Fraud Interviews Deserve Professional Attention
How experts gather facts and get to the truth
All too often, companies defrauded by employees attempt to solve the problem internally. Whether motivated by cost concerns or the desire to keep occupational fraud incidents quiet, owners and managers may even conduct employee interviews themselves. This usually is a mistake.
Not only are forensic accounting experts experienced at eliciting confessions from guilty parties, but they’re also better able to extract vital information from witnesses, who may be reluctant to “squeal” on a co-worker in the presence of their boss. So when a client suspects fraud, your first step should be to engage an expert interviewer.
Preparation is key
When interviewing fraud suspects, forensic experts aim to find any stolen funds and determine whether they can be returned to the company. These experts also can uncover key evidence to help in a criminal prosecution or civil suit leading to a judgment against the suspect’s assets. Finally, they’ll try to obtain a signed confession.
To gain the best chance of securing a confession, the expert needs documentary evidence the suspect committed the fraud. So he or she starts by examining company books and records, as well as insurance claim reports, management reports and, if available, police reports. The expert also gets acquainted with the suspect’s responsibilities, authority in the company and work history.
Before questioning the primary suspect, the expert interviews other employees who may have knowledge of the scheme. Even those least likely to be involved can sometimes provide useful information. Next come people who may be helping the perpetrator, and, finally, the suspect.
Suspects don’t have to agree to be interviewed. But refusal raises a big red flag, so most will consent.
Fraud experts know how to create a “comfort zone” for the suspect so he or she feels at ease going into the interview and is less likely to clam up while it’s in progress. Often experts write down key points to guide the talks, rather than writing actual questions that can inhibit spontaneity. And they generally start interviews in a casual, conversational mode, avoiding questions that may seem intimidating or pointed. Because body language is as important as spoken answers, fraud experts carefully watch their subject’s facial expressions and postures.
These professionals don’t talk too much but truthfully answer the suspect’s questions about why he or she is being interviewed — for example, “We’re auditing the company’s financial statements and would like your help.” And they avoid acting defensive even when subjects become aggressive or threatening.
When a fraud suspect understands the documentary evidence against him or her and seems ready to confess but is still stalling, some forensic experts will suggest a motive other than greed. “Family financial problems” often works well. Indeed, a “nobler” motive lets the perpetrator confess and still save face.
If a subject confesses, the forensic expert tries to pin down how much he or she stole, in case some evidence has yet to surface. Numbers the suspect initially provides can be significantly understated, so persistence is essential. This is also the time to ascertain exactly where the stolen money is and whether the company can get it back.
Finally, experts try not to leave the interview without a written statement. This may be the only time the perpetrator is willing to put it all in writing and affix a signature.
Knowledge is power
Conducting effective fraud interviews requires knowledge about everything from behavioral psychology to criminal law to accounting and auditing rules — a breadth of knowledge few business managers possess. To help ensure your client nabs the perpetrator and recovers financial losses, talk with an experienced forensic accounting expert whenever occupational fraud is suspected.
Sidebar: Management’s role in preventing fraud
Fraud interviews are best left to the experts. But business owners and managers are strongly advised to take an active role in preventing fraud. Some of the best practices for keeping the workplace fraud-free include enforcing control procedures such as segregation of duties and addressing employee grievances as soon as they arise.
Managers who cut corners when pursuing business targets or pay for personal expenses with company funds make it easier for their workers to justify unethical behavior. But if management is conscientious, treats employees respectfully and shows good leadership, fraudulent activities probably won’t even enter employees’ minds.