In a corporate fraud investigation, the most abundant source of information about the fraud will likely come from internal records of the company. Remember, of course, that the internal records will be not only be paper records, but will be digital as well. In fact, the volume of digital records will likely be greater than the paper records, as companies reduce the amount of paper in favor of computerized records.
Typical internal records requested by a fraud investigator include accounting system data, financial statements, tax returns, sales and accounts receivable records, expense documentation, and proof of payments to vendors. The financial data requested often starts with broader requests (financial statements and tax returns) and moves toward more detailed requests (account detail, invoices, etc.). This is because the broader requests are generally used to get background information about the company and its finances. As the investigation progresses, the investigator will dig further into the specifics, which will require the detailed documentation.
The list of things that a fraud investigator could request from the client is endless, so it is all going to depend on the facts of the particular case. A thorough understanding of accounting is beneficial here, because there is so much to be learned from the client’s accounting records, if only the investigator knows what to ask for.
Find contacts within the company who will be able to help you get the documents you need. Management should be able to provide a list of responsible parties for the various areas of the company, and they should tell you who will have the greatest familiarity with the documentation. The client should be willing to provide you with complete access to any and all employees needed to complete your investigation. This does not mean that the fraud investigator will monopolize the time of employees and put them to work on lengthy tasks related to the investigation. It does mean that the client must provide reasonable access to the employees who will need to answer questions and gather documentation. If more significant assistance from employees is needed, the client should be willing to work that out with the fraud investigator so that the investigation goals can be accomplished, but the company’s normal operations can continue.
The key is to work with the most knowledgeable employees who can help you access the information you need in the most efficient way. Sometimes that literally involves sitting together and walking through reports or computer menus to determine what will provide the information the fraud investigation team needs. Accounting system reports offering the information the investigator needs may be found on a trial-and-error basis, as the right reports are not always the ones used by personnel on a daily basis.
Investigations will not always rely heavily on internal records. In some instances, a company may not have internal records to aid in your investigation. A fire or flood may have destroyed the records the forensic accountant is being called in to reconstruct. A malicious employee may have destroyed paper records or computerized data. The company may have an archaic or unreliable system, from which the internal records may be of limited usefulness.
It is clear that internal accounting records and other operational data may play a major role in a fraud investigation. But these records are by no means exhaustive of what a fraud investigator may use during the case.