Expert Fraud Investigation

Preface 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