Questions to Ask at the Start of a Fraud Investigation


In order to properly plan a fraud investigation, a fraud examiner needs to be able to ask good questions that extract valuable information about what needs to be done. The specific questions vary with each investigation, but the following are some basic areas that an investigator should strongly consider exploring.

What happened?

  • How did this situation come to light?
  • Who was involved with the discovery?
  • Who is aware that a potential fraud occurred?


  • What evidence has already been found?
  • How conclusive is it?
  • Are there multiple pieces of evidence?
  • Might there be other easily discoverable pieces of evidence?
  • How much does the evidence tell us about the methods of fraud and the parties involved?

Continue reading

Top Ways Fraud is Detected in Companies


Tracy Coenen talks to a group of CPAs about the top ways fraud is detected within companies. The Association of Certified Fraud Examiners (ACFE) conducts a survey of its members every two years. It consistently finds that tips from employees, customers, and vendors most commonly uncover fraud within companies.

But after that, management review of financial statements and account balances and reconciliations is a very effective technique. The internal audit function can also be very effective at helping to uncover fraud at companies. Sadly, many internal frauds are also uncovered by accident.

Fraud Investigation for Small Firms


Minnesota Society of CPAs Footnote Magazine
February/March 2017

The growth in forensic accounting and fraud investigation specialties has led accounting firms of all sizes to expand their practices to these areas. Experts agree that this practice area will continue to grow for the foreseeable future.

Is it as easy as it sounds to add forensic accounting to your firm’s competencies? Traditional audit staff may have excellent foundational knowledge that could be applied to fraud investigations, but offering consistent and reliable services to clients in the area of forensic accounting will take some work.

Here are areas your firm — especially if it’s small — should focus.

Service focus

It is a simple decision to start providing accounting services. The next step is deciding which specific services to provide. Many types of engagements can fall under the forensic accounting umbrella, so it is important to develop a focus. Continue reading

Conducting Internal Fraud Investigations


Fire drill training in grade school always included the mantra, “Stop, drop and roll.” This was the prescribed course of action if you were on fire. Professionals sometimes refer to tragedies in companies as fire drills. When a major internal theft occurs, it is akin to catching on fire, and needs to be met with swift action.

Where there is smoke, there might be fire. There are numerous potential red flags that might point to internal theft – things like missing or altered documentation, numerous unexplained accounting entries, excessive customer complaints about account balances, and disregard or override of procedures.

While one red flag alone does not necessarily mean a fraud has occurred, the presence of numerous red flags increases the suspicion of internal fraud. It is important to quickly identify the red flags, determine who might be responsible, and take quick action to extinguish the problem. Continue reading

Sources of Information in Fraud Investigations


Written by Tracy L. Coenen, CPA, CFF

Wisconsin Law Journal

When you think of information in an internal fraud investigation, you most likely think of things like a company’s internal records. These include accounting documents, personnel files, payroll records, accounting system information, and internal memos. While these items are key parts of an internal investigation, they are not the only tools a fraud investigator may use.

Most people don’t think about all the other records available to assist in an investigation. There are many public and non-public records that can aid the investigator in determining who was involved, where the money went, and what the motive for the fraud may have been. These records are invaluable to the investigator, and often play a key role in determining the details of a fraud. Continue reading

Planning and Conducting Corporate Fraud Investigations


The unthinkable has happened. We have good employees. Our people are honest. They don’t steal from us. They’re like family. We trust them. So it goes when a company discovers a fraud from within.

Then what happens?

After the initial shock wears off, it’s time to start investigating the situation. The company must know who did it, how the fraud was committed, and what controls can be put in place to stop fraud from happening again. This is all accomplished with an effective fraud investigation. Continue reading

Internal Investigations and the Use of Auditors and Accountants


When whistleblowers report potential ethics violations within companies, the first step the company must take is an internal investigation. The best internal investigations are independent and led by outside counsel, for a variety of reasons.

But what about the part of the investigation that involves analyzing accounting records, financial statements, and SEC filings? Management often wants to use internal finance professionals or their outside auditors for this task. It seems to make sense to utilize the expertise of people who are already familiar with the company’s finances. Continue reading

Patrick Byrne: Do As I Say, Not As I Do.


Patrick Byrne, CEO of (NASDAQ:OSTK) has been on a crusade against naked short selling for a couple of years (or more?). It is currently his position that naked short selling is bad. He confirms his belief in this statement on

Patrick Byrne is waging a fight with Wall Street over naked short selling. He believes that, through the practice of naked shorting, Wall Street is cheating Main Street America and destroying small companies for a profit. Byrne feels that the SEC is failing to protect retail investors and small companies because it has been captured by Wall Street, and that the New York financial press is similarly co-opted. Byrne believes that the SEC’s efforts to eliminate this abusive practice are falling short, not simply for Overstock (which has itself been on the Regulation SHO Threshold list for over two years), but in a way that creates the possibility of systemic risk for our financial world.

So naked short selling is an “abusive practice”? (Notice that there are no qualifiers in the statement above. It simply says that naked shorting is bad.) Continue reading

Airlines likely to increase fares due to “congestion fees”


Last week I posted on WalletPop about a proposed “congestion fee” that airlines would have to pay at airports. Right now they pay a landing fee based upon the weight of the plane. With the congestion fee, they would instead pay a fee based upon the day of week, time of day, and congestion at the airport during landing. Simply put: During peak travel days and times, airlines will pay more for each plane they land.

Several comments have been left on the post, with readers generally arguing about why airlines charge so much to fly, why they’re not profitable, and what the lowly consumer can do about it.

One reader left this excellent comment that I think does a marvelous job of summarizing the problem with the U.S. airline industry:

Two issues were noted in previous posts:
(1) Airlines treating us like cattle because it maximizes their profits. (2) Airline costs are high because of labor costs.

Let’s address these problems – unions exist because labor organized to fight management abuses – many of them salary related. (And we all know cases of rotten management somewhere!) Businesses (in theory) exist to return profits to stockholders. Simplify the equation to a single boss and a single worker – a boss offers a salary for a given unit of work, and a worker offers work for a given unit of salary. If the worker asks for too much, the boss hires a different worker. If the boss offers too little, then the worker tries to find work elsewhere. Looking at the problem from the point of a single boss and worker, it’s simple….

But we are not looking at a simple equation. Workers are expecting pay scales based on airlines past successes. Airlines have costs imposed on them due to past regulations and contracts which no longer are sustainable. Government has not defined the markets in a way that natural forces check and balance both airline management and labor. Nor has it managed resources well (landing slots, transport to airports, etc.). Couple this with an American culture that rewards false economies (such as buying things at the lowest price without regard to quality), and we’ve seen air travel go to blazes.

How should we address this in a way to save real money, and yet use markets to our advantage? For me, it’s choosing not to use airlines for shorter trips. It also includes choosing my airports carefully (and I can do so in the NYC region), which may include driving out of my way to avoid airports with excessive congestion. If we start acting rationally, both airlines and their labor will start doing the same. And we may see realistic, sustainable, reasonably inexpensive fares with quality service return…..

I couldn’t have said it better. The airlines have a cost structure that they can’t support and real customer service is practically non-existent. How long can the airlines tread water?

I think a large-scale overhaul of the industry is necessary, but it will inflict great pain on the consumers while it happens. It may even require the airlines to “start over”… essentially completely overhauling their process and their sales force. While they do that, I expect that flights will be in short supply and prices will be very high.