Conducting Investigations Flashcards

A fraud examiner is investigating a complex kickback scheme allegedly involving a purchasing manager, a vendor, and a junior accounts payable clerk who may have unknowingly processed fraudulent invoices. What is the generally recommended order for interviewing these individuals?

Answer: Accounts Payable Clerk, then the Vendor, and finally the Purchasing Manager.

The proper order for interviews is to start with individuals who are least likely to be involved and move toward those who are most culpable. This involves interviewing neutral third-party witnesses first, followed by parties who may have some knowledge but are not central to the scheme, and finally, interviewing the primary suspect(s) last. In this case, the A/P clerk is a neutral witness, the vendor is a potentially corroborating party or co-conspirator, and the purchasing manager is the primary target.

A Certified Fraud Examiner (CFE) obtains a series of original invoices during an investigation. To ensure the invoices are admissible as evidence in a legal proceeding, what is the MOST critical process the CFE must maintain from the moment of collection?

Answer: Chain of custody

The chain of custody is the chronological documentation showing the seizure, custody, control, transfer, analysis, and disposition of evidence. Maintaining a proper chain of custody is paramount to proving the integrity of the evidence and is critical for its admissibility in court. A break in the chain can lead to the evidence being challenged and potentially excluded.

During an admission-seeking interview with a suspect, the fraud examiner asks, "It must have been difficult to support your family on your salary, wasn't it?" This question is an example of which type of admission-seeking technique?

Answer: Offering rationalization

This technique is known as offering rationalization. The examiner suggests a morally justifiable reason for the suspect's actions, making it easier for them to confess by framing the act as understandable under the circumstances. It is a key step in lowering a suspect's resistance to confessing.

A CFE is hired by a private corporation to investigate suspected inventory theft. The CFE searches a suspect's unlocked personal locker on company property and discovers stolen goods. In a subsequent criminal prosecution, the suspect's attorney moves to suppress the evidence, claiming an illegal search. How is a court most likely to rule?

Answer: Admit the evidence because the CFE is a private party not subject to Fourth Amendment restrictions.

The U.S. Constitution's Fourth Amendment protects individuals from unreasonable searches and seizures by government actors. This protection does not extend to searches conducted by private individuals or entities, such as a CFE working for a private corporation, unless they are acting as an agent of the government. Therefore, the evidence obtained by the CFE would likely be admissible.

A fraud examination should only be initiated when there is a sufficient basis to believe a fraud may have occurred. This basis is known as:

Answer: Predication

Predication is the totality of circumstances that would lead a reasonable, professionally trained, and prudent individual to believe that a fraud has occurred, is occurring, or will occur. Fraud examinations should not be commenced without proper predication.

Which of the following is a primary objective of a formal fraud examination report?

Answer: To provide recommendations for improving internal controls to prevent future fraud.

A key goal of a fraud examination report is to help the organization mitigate future losses. This includes providing recommendations to strengthen internal controls based on the findings of the investigation. The report should state factual findings, not legal opinions of guilt (A), it must be objective and include all relevant findings (D), and it may be used in legal proceedings, not just for management (C).