Audit

he Fraud Tree—

Corruption Branch

November 2009

Mysteriously, the Certified Fraud Examiners do not put forth any standards regarding fraud investigation. I have always wondered and worried about that. As someone addicted to standards and groups that issue standards (such as the AICPA and the IIA), I am a bit uncomfortable with investigations running purely on instincts and common sense.

In Albuquerque, I ran into an experienced auditor who said that her internal audit shop was recently tasked with an investigation. She quickly found out that the tools and techniques she used as an auditor weren’t appropriate. She suggested I could make a fortune if I could lay out a methodology for investigators—in other words, if I would write some standards.

The next week, an investigator with a major university called me to complain that the elements of a finding (required by the GAO in the Government Auditing Standards) didn’t really fit her work. Investigations, she argued, were different, and should not follow the audit standards.

So, seeing an opportunity to enhance clarity and seek my fortune, I Googled a few concepts and interviewed the university fraud investigator and a police detective. Here is what I learned…

When an investigation is warranted, the detective/investigator first has to figure out what type of crime as occurred. Is it an assault, molestation, suicide? In order to talk to each other and the courts, they have to name the crime. So one of the core bodies of knowledge they need to do their job is a taxonomy of crime that lays out the different types of crimes and their legal names.

Next, they visit the crime scene and ask, "Who, what, when, where, why?" They document the answers to as many of these questions as they can in their file. The rest of the investigation is an effort to find the answers to all of the questions and to gather sturdy evidence to support the answers.

An investigator’s ultimate goal is to present so much evidence to a judge that...