Investigating fraud: Key steps the professionals take


Fraud can be devastating for business owners. When you see signs that an employee, partner, or shareholder might be participating in fraud, experts can step in to help you investigate. While the specific nature of your suspected fraud case will determine your course of action, forensic accounts start with these three steps to investigate and build a solid case for any necessary legal action.

Start with interviews 

Interviews are incredibly important for forensic accountants. Interviews help them identify red lights, spot deceptive behaviors, and determine if anyone is behaving suspiciously. While suspects and their colleagues are part of the interview process, the process also involves discussions with management, executives, and audit committees. The goal is to learn more about:

  • Possible fraud activities
  • Fraud risks within the company
  • What internal controls are in place to prevent, detect, and deter fraud  

Forensic accountants make it a practice to interview widely throughout your company to gather as much information as possible about financial fraud risks. That means employees that participate in initiating, recording, or processing financial transactions, as well as staff not immediately engaged with financial processes. Once the interview is done, forensic accountants confirm the information they’ve gathered.

Collecting evidence

Forensic accountants need more than interviews to investigate fraud. They need evidence. As part of their investigation, they gather both physical and digital evidence of fraud. They might look at personnel files, phone and email records, security footage, and access records for IT systems. 

Given the importance of digital records, fraud experts usually require access to your accounting system. They’ll pull journal entries, credits, reversals, and overridden controls to dig up any suspicious activity. They may also seek out external sources like public records, customer and vendor records, media reports, and private detective reports, depending on the nature of your case. 

Review the facts

Forensic accountants specialize in reviewing evidence and analyzing data. The goal is to create and test hypotheses about fraud within your company. This practice allows them to create a formally documented investigation that is based on facts rather than suspicions. 

Once they are finished, you’ll receive a report of their findings. Depending on the outcome, you may need to work with your attorney to pinpoint an appropriate format for their report and determine how it should be distributed to protect both legal privileges and your reputation. 

Avoid a botched investigation

Fraud is a difficult issue for companies to address without the right help. If you suspect fraud is occurring at your company, it’s critical to coordinate a thorough investigation to protect your assets and make sure the perpetrator is prosecuted. Contact Smolin Lupin today to learn about how we can help you during this challenging time.