CFE Exam Quiz 50

There are many reasons why an organization would choose to conduct a fraud examination. A properly executed fraud examination can be executed in order to address some organizational objectives. These reasons include:

– Identifying improper conduct.
– Identifying the persons responsible for improper conduct.
– Stopping fraud.
– Sending a message throughout the organization that fraud is intolerable.
– Preventing future losses.
– Reducing other potential consequences.

There are several ways through which fraud can be discovered. They include via a tip or complaint, an auditing procedure, monitoring, or chance.

Fraud can be discovered in several ways, such as through a tip or complaint, an auditing process, monitoring, or by chance. According to the ACFE 2016 Report to the Nations, the largest percentage of all internal investigations originate with a tip from an employee, customer, or vendor.

Tips are the most valuable resource for discovering internal fraud, therefore, companies need to proactively seek them out by putting in place, easily accessible and anonymous (where permitted by law) fraud reporting tools, such as an anonymous tip line or a tip hotline or a dedicated web page.

The term fraud examination refers to a process of resolving allegations of fraud from inception to disposition. Fraud examination is the primary function of the anti-fraud professional. Fraud examinations are conducted to determine if fraud has occurred and if so to gather evidence of the crime.

The fraud examination process encompasses a variety of tasks that might include the following:

– Obtaining evidence.
– Taking statements and writing reports.
– Testifying to findings.
– Assisting in the detection and prevention of fraud.

A fraud examination report is a narration of the fraud examiner’s specific activities, findings, and, if appropriate, recommendations. A fraud examination report is necessary so that those responsible can determine the appropriate course of action.

Fraud examiners are often called upon to report their findings and provide testimony at a deposition, trial, or other legal proceedings. Fraud examiners must be truthful when providing testimony and they should communicate in a clear and concise manner.

A fraud examination report must be accurate and understandable so that others may know what transpired without having to hear from the report’s author. In other words, a fraud examination report must speak for itself. A report that is poorly written may lead the reader to doubt the skills and conclusions of the fraud examiner.

There are various methods fraud examiners can use to capture information on social media sites and memorialize the collection process. These methods include the following:

– Convert web pages into another format (e.g., PDF).
– Use screen-recording software to create a digital recording of a screen’s output.
– Print the content.
– Take screen captures of relevant information.
– Use a website capture tool that navigates to each link on a web page and captures all the content on each link, including embedded files and source code, contained in those links.

It might be advisable to prepare an evidence control log in cases where there are significant items of evidence. An evidence control log is a form that documents the following:

– The bank safe-deposit box location.
– The file case number.
– The signature(s) of person(s) placing in or removing evidence from repository.
– The reasons why evidence was moved.
– The evidence control center location.
– The time(s) and date(s) when authorized individuals entered and departed the evidence repository.

Consent to record form is a form that documents the fact that permission was given to the fraud examiner by an individual to record specific conversations. This form must be signed and witnessed.

A consent to record form documents the fact that an individual has given the fraud examiner permission to record specific conversations. This form must be signed and witnessed. It contains the following details:

– The name of the individual.
– The date(s) of the conversation(s).
– The location of the conversation(s).
– The name of the subject(s) with whom the individual might converse.
– The individual’s address.
– Who might record the conversation(s).

The multipurpose document used to list items of evidence that have been received, returned, or released is known as a receipt for property form.

A receipt for property form is a multipurpose document used to list items of evidence that have been received, returned, or released. The receipt for property form includes the following information:

– Date of transfer of property.
– Name of the property owner.
– Address of the owner.
– Description of item(s).
– Signature lines (“received by” and “received from”).

A telephone recording consent form must be signed by the subject and witnesses. It stipulates where, when, and with whom telephone conversations can be recorded. This form states that the subject has granted permission without threats or promises of any kind.

Nonpublic records are not available to the public, therefore they could be difficult to obtain. Despite the difficulty in obtaining personal records, fraud examiners might be able to obtain nonpublic records by using one or more of the following methods:

– Requesting the records.
– Subpoena or other legal processes.
– Demand as a condition of continued business.
– Consent from the entity to whom the records pertain.

Public records are documents that a governmental agency is required to keep by law or that are necessary to discharge the duties imposed by law. Public records can be accessed by the public and are thus available to anyone who wishes to use them.

Public records are documents that a governmental organization is required to keep by law or that are necessary to discharge the duties imposed by law. Publicly available information is information that has lawfully been published or broadcast to the public for consumption. Unlike public records, publicly available information is not kept by government organizations.

To conduct a public records search, the fraud examiner must have information about the subject. The better informed the fraud examiner is about the subject he is investigating, the easier his search will be. The following items are essential for searching public records for information about an individual:

– The correct name of the subject.
– The date of birth of the subject.
– The last known address of the subject.
– The government identification number of the subject.

Nonpublic records include information about a person or business considered to be private and confidential. Nonpublic records are not available to the general public.

Local government agencies often maintain general records. The following are examples of local sources of records:

– Building inspector records.
– Building permit records.
– Health and fire department records.
– Birth and death records.
– Public school records.
– Marriage records.
– Coroner’s register.

The use of professional accounting skills in matters involving potential or actual civil or criminal litigation is known as forensic accounting. Forensic accounting is litigation support involving accounting.

When conducting investigations into allegations or signs of fraud, fraud examiners should make a hypothesis of what might have occurred based on the known facts. The fraud theory approach involves the following steps:

– Analyzing available data.
– Creating a hypothesis.
– Testing the hypothesis.
– Refining and amending the hypothesis.

The actions that members of an organization will take when suspicions of fraud arise is outlined in a fraud response plan. Because every fraud is different, how a fraud examination should be conducted should not be outlined in the fraud response plan. Instead, it should help organizations manage their responses and create environments to minimize risk and maximize the potential for success.

The fraud response plan guides the necessary action when potential fraud is reported or identified. The elements of a fraud response plan include:

– Reporting protocols.
– A response team responsible for conducting an initial assessment.
– Factors used to determine the course of action.
– Litigation hold procedures.
– Principles for documenting the response plan.
– A template or form to report fraud incidents.

Establishing reporting protocols for tips, matters, allegations, and other indicators of improper activity is one of the first steps when developing a fraud response plan. Reporting protocols are necessary to ensure that the right individuals are notified immediately to enable a prompt response.

No single person can effectively address every fraud-related issue. Therefore, the fraud response plan must identify key individuals who might be required to respond to a particular fraud. The response team members vary depending on the facts and the potential severity of the suspected fraud. The members of a fraud response team might include:

– Legal counsel
– A management representative
– A certified fraud examiner
– The finance director
– A representative of internal audit
– Audit committee members
– A representative of human resources (HR)
– Information technology (IT) personnel

A litigation hold refers to the steps an organization takes to instruct employees not to delete or destroy potentially relevant records to a new or imminent legal case. Litigation hold procedures are necessary to ensure that potentially responsive documents are not destroyed once evidence of misconduct arises.

Publicly available information is data, facts, instructions, or other material published or broadcast for general public consumption. The information gathered might include any available personal information. Publicly available information does not include data about a person or business considered to be private and confidential.