INQUIRY METHODS AND FRAUD REPORTS

Chapter 10

INQUIRY METHODS AND FRAUD REPORTS

Short Cases

Case 1

Judd Jim
1. Denial Disbelief; lets it go Dumbfounded; denial
2. Anger Confrontation “What right …”
3. Rationalization Jim slipped up Just doing his job
4. Depression Feels sad “The gig is up”
5. Acceptance Friends with Jim Admits guilt

Case 2

Because you may already have enough evidence to support your claims against Damon, the first thing you should do is contact the police and present to them the results of your investigation and audits. You might prearrange a meeting with Damon and record the discussion. You may want to have police officers watch the discussion live. If you decide not to have police involvement, Damon could deny the conversation or say that you fabricated it. It is important to plan the interview carefully.

1. Introductory Questions: Because you already know Damon through your father-in-law’s work, Damon should not be alerted by your request for a private talk. Once the discussion has started, you could make small talk initially but should keep it brief.

2. Informational Questions: You could openly bring up the topic of how cheap your father-in-law is and how you wish he would pay more. After a comment like, “I bet it wouldn’t be hard to find a little extra money laying around the office,” you could ask Damon if he can think of any ideas of how to defraud the company. You could ask other questions to gather more information, but if Damon is not willing to open up you could question him directly about the fraud.

3. Closing Questions: To verify the facts he had told you, it is important to ask closing questions. If you want to close the conversation, you could ask, “Do you know anyone else I could talk to? Is there anything else I have forgotten to ask you that would be relevant? If I need to talk to you again, would it be okay?”

4. Assessment Questions: If Damon just does not seem to be opening up to any of your questions, you could specifically bring up some of the things that Damon has done. You could say that you happened to see him commit fraud and you were just wondering how he happened to pull it off without getting caught. While asking about the frauds, you should bring up each one specifically and watch to try to determine if Damon is telling the truth.

5. Admission: Seeking Questions: If Damon opens up and feels comfortable with you, you can ask him if he has ever done the things he described or talked about previously. You will likely need to admit to Damon that you have been tracking his frauds and that he has taken a substantial amount of money. You might tell him that you wanted to talk to him directly rather than talking to your father-in-law because you are hopeful that you will find an acceptable way to fix things. You should ask direct questions, encouraging Damon to confess.

Before the interview, you should have prepared a written confession for Damon to sign and it should be accessible in case he admits to what he has done. You might have purposely misprinted the amount taken to read $70,000 so that Damon will notice the difference, change it to $50,000, and initial it. You should be aware, however, that most perpetrators don’t keep track of how much they steal and they always believe it is less than they really took. Putting too large a number for the theft could scare him into not signing.

Case 7

1. A good place to start would be checking personnel records and company records to gather information about Jane. Next, you could examine financial statement accounts to verify that there is erratic activity. During hours when no one is at work, you could examine debit and credit documents to ascertain their purpose. Interviewing Jane’s coworkers and subordinates might come next. Gathering public information about Jane’s spending habits and performing a net worth analysis might be helpful. Finally, you would interview Jane, especially if you have sufficient evidence to confront her and obtain a confession. Before you proceed too far, you should obtain the CEO’s and legal counsel’s permissions for the investigation.

2. No. There are several reasons why you would not interview Jane first. First, you would not want to alert Jane to the fact that you are investigating because you would not want her to have a chance to conceal the embezzlement. Second, you would not want to cause any undue hardship or emotional stress for her department or create future legal problems for the company. Finally, in order to eventually seek a confession from Jane, you would want to have as much evidence as possible to convince her that she cannot hide her fraud any longer.

3. You would want to have as much evidence as possible when you interviewed her and you would perform all other investigative procedures before the interview. You would explain to Jane that she should feel free to leave at any time but that you have important information to present to her. You would conduct the interview at a neutral location and make sure that it was a surprise to Jane. You would state the allegations clearly and indicate that Jane was the primary suspect. You would use a direct confrontational style while using statements of sympathy to seek a confession from Jane.
Case 8

1. John went through the predictable sequence of five reactions: denial, anger, rationalization, depression, and acceptance.

a. Denial. When John first spoke of the fraud, he mentioned how much he respected his boss. John seemed to screen out reality. He did not respond well to questions, and he seemed emotionally distant from the situation.

b. Anger. Later, John became angry. His anger was displayed by his comments about his boss. He also displaced some anger toward his innocent friend.

c. Rationalization. John tried to justify why his boss committed the fraud. He cited his boss’s family life, work troubles, and recent traumatic events. John even made the comment that he might have done the same thing.

d. Depression. John displayed depression in several ways. He blamed himself for what had happened and felt a sense of embarrassment for what happened before his eyes.

e. Acceptance. John finally accepted the fact that the fraud happened. He acknowledged that it occurred and volunteered his assistance with the investigation. At this stage, John wanted to help resolve the situation and move on.

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