An investigative policy is an important tool to help manage the process of initiating a corporate fraud investigation. Doing so will help bring uniformity to the evaluation of fraud allegations, and it will help guide management through the decision making relative to the claims.
The first step in creating an investigative policy is drafting a list of red flags that might cause management to investigate. For example, a credible tip from an employee or vendor would be an important red flag which needs follow up.
The policy should help management determine what “credible” means in these situations. Does the tip come from someone who is usually reliable and honest? Does the tip make sense in light of known facts about the employees and the company? Are there sufficient details about the allegations so as to lend credibility to them? Was any credible evidence submitted with the tip?