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Fraud Investigation
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  1. Fraud Investigation Fraud Examination Actg 537

  2. Conversion Concealment Theft The CFE gathers evidence ofthe ELEMENTS of Fraud Elements Of Fraud Accounting 537

  3. Investigation • Chapter 7 – Theft • Chapter 8 – Concealment • Chapter 9 – Conversion • Chapter 10 – Inquiry Methods Accounting 537

  4. When would we actually begin a Fraud Examination? “Circumstances, Taken as a Whole, that Leads a Reasonable Prudent Professional to Believe a Fraud is Occurring, or Has Occurred, or Will Occur” When there is PREDICATION of fraud Accounting 537

  5. What Are the Considerations in Deciding to Investigate? • Perceived strength of the predication • Perceived cost of the investigation • Exposure or amount that could have been taken • Signal that investigating or not investigating will send to others in the organization • Risks of investigating or not investigating • Public exposure or loss of reputation from investigating or not investigating • Nature of the possible fraud Accounting 537

  6. Interview Suspect Accounting 537

  7. 2 1 4 3 The CFE’s Evidence Square Testimonial Evidence Documentary Evidence Physical Evidence Personal Observation Accounting 537

  8. 2 1 4 3 The CFE’s Evidence Square Testimonial Documentary Gathered from Individuals, Includes Interviewing, Interrogation & Honesty Tests Gathered from Papers, Computers & Written & Printed Sources Personal Observation Fingerprints, Weapons, Stolen Property Often Involves Forensic Analysis Collected by the Investigator, includes Invigilation, Surveillance and Covert Operations Physical Accounting 537

  9. Evidence Gathering • Surveillance & Undercover Operations • Invigilation • Physical Evidence • Documents – paper and electronic • Chain of custody rules • Access – subpoena, search warrant, voluntary • Forgery or alteration Accounting 537

  10. Video Making Crime Pay: Locating Hidden Assets

  11. Fraud Investigation Fraud Examination Actg 537

  12. Government Private Sources Online Databases • Federal • State • Local • Utility Records • Previous Acquaintances • Trash Cover • Credit Agencies • Financial Institutions • Subscription • Per-Search Fee • Free Sources of Information Public Records Internet Searches • Google • Altavista • Etc. Accounting 537

  13. Net Worth Calculation • Assets – Liabilities = Net Worth • Net Worth – Prior Year’s Net Worth = Net Worth Increase • Net Worth Increase + Living Expenses = Income • Income – Funds from Known Sources = Funds from Unknown Sources Accounting 537

  14. How can information be obtained from a source • Pencil & Paper Test • Graphology • Voice Stress Analysis & Polygraphs Accounting 537

  15. Interviewing • Most Common Technique • Question & Answer Format • Structured Has a Purpose • Low Cost • Effective if Done Well Accounting 537

  16. Interviews Obtain • Information that Establishes Essential Elements of the Crime • Leads for Developing the Case or Gathering Other Evidence • Cooperation of Witnesses & Victims • Information on Personal Background & Motives of Witnesses Accounting 537

  17. About The Offense Legal Nature Date, Time, Place Manner in which Crime was Committed Possible Motives All Available Evidence About The Interviewee Personal Background Age Education Marital Status Attitude Toward Investigation What information do you need to plan the interview? Accounting 537

  18. Interviewer’s Demeanor • Sit Fairly Close, Stay Seated • Don’t Talk Down • Be Sensitive & Business Like • Do Not Dominate Interview • Do Not Use Jargon • Do Not Use Paper & Pencil, Keep Out of Sight • Express Sincere Appreciation Accounting 537

  19. Interview Language • Short Questions, Stay on One Topic • Seek Narrative Answers • No Leading Questions • Get the Facts for Opinions • Keep Interviewees on Track • Stay on Topic • Concentrate on Answers Accounting 537

  20. List 5 Types of Questions • Introductory • Information • Closing • Assessment • Admission Seeking Accounting 537

  21. What is the reaction sequence? • Denial – Acts as a psychological buffer, subject doesn’t acknowledge stress • Anger – All directions, result of frustration • Rationalization or Bargaining – Justify dishonest actions, “A mistake was made.” • Depression – Sad and withdrawn • Acceptance – Realistic understanding of what happened, resolve & move on, best time for interviews Accounting 537

  22. Why is the reaction sequence important to a fraud examiner? • The suspect may go through this sequence in the course of an interview. • Other people in the organization may go through this sequence in the course of the investigation. • Being aware of these emotional stages will help the fraud examiner to identify them and take the more productive actions. Accounting 537

  23. Accounting 537

  24. End Fraud Investigation Fraud Examination Actg 537