CFE Exam Quiz 33

Paralinguistic communication involves the use of volume, pitch, and voice quality to convey meaning. Listening and observation of changes in the nonverbal accompaniment should be done carefully by an interviewer as this is the key to understanding if the respondent is trying to deceive the interviewer.

An investigation technique designed to obtain evidence by the use of agents whose true intentions are not communicated to the target is known as a covert operation. With proper planning and precautions, a covert operation can prove very beneficial to an investigation.

The two main forms of covert operations, which are investigation techniques designed to obtain evidence by use of agents whose true intentions are not communicated to the target, are undercover operations and surveillance operations.

Undercover operations often use deception and disguise to obtain evidence directly from those involved in illegal activity. Agents engaged in undercover operations actively attempt to extract the desired information.

Surveillance operation is the form of covert operations that makes use of observation to gather information about individuals suspected of misconduct.

In surveillance operations, the agent makes use of observation to gather information about individuals suspected of misconduct. Bill would be carrying out a surveillance operation when he observes a suspect from afar while he meets with a potential co-conspirator.

Undercover operations make use of deception and disguise to obtain evidence directly from those involved in the illicit activity. If David poses as the co-conspirator’s agent and engages the suspect in conversation in an attempt to gather information, David’s investigation technique would be an example of an undercover operation.

The memorandum of a covert operation should clearly state the following:

– The information upon which the covert operation will be based.
– The information that is expected to be gained from the operation.
– The identities of suspects, if known.
– Operatives under the fraud examiner’s care, custody, or control (confidential sources’ identities should not be disclosed, but such sources should be referred to with a symbol).

A fraud examiner is undercover when he officially abandons his identity as a fraud examiner and adopts one designed to obtain information from people who do not realize his true identity. The aim of abandoning his true identity is normally to avoid being compromised, to minimize danger to the fraud examiner, and to ensure the operation’s success.

Only those people who need to know about an undercover operation should be informed of the undercover investigation. Information should be developed with care to avoid alerting the targets or their associates.

The specific objectives of a covert operation depend on the type of investigation being conducted. For example, the objectives in the surveillance of a warehouse would not be the same as those in surveillance designed to determine if someone is receiving a kickback. However, all covert operations have similar general objectives and they include:

– To obtain evidence of a past, current, or future crime.
– To identify those engaged in possible illegal activity.
– To recover illegal gains.
– To identify co-conspirators.
– To identify the modus operandi.

The process of law enforcement officers or government agents inducing a person to commit a crime that he is not previously disposed to commit is known as entrapment. Entrapment poses a legal problem in covert operations, particularly in undercover operations, because the defendant might not be found liable if it appears that he was improperly induced to commit the crime.

There are two general types of surveillance. The two general types of surveillance are mobile surveillance (also known as tailing or shadowing) and fixed surveillance (also referred to as stakeout or plant).

There are two basic methods of surveillance. These basic methods of surveillance are loose surveillance and close surveillance.

When targets do not need to be kept under constant observation, the common method of surveillance used is loose surveillance. Loose surveillance should be discontinued if the subject becomes suspicious.

When subjects need to be kept under continuous observation, the common method of surveillance used is close surveillance. Close surveillance should still be used even if it appears that the subjects have become suspicious.

During foot surveillance, observers tend to make sure that they are not identified by the subject. One method of achieving this is by using the leap-frog method which involves the observers changing places with each other by either pre-arrangement or signal.

One method that lessens the chance of an observer being identified by the subject is the progressive surveillance method. This method is used when extreme caution is necessary. With this technique, the subject is followed a certain distance, then the surveillance is discontinued and the time noted. The next day, another observer picks up the subject at the time and place where the surveillance was previously discontinued, and again follows the subject for a short distance. This continues for days until the surveillance is completed.

Aerial surveillance is the observation of a place, person, group, or ongoing activity from an aerial vehicle. Aerial surveillance includes satellite surveillance and surveillance with unmanned aerial vehicles (also known as drones).

In the body of the long-form engagement letter, the fraud examiner describes the procedures in detail and limits the scope of an examination to the procedures defined. The long-form engagement letter is not recommended for engagements that require the investigation of fraud allegations and a concluding opinion on the existence of fraud.

To ensure the most accurate and meaningful results in a fraud examination, a formal data analysis process should be applied. While the specific data analysis process will vary based on the realities and needs of the organization, the following steps should be considered and implemented, to the appropriate extent, in each data analysis engagement:

– Planning phase
– Preparation phase
– Testing and interpretation phase
– Post-analysis phase

Proper planning is essential in a data analysis engagement. Without sufficient time and attention devoted to planning early on, the fraud examiner risks analyzing the data inefficiently, lacking focus or direction for the engagement, running into avoidable technical difficulties, and possibly overlooking key areas for exploration.

Sufficient time and attention should be devoted to planning a data analysis process early. The planning phase of data analysis is made up of the following steps:

– Understand the data.
– Define examination objectives.
– Build a profile of potential frauds.
– Determine whether predication exists.

The term used to refer to the totality of circumstances that would lead a reasonable, professionally trained, and prudent individual to believe that a fraud has occurred, is occurring, and/or will occur is predication. Data analytics is instrumental in helping a fraud examiner determine predication. Predication is the basis upon which a fraud investigation begins. Internal fraud investigations should not be conducted without proper predication.

The phrase “garbage in, garbage out” is applicable in the preparation phase. Before running tests on the data, the fraud examiner must make certain the data being analyzed are relevant and reliable for the objective of the engagement. This is done during the preparation phase.

In the preparation phase, the fraud examiner must make certain that the data being analyzed are relevant and reliable for the objective of the engagement. The preparation phase of data analysis is made up of the following steps:

– Identify the relevant data.
– Obtain the data.
– Verify the data.
– Cleanse and normalize the data.

The specific groupings should be based on the target fraud scenario and data being analyzed, but such categorization might include grouping data by:

– Geographical location
– Business division or unit
– Time period
– Dollar value
– Salesperson

A transaction identified by a data analysis test as an anomaly within the data set even though it is not actually a fraudulent transaction is known as a false positive. Such results can occur for various reasons.

False positives can occur for a number of reasons. These reasons include data validity/integrity issues, data merging difficulties, and Legitimate data that fall outside the field norm (e.g., letters in a numbers-only field, such as a phone number).

A formal report of data analysis might be issued depending on the terms and objectives of the engagement. Such a report should typically be easy to understand, summarize the analysis findings, and provide insightful and applicable information for the relevant readers.