How to Avoid Jumping to Conclusions in a Fraud Investigation

The obvious answer isn’t always the right answer. Get all the pieces of the puzzle by asking the right questions.

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When conducting a fraud investigation, make sure you don’t miss the forest for the trees. Inexperienced fraud investigators sometimes don’t know what questions to ask, and draw the conclusions that are obvious, without taking the time and effort to look beyond the basics.“An investigator may look at misallocation of funds as a simple ‘tick and tie’. If it’s not here… but it’s over there, it’s misallocated,” says Sheryl Vacca, Senior Vice President and Chief Compliance and Audit Officer at the University of California.“In reality, if they just step back a little bit and talk a little bit more about the process of how something got to where it was, they actually may find that there is more root cause to this problem than the fact that somebody inadvertently put something over here,” says Vacca. “Or, for instance, that a process has never been established for that particular area.”

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It’s important to remember that the person being investigated has rights and should receive the benefit of the doubt until the conclusion of the investigation. Forgetting this fact can lead to unfair discipline or even wrongful dismissal, which can end in a costly court case.

Sacrifice Efficiency to Get it Right

We all have time constraints, and it’s tempting, when faced with what we think is an open-and-shut case, to wrap it up quickly and move on to the next one. Efficiency is a prized trait in an investigator, and the more cases you solve, the better your reputation becomes.Mishandling an investigation, however, can do far more damage to your reputation than the benefits you gain from being efficient. So it’s important to get the facts and read them correctly, without bias or any pre-conceived notions of the outcome.“There are two things that cause investigations: people and process,” says Vacca. “Sometimes there’s a hybrid. And you have to consider that hybrid.”An irregularity in the accounts that suggests fraud may be due to a faulty process, rather than a faulty person. Or it could be due to a mixture of the two.An investigator should ask a lot of open-ended questions, even if he or she thinks the answers are clear. And all parties to the dispute should be questioned thoroughly, impartially and in privateAnd once all the questions have been asked, ask some more questions.

You Don’t Need All the Answers

Vacca suggests asking “Is there another piece of this investigation that should be carried out for future answers?” This is not necessarily done to get the answer, but to understand that there may be more to the investigation, she explains.“To me that brings much more value, without doing scope creep, than just saying it was embezzlement. How much embezzlement?” she says. Finding out how it happened, where the fault lies, and what gaps in the system allowed it to happen helps to ensure it doesn’t happen again. And just asking the questions is sometimes enough.“It’s not that you have to have all those answers.” The aim, she says, is to determine the next steps that management needs to take to prevent the next fraud.