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The Evidence Collection The Evidence Collection ProcessProcess

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction to EvidenceIntroduction to Evidence

Once a fraud investigation is launched, the evidence collection process begins.

Generally speaking, evidence is anything (tangible objects, documents, and testimony) that relates to the truth or falsity of an assertion made in an investigation or legal proceeding.

The goal of the fraud investigator is to collect evidence relevant to the fraud under investigation.

Evidence, when well organized, provides answers to the classic sleuth’s questions regarding the possible fraud: who, what, when, where, how, and why.

A fraud theory provides answers to the sleuth’s questions.

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A Fraud TheoryA Fraud Theory

A fraud theory paints a picture of a fraud

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The Evidence Gathering Process

The evidence gathering process involves 3 main steps: 1) review physical and document evidence, 2) observe, and 3) conduct interviews

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Steps in the Evidence Gathering Process

Reviewing the physical and document evidence provides a basis for know what to observe, and what questions to ask in interviews.

Observing can catch a fraudster in the act, which can result in substantially lower investigation costs.

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.

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The Fraud Theory Approach to Fraud Investigation

The fraud theory approach to fraud investigations is 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.A fraud 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 suggests 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.

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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.