Evidence
anything (tangible objects, documents, and testimony) that relates to the truth of falsiy of an assertion made in an investigation or legal proceeding.
Evidence provides answers to sleuth’s questions.
Sleuth’s Questions
who, what, when, where, how, and why.
A fraud theory answers sleuth’s questions
Complete court case
Typically includes a fraud theory, collected evidence, and expert testimony.
Fraud Theory
paints a picture of a fraud
who, what, when, where, how, why?
Fraud investigator’s role in collecting evidence
- Primary responsibility for collecting the basic evidence needed to build a possible case.
- Fraud investigator may provide expert opinion
- The investigator should never provide an opinion of guilt or innocence of any person or party.
- The attorney constructs a (possibly different) fraud theory to be used in court.
The Evidence Gathering Process
The evidence gathering process involves 3 main steps: 1) review physical and document evidence, 2) observe, and 3) conduct interviews.
Step 1: review physical and document evidence
reviewing the physical and document evidence provides a basis for know what to observe, and what questions to ask in interviews.
Step 2: observe
observing can catch a fraudster in the act, which can result in substantially lower investigation costs.
Step 3: conduct interviews
Interviewing should lead to a confession, if possible
The investigator should begin interviewing those furthest from the prime suspect and then work toward the suspect. If there is more than one suspect, the prime suspect should be saved for last.
The Fraud Theory Approach to Fraud Investigation
a process that posits a hypothesis regarding a fraud scheme, tests the hypothesis with evidence, and then accepts, modifies, or discards the hypothesis as the evidence warrants.
Fraud scheme
Scheme is a predefined set of answers to the questions “who, what, how, when, and where.”
The question “what” must be asked first—what fraud has occurred.
Predication Principle
Requires discontinuing the investigation if no reasonable basis exists to continue to collect evidence. On the other hand, the investigator should follow the evidence if the evidence justifies continuing the investigation.
Hypothesis Testing for a Fraud Theory
In fraud theory, a hypothesis test is an examination of a piece of evidence to decide whether it is consistent with a given fraud theory under consideration.
Protocols for Investigating Fraud Schemes
- No generally accepted, published professional protocols exist for conducting investigations for each type of fraud scheme.
- In the absence of any pre-established protocols, the fraud investigator must establish protocols for each new investigation. The general rule in establishing such protocols is that each fraud scheme has its own “smoking gun” that represents not only evidence but also a weak point in a fraud scheme.
