Private and public records offer a wealth of information to fraud investigators
On Balance – The Magazine for Wisconsin CPAs
Without information, a fraud investigation goes nowhere. There are abundant sources of information on people and companies, and as the Internet continues to expand, so does the accessibility of the information.
Doing a thorough fraud investigation often goes beyond just analyzing documents produced by the client. The best forensic accountants and fraud investigators are able to find additional sources of information to help crack the case. There is plenty of art to finding clues in an investigation, and it all starts with knowing what to look for and where to find it.
Fraud investigations rely heavily on the availability of private records. In the typical business fraud case, helpful internal records could include financial statements, tax returns, sales and receivable records, expense documentation, proof of payments to vendors, or other information from a company’s accounting system. Continue reading
A few months ago, I was asked to beta test PerfectAudit software by Ocrolus.The software has used other names such as AuditGenius (auditgenius.com now forwards to perfectaudit.com) and Medicaid Genius. Promotional emails are being sent from the domain perfectauditpreview.com, which forwards to perfectaudit.com. The company is currently marketing to service providers in the divorce arena, and they say that firms such as Met Life, RGL, and Duff & Phelps are using the site for divorce cases.
The website bills Perfect Audit as a “game changer” for those who depend on data from bank statements and credit card statements. It’s a great concept! PerfectAudit will use OCR technology to pull the data off the statements, put the data into a searchable database, and you have access to data that is guaranteed to be 100% accurate.
But the product is terrible and doesn’t even come close to doing what they say it does. Here is what they say it does: Continue reading
One of the last places you’d expect to find fraud is in a law practice. Like accounting, the practice of law is a profession in which ethics are of utmost importance. Accountants and lawyers are often too trusting of their fellow professionals, and therefore leave themselves open to the risks of fraud.
The issue of fraud isn’t limited to a law practice of a particular size. Larger firms experience fraud because there are so many people generating so many documents, that it’s easy for a fraud to get lost in the shuffle. Small firms become victims of fraud primarily because management puts too much trust in one or two employees and fails to properly supervise them.
According to the Association of Certified Fraud Examiners, the average workplace fraud costs $175,000. What would a theft of that size mean for your practice? Could your law office sustain such a fraud? The average workplace fraud goes on for two years before it is discovered. Could that be happening in your law firm? Continue reading
What is at the heart of almost every securities case, whether the case is pursued by the government or a private party? It is a trail of money. The difficulty in prosecuting or defending a securities case is the fact that there is voluminous financial data that must be culled, analyzed, and presented in a way that proves the case.
For the last three decades, securities and financial fraud cases have been evaluated by forensic accountants using manual processes. The financial investigators compared accounting data with source documents, ultimately trying to prove the source and use of funds.
This is complicated, especially in large cases (which are the ones the government most often cares about), because there can be a multitude of involved people, entities, bank accounts, and brokerage accounts. The process of understanding and organizing the flow of funds is complex, and it can take months or even years before plaintiffs or defendants know exactly what happened to the money.
Cutting-Edge Forensic Accounting
The world of forensic accounting is moving in a new direction, however. Fraud investigators are slowly beginning to use technology to analyze large volumes of financial data much faster, more efficiently, and more accurately than they have been able to do using traditional investigative techniques. The shift has been moving at a snail’s pace, however, but this provides significant opportunities for parties to litigation who are willing to embrace change and harness the power of cutting-edge technology. Continue reading
Most attorneys don’t think about the issue of fraud in companies until a client (or their law firm) is hit by employee theft. It’s simply not one of those issues that is taken too seriously unless huge risks are identified or a crime has already been committed. Until then, fraud is just another “issue” that probably isn’t as pressing as other legal and operation matters.
Once a sizable fraud is committed and detected, everyone is in fire drill mode to get to the bottom of the issue. Everyone wants to find out who stole the money, how it was done, and how in the world someone could get away with this at “our” company! While this reactive attitude is very common, it’s not the best for the long-term health of a company.
Maybe the issue of fraud in companies is ignored because it’s not something that attorneys see everyday. Maybe it’s because issues like profitability and closing new deals are so much more important to the viability of a business. Yet fraud cannot be overlooked, as companies put their livelihood at risk when they do not take steps to deter and detect fraud. Continue reading
Take a look at the frauds in the news, and most of them are huge. Huge frauds make huge news.
As investors and the general public demand more transparency from companies and executives, the issue of fraud is being talked about more than ever. Everywhere we turn, the word fraud is rearing its ugly head.
While fraud is a good thing if you make a living as a fraud investigator, it’s not so good for business and profits. The impact goes beyond dollars and cents, as fraud can negatively affect employee morale, employee work ethic, investor confidence, and customer loyalty.
The sad truth is that almost all frauds started small. They had to start somewhere before they grew to those headline-grabbing proportions. Think about Enron, everyone’s favorite example when discussing corporate fraud. Continue reading
A competent expert witness is vital to cases involving economic damages and other financial calculations. However, the expert must be much more than just a mathematician, market analyst, economic guru or forensic accountant. The job of the expert is far from over once the facts are analyzed and the calculations are completed.
Traditional accounting and finance skills are not enough when it comes to litigation. A financial expert witness must qualify as an expert in court and must convey the findings to non-accountants on paper and on the witness stand.
Probably one of the most important yet difficult parts of being a financial expert is relaying the findings without using accounting lingo. Accountants often forget that not everyone speaks their language. They are not used to explaining their findings to people outside the finance environment. Creating a meaningful understanding for readers and listeners can be an art form unto itself, and the best financial expert witnesses do it easily. Continue reading
It’s easy to assume that upper-level executives in companies with fraud scandals were always bad people. By assuming that they were inherently bad people, we don’t have to confront the issues related to trusting people who seemed trustworthy. We don’t have to explore the idea that people can turn bad or choose a bad path or give in to greed.
Yet the fact remains that many executives who committed fraud were at one time considered rising stars with good values. If it was recognized that their ethics were a little lower than preferred, some were still promoted because those in charge believed the results were more important than the methods.
Many may look at executives like Kenneth Lay and Jeffrey Skilling of Enron infamy, and believe that they were bad people long before Enron. The role of the villain is sometimes easy to fill when you have someone like Tyco’s Dennis Kozlowski, who was busy buying unusually lavish items with company funds. Certain people just make good villains in our minds. Continue reading
Employee fraud always has a “cause.” The “cause” is the motive, desire, or need that is being filled by the theft from one’s employer. A need doesn’t have to be a true need in order for fraud to occur, but can be a perceived need on the part of the thief. One common impetus for fraud is an addiction. Addictions are expensive, and the money has to come from somewhere. The employer is sometimes the logical answer to the problem.
But addictions aren’t limited to drugs, alcohol, and similar vices. They can and do include gambling, and the news is full of incidents of fraud with a gambling connection. A known addiction can be a red flag of fraud, meaning that the addicted employee is statistically more likely to commit fraud and therefore usually merits further monitoring.
Defining Gambling Addiction
People didn’t talk much about gambling addictions in the old days. They may not have even realized it existed. But just like a chemical addiction such as alcohol or drugs, it has now been found that gambling can cause changes in the brain that can become addictive. Continue reading
When there are suspicions of hidden income or secret investments or bank accounts, an analysis of known bank accounts can reveal helpful details. Tracy Coenen explains how bank statements and credit card statements can be used by a forensic accountant in a divorce case.