Investigators and auditors bring their own sets of tools to an investigation. In the investigator’s tool kit are interviewing skills, knowledge of the law, collecting and preserving evidence know-how, and honesty and ethics. Auditors bring different assets: integrity, independence, attention to detail, internal controls experience and expertise in collecting hard copy evidence. And, as Richard Leach, former government auditor and now Director at CohnReznick, said, when the two forces combine, a private company or government agency can truly benefit from the Batman and Robin-like duo (I will let Leach and his co-presenter, William Monks, Investigator and Director of CohnReznick, fight over which one is Batman).
Many times the people at the top trust their employees too much, Leach said. In both of the case studies highlighted, one of the weaknesses he consistently found was a lack of a segregation of duties. He said that many of the companies he now works with in the private sector pride themselves on trusting their employees. “We trust our people,” is a phrase he hears routinely when beginning an audit. However, he typically counters with, “Well we trust them too, but we also verify.”
In one case, a woman who embezzled more than $200,000 using a company credit card was known in the company as the organizer, the doer, the person who was always on top of things. As Leach said, while she was buying everything the company needed, she was also purchasing everything she personally needed (two SUVs, cosmetic surgery and vacations). This misplacement of trust in lower-level employees is a story we see time and time again in the news (think Rita Crundwell, the bookkeeper for Dixon, Ill. who wiped out the town’s savings). This woman’s fraud was found through a surprise audit by Leach and his team. She was dishonorably discharged from the government and sentenced to six years in prison.
In another case Leach cited, government employees stole $2.5 million worth of military equipment and attempted to sell it online. The investigators received a tip from the manufacturers of military goggles that they noticed a large amount of their goggles being sold on eBay. This single tip led to the discovery of collusion through reconciled orders and shipments. The fraudsters were all dishonorably discharged and, just as the example above, sentenced to six years in prison.
What both of these cases have in common, as told from the auditor’s point of view, are a lack of controls and a lack of segregation of duties. The trust that employees are just doing their jobs because everything seems to be running smoothly will only take a company so far. It may help you sleep at night, but it could also make for one horrible nightmare.
Another similarity these cases both share is the importance of the interview. According to Leach, the fraudsters in both cases ended up confessing to their crimes (most of them, anyway). The second part of the session, given by Monks, stressed the importance of the interview when investigating fraud. While Leach summarized the backend of certain fraud cases, Monks shared the value that an investigator’s interviewing skills bring to the beginning and end of any fraud case. According to Monks, the interview is still the No.1 investigative tool used by the FBI, CIA, OIGs and many private investigators.
During the interview, Monks advises to pay attention to the details and evaluate whether someone is trying to convey something to you or convince you of something. “When someone is truthful, they are trying to make you understand something; they are conveying something to you,” Monks said. “When they are being deceptive, they are trying to convince you of something and trying to manage your perceptions.”
Whether you work as an auditor or an investigator, the value of your contribution to a company’s search for fraud does not change with your title. As Leach and Monks both made clear, you have a vital role to play and you don't have to do it alone.