Chapter 7: Engagement Process

Question 1

Fraud Investigation Process

Answer 1

involves systematically gathering and reviewing evidence for the purpose of documenting the presence or absence of fraud.

Question 2

Fraud Investigation Process Steps:

Answer 2

1. The Engagement Process
2. The Evidence Collection Process
3. The Reporting Process
4. The Loss Recovery Process

Question 3

The Engagement Process

Answer 3

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

Question 4

The Evidence Collection Process

Answer 4

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.

Question 5

Four Types of Evidence

Answer 5

Physical evidence, document evidence, observation evidence, interview evidence

Question 6

Interview Order

Answer 6

The initial interviews are conducted with the most remote suspects. Prime suspect being the last person interviewed.

Question 7

The Fraud Engagement Process

Answer 7

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.

Question 8

The Incident Report

Answer 8

Includes the initial information used to justify the investigation

Question 9

What the Incident Report can be used for?

Answer 9

• 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

Question 10

Unified case file

Answer 10

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.

Question 11

The Initial Notifications

Answer 11

• 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

Question 12

Consider Legal Issues

Answer 12

• 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

Question 13

Evaluate Loss Mitigation and Recovery Considerations

Answer 13

• 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

Question 14

Reverse Proof

Answer 14

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.

Question 15

Objectives and scope of an investigation

Answer 15

• 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.

Question 16

Engagement Letter Elements

Answer 16

• Services to be Provided
• Objectives and Scope of the Investigation
• Methods to be used
• Resources required
• Responsibilities of the respective parties
• The Basis and Methods Used for Charging Professional Fees
• The means for resolving disputes