves and limit it’s access to others.
  • 2. Whatever it is we want to keep private, we want to further protect it from judgment of others, monitoring or scrutiny of others.
  • 3. We want to decide for ourselves what we keep private and free of influence.
balancing privacy versus corporate need to protect against fraud
Balancing Privacy versus Corporate Need to Protect Against Fraud
  • Back at Discount Plus Company (only 5 years old) we have a lead suspect in the accounting department. Our accountant suspected of embezzling is still working unbeknownst of the ongoing investigation.
  • Does he have a right to privacy? Yes and No. Discussion
  • General rule: Employers and companies have a right to protect their business interests and the company against fraudulent and illegal activity.
  • Who owns the accounting records? Discuss
  • Does the company have a right to disseminate their own records if it incriminates the employee?
as an investigator you have discovered the fraud
As an Investigator You Have Discovered the Fraud
  • Your suspect, through your investigation with camera work, employee interviews, internal audits, internal review of records, you have confirmed fraud and embezzlement.
  • Your next step:
    • Report to your supervisor
    • Request Interview
    • Suggest polygraph…..
polygraph lie detectors
Polygraph / Lie Detectors
  • General Rule – Employer cannot force employee to take polygraph;
  • Informed Consent allows an employee to know what they are submitting to an voluntarily agree to such testing.
  • Many employees see these as a violation of privacy rights?
other covert operations
Other Covert Operations
  • Undercover security
  • Record detection
  • Computer investigation (is this computer hacking?)
  • Use of co-workers to detect fraud

Do you think that if the investigation has some potential illegal aspects, and/or breaches an employee’s right to privacy, it is justified in detecting fraud?