Fraud Investigations

Instructors: Dan Ray and Fausta Shuler

Assumptions:

Assume you've been called by the attorney of a wealthyindividual (the Client). The Client is concerned that her personal bookkeeper (the main bookkeeper) may have embezzled money from her. The concern was raised by the Client's other personal bookkeeper (the second bookkeeper) who was about to get fired for poor performance. You have been engaged to perform a review and analysis of the accounting books and records to investigate these concerns.

Background and general information:

• The main bookkeeper has been a trusted employee for almost 15 years.

• The main bookkeeper has signing authority over all the Client's accounts. She controls the inflows of funds received and outflow of funds disbursed.

• There is a frequent use of cash (checks payable to cash) to pay other staff (nannies, housekeepers, drivers, etc.), small expenses, and reimbursements.

• There are zero internal controls in place.

• The Client has an accounting program in place that has been used for many years. Both bookkeepers have access to the system.

• The second bookkeeper works directly for the main bookkeeper. She is about to be fired on the advice of the main bookkeeper.

• While the investigation is taking place, the main bookkeeper was placed on paid leave, but was not told why.

• The Client suspects that possibly millions of dollars were embezzled over a 5-10 year period.

Answer the following questions:

1. What was the method used for uncovering the embezzlement?

2. How and where would you begin your investigation?

3. What records would you request? From Whom?

4. Who would you interview? When?

5. What kind of analysis would you perform and why?