Chapter 7: Engagement Process Flashcards
Fraud Investigation Process
involves systematically gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.
Fraud Investigation Process Steps:
- The Engagement Process
- The Evidence Collection Process
- The Reporting Process
- The Loss Recovery Process
The Engagement Process
the series of steps that begins with the investigator’s first contact with the case and concludes with a complete agreement regarding the fraud investigation
The Evidence Collection Process
the various steps in which evidence in support of the objectives and scope of the investigation is collected.
(1) analyze data, (2) create hypothesis regarding the possible fraud, (3) test the hypothesis, and then (4) refine and amend the hypothesis.
Four Types of Evidence
Physical evidence, document evidence, observation evidence, interview evidence
Interview Order
The initial interviews are conducted with the most remote suspects. Prime suspect being the last person interviewed.
The Fraud Engagement Process
The fraud engagement process begins with the investigator’s first contact with the case and ends with a complete agreement regarding the services the fraud investigator will provide.
The Incident Report
Includes the initial information used to justify the investigation
What the Incident Report can be used for?
- The initial information should be included in a unified case file
- The incident report can serve as probable cause for law enforcement
- The incident report can provide proof the the suspect is not being singled out because of illegal discrimination or in violation of collective bargaining rights
Unified case file
the file should document all activities related to the investigation.
The file serves three main purposes:
(1) to provide needed organization for administering and managing the case as it unfolds, (2) to document the investigation for future review and use in optimizing the fraud management system, (3) to be a case information an entire investigation by tipping off suspects.
The Initial Notifications
- Routine incident reports may be routed to a predetermined department
- Non-routine reports may be routed to the legal department or outside council
- It might be necessary to notify an insurance provider or regulatory body
- The initial notification and incident evaluation must be kept as secret as possible, to avoid compromising a possible investigation
- Temptation must be resisted to confront suspects at this point
Consider Legal Issues
- Consider rights of workers or other suspects
- Consider the possibility of conducting the investigation under attorney-client privilege
- Evaluate the evidence and consider whether there is sufficient legal justification to fire a worker or place a worker on administrative leave
- Consider the rights of investigating employers
- Consider the extent to which a government entity might be involved in the investigation
- Consider reporting obligations
Evaluate Loss Mitigation and Recovery Considerations
- Immediate Loss mitigation options: (1) immediately fire the employee, (2) change the employee’s job responsibilities, (3) place the employee on administrative leave (with or without pay), or (4) permit the employee to continue in her current position, possibly continuing the fraud, thus giving the investigator the possibility of catching her in the act.
- Insurance recovery
- Recovery through litigation
- The objectives, scope, and costs of the investigation
Reverse Proof
in order to prove that an apparent fraud has occurred, it is necessary to prove that the apparent fraud cannot be explained by any means except fraud.
Objectives and scope of an investigation
- Stop the fraud from continuing.
- Identify the loss for insurance purposes.
- Identify the loss for tax purposes.
- Make an example of a fraudster.
- Minimize any embarrassing disclosures in the press.
- Discover weaknesses in the internal control system.
