In many instances, even without an individual officer planning to conduct an offense, a company may be criminally responsible for the collective knowledge of some of its workers.

According to COSO, risk assessment involves the following principles:
-The company establishes clear goals that enable threats linked to expectations to be defined and assessed.
-The organization defines and analyzes threats to the accomplishment of its priorities across the company to assess whether risks should be handled. —-When determining the possibility of meeting the targets, the company recognizes the potential for fraud.
-The company recognizes and reviews improvements that could have significant impacts on the internal control structure.

-Ensuring the fraud processes are planned and managed consistently enough to resolve identified fraud threats is ample time and attention for
assessment to provide accurate confidence to the board and management.
-Assess the quality and adequacy of management-related fraud threats found (reflecting, in particular, the fraud risks based to the bypass of control management).
-To ensure that all threats of fraud have been properly addressed, notify those responsible for the fraud risk assessment periodically.
-Hold a qualified skeptical approach and be vigilant about indicators of theft.
-Actively contribute please promoting the legal structure of the company.
-Find the fraud risk assessment of the company in the planning of its audit report. Test compliance techniques and skills of fraud prevention on a
periodic basis.

When there is systemic pressure to fraud, an organization can not always get its agents together in these activities. This cohesion is hindered by at least three factors.
First, the pressures on fraud could not reasonably impact a company’s divisions.
Second, some employees are unaware of the difficulty of getting the necessary resources, even in high-pressure departments.
It ensures that an employee usually requires a high level of responsibility for the performance of an organization and the ability to achieve such objectives before an incentive for wrongdoing will occur.

Clinard and Yeager suggested that if businesspeople rejected an unethical order, a broad and detailed industrial code of ethics that many businesspeople favor would be a great help. This would help define better the boundaries of reasonable or ethical conduct, strengthen the industry’s ethical environment, and minimize misleading practices where there is intense competition. Greater participation of shareholders may require corporate enforcement, but the company is actually managed and made decisions by its management staff; shareholders mainly focus on stock growth and dividends.

It should be noted that deterrence programs attempt to control individuals’ immediate actions, not compliance-targeted long-term behaviors.

The following are examples of data analysis queries that can be performed to detect fraud through the examination of sales information:

– Create a report of all system overrides and sales exceptions.
– Analyze returns and allowances by store, department, or other areas.
– Summarize trends by customer type, products, salesperson, etc.
– Compare ratios of current sales to outstanding receivables or other variables.
– Generate reports on a correlation between product demand or supply and sales prices.

The following are examples of data analysis queries that can be performed to detect fraud through the examination of accounts payable:

– Audit paid invoices for manual comparison with actual invoices.
– Summarize large invoices by amount, vendor, etc.
– Identify debits to expense accounts outside of set default accounts.
– Reconcile check registers to disbursements by vendor invoice.
– Verify vendor tax forms (e.g., U.S. Form 1099 or Value Added Tax (VAT) forms).
– Create vendor detail and summary analysis reports.
– Review recurring monthly expenses and compare them to posted/paid invoices.
– Generate a report on specified vouchers for manual audit or investigation.

If a fraud examiner suspects a ghost employee scheme after gathering data, he would first need to determine what kind of tests to run. The following are some tests that can help to uncover ghost employee schemes:

– Multiple employees using the same bank account for direct deposit.
– Invalid or blank tax/government identification numbers.
– Multiple employees with the same tax/government identification number.
– Employees on the payroll register prior to their start date or after their termination date.
– Non-salaried employees on the payroll register but not in the timekeeping system.
– Employees on the payroll register but not in the employee master file.
– Employees with no deductions for taxes or benefits (where applicable).
– Employees with no pay increases, or more than two pay increases, in the past year.

Unstructured data is the type of data that would not be found in a traditional spreadsheet or database. Unstructured data comes from numerous sources. Sources of unstructured data include social media posts, instant messages, videos, voice files, user documents, mobile phone software applications, news feeds, and sales and marketing materials.

As a general rule, as few people as necessary should be kept informed about an investigation. At the outset of a fraud examination, the investigation team and management must identify who should be kept informed about the investigation. Factors to consider when determining who should be kept informed include:

– The severity of the incident under investigation.
– The suspect’s role in the organization.
– The tasks that will be required to conduct the investigation.

During the planning process, management must consider any operational issues, which might include:

– Gathering facts abroad.
– Recordkeeping practices abroad.
– Record content and format differences.
– Language translation.
– Cultural differences.
– International data privacy issues.
– Differing conceptions of privacy and discovery.
– Immigration regulations.
– Safety concerns, especially for global assignments.

A chronological investigation is divided into time-based phases that, when completed, are marked as milestones. A chronological structure is best suited for investigations where time sequence is essential in organizing tasks.

Fraud can be discovered in several ways, such as via a tip or complaint, an auditing procedure, monitoring, or chance. However, most of all internal fraud investigations originate with a tip from an employee, customer, or vendor.

Engagement letters should address a variety of items. Those items include the client’s identity, the scope of the services, the timing of the work, deliverables, payment terms and fee structure, communication with the client, non-guarantee, governing law, jurisdiction, termination, and a limitation of liability through indemnity clause.

Anatomical physical responses are the involuntary reactions of the body to fear, such as increased heart rate, shallow or labored respiration, or excessive suddenness. These responses are typical of individuals charged with wrongdoing who are dishonest.

Accusing innocent individuals of misdeeds they have not committed is usually legal when:
-The accuser is reasonably suspected or predicted of an offense committed by the accused.
-The charge is produced under privacy circumstances.
-The accuser does not take any action that could confess to an innocent individual.
-The charges are carried out under sensible circumstances.

Once the accused utters a denial, altering his answer is extremely difficult for him because doing so would be acknowledging that he was lying. The interviewer must avoid an outright denial, making confessing at a later time easier for the subject. It is unlikely that an innocent person would allow the interviewer to prevail and stop the denial. Fraud examiners may use many tactics, including delays, repetitive interruptions, and logic, to prevent or interrupt denials.

Criteria-based analysis is post-interview tool which is used to assess how truthful the subject had been, by analyzing his language. Statement analysis is based on the notion that when people speak, whether purposely or unconsciously, they explicitly choose the language they use. The verbal clues given by a subject are as prominent as any nonverbal clues. The tense used by an interviewee is often an indicator that the interviewee knows more than he is allowing.

This is based on the assumption that the declaration of a truthful subject will be densely woven with incidental information, such as the daily routine, habits, or family interactions of the subject. A deceptive topic is far less likely to associate an event with such apparently insignificant information, choosing to concentrate solely on covering up the significant event being discussed.

Tax records reveal deductions and expenses that can lead to previously unknown funds or assets. Personal tax records, if available, might provide indirect evidence of illicit payments.
Tax-related documents can provide information like where the subject works, his source of income and the royalties he receives.

Reports filed with FIUs contain the identity of the persons making the transactions and the amount of the transactions, among other things. In addition, they can provide valuable information that can be used to identify illegal activity, detect the flow of illicit funds, and identify leads to assets purchased with ill-gotten gains.

The direct approach method relies on specific transactions while the indirect approach relies on a circumstantial proof. Circumstantial evidence is evidence that relies on an inference to connect it to a conclusion of fact such as a fingerprint at the scene of a crime. If illicit transactions cannot be traced directly to the subject, then an indirect method of proof might be required to corroborate evidence of illicit transactions.

There are two basic methods for performing a net-worth analysis to examine a subject’s sources of income. They are the asset method and the expenditures or sources and applications of funds method.

The financial profile of a subject can contain direct evidence of illegal income or hidden assets, or circumstantial proof, by showing that the suspect’s expenditures exceeded known sources of income. It can be used to establish the level of criminality, to build evidence for litigation, to support a request for an enforcement order, to identify fund transfers between entities, and so on.

Asset hiders want products that are difficult to trace or untraceable. With such instruments, asset hiders can break or obscure links between the initial receipt of the assets and their final disposition. Asset hiders want products that are secure and accessible. Assets hiders also want products that are liquid.

To develop a fraud response plan, elements that needed are:
-Reporting protocols
-A response team responsible for carrying out an initial evaluation
-Procedures for litigation
-Factors used to determine how action should be taken
-A template or form for reporting incidents of fraud
-Principles of the response plan

Liabilities are the obligations of an entity or the claims of an outsider against the assets of a company. Examples of liabilities include payable accounts, notes payable, interest payable, and long-term debt.

Entries on an account’s left side are debits (dr), while entries on an account’s right side are credits (cr).

The debit side of entry always equals the credit side of all three factors namely assets, liabilities and owner’s equity so that the accounting equation remains in balance.