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08
The Evidence Collection
Process
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
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Introduction to Evidence
 Once
a fraud investigation is launched, the evidence
collection process begins.
 Generally speaking, evidence is anything (tangible objects,
documents, and testimony) that relates to the truth or falsity
of an assertion made in an investigation or legal
proceeding.
 The goal of the fraud investigator is to collect evidence
relevant to the fraud under investigation.
 Evidence, when well organized, provides answers to the
classic sleuth’s questions regarding the possible fraud:
who, what, when, where, how, and why.
 A fraud theory provides answers to the sleuth’s questions.
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A Fraud Theory
A
fraud theory paints a picture of a fraud
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The Evidence Gathering
Process
 The
evidence gathering process involves 3 main steps: 1)
review physical and document evidence, 2) observe, and 3)
conduct interviews
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Steps in the Evidence
Gathering Process
 Reviewing
the physical and document evidence provides a
basis for know what to observe, and what questions to ask
in interviews.
 Observing can catch a fraudster in the act, which can result
in substantially lower investigation costs.
 Interviewing should lead to a confession, if possible.
 The
investigator should begin interviewing those furthest from
the prime suspect and then work toward the suspect. If there
is more than one suspect, the prime suspect should be saved
for last.
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The Fraud Theory Approach to Fraud
Investigation
 The
fraud theory approach to fraud investigations is a
process that posits a hypothesis regarding a fraud scheme,
tests the hypothesis with evidence, and then accepts,
modifies, or discards the hypothesis as the evidence
warrants.
A
fraud scheme is a predefined set of answers to the
questions “who, what, how, when, and where.”
 The question “what” must be asked first—what fraud has
occurred.
 Predication suggests discontinuing the investigation if no
reasonable basis exists to continue to collect evidence. On the
other hand, the investigator should follow the evidence if the
evidence justifies continuing the investigation.
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Protocols for Investigating
Fraud Schemes
 No
generally accepted, published professional protocols
exist for conducting investigations for each type of fraud
scheme.
 In the absence of any pre-established protocols, the fraud
investigator must establish protocols for each new
investigation. The general rule in establishing such
protocols is that each fraud scheme has its own “smoking
gun” that represents not only evidence but also a weak
point in a fraud scheme.