Nov 06, 2019

Forensic Accounting Tips to Catch Crafty Criminals

William HayesBy William J. Hayes, managing editor, Pennsylvania CPA Journal

Criminals can be a sneaky lot. They are always coming up with new tricks to gain an edge in their frauds. Glenn Helms, CPA, PhD, CFF, president of Glenn L. Helms Inc. in the Greensboro/Winston-Salem, N.C., area, understands the numerous strategies used by forensic CPAs during a fraud investigation to pinpoint the bad guys, including surveillance and data analytics techniques. I spoke with Helms recently, during which he shared some of the topics he expected to cover during his presentation at the PICPA Valuation & Forensic Accounting Conference on Nov. 18, 2019, in King of Prussia, Pa.

In your presentation, you'll discuss devising different strategies based on the type of fraud. Can you explain why investigative strategies would be different depending on the fraud?

Glenn Helms, CPA, PhD, CFFThere are three major categories of fraud, as well as certain subcategories. As an overview, fraudulent financial reporting is typically accomplished by senior management in collusion, and they tend to make fraudulent journal entries. Unlike many other types of fraud, there's often a documentary trail of management's nefarious gain. We would use software and data mining tools to select journal entries that have certain types of red flags.

Another category of fraud is misappropriation of assets. These are a little bit more difficult to investigate because you have to narrow down whether or not the crime is originating from known parties, unknown third parties, inside jobs, and so forth. In misappropriation of asset frauds, sometimes people have to make up documentation to support a fictitious disbursement. Certain controls can be put in and procedures performed to help discern whether or not a document is fictitious or not.

The third category of fraud is a corruption gain. These are the most difficult to discover because the pay-off is typically in cash. You don't see one fraudulent person writing a check to another perpetrator. Here, techniques primarily used include surveillance, such as webcams.

Are there any standard techniques you would recommend in the case of interviews and interrogations to bring out the best results?

This varies, depending upon the research we're conducting. If it's an interrogation to get the confession, you have to decide whether or not to put stress on the person. In an interview that's fact-finding by nature, you don't necessarily want to put a lot of stress on the person.

Going into an interrogation where you want to put pressure on people, there are a few bits of theater you can set up to gain an advantage. J. Edgar Hoover, for example, would sit on a platform – his desk and chair were a little bit higher than the person he was interviewing so he would be perceived as a person of authority.

There are other common techniques that can be used subtly to put stress on people during an interrogation. One study says the simple use of a pencil on a piece of paper is a sound that creates stress on the person being interviewed or interrogated, and can lead to truth-telling.

Are there tells for spotting a liar? If so, what would be one or two of the most reliable ways?

I know a lot of us have watched those television programs about how to spot a liar, but the most concrete method that I've seen after review of the literature is that you go into a normal interview or discussion phase with an individual, and then, as you put stress on the person, you want to compare how that baseline changes. For example, if during a conversation people aren't moving their knee up and down in a fast manner, but when you start getting into sensitive topics that occurs, then you might become suspicious that whatever topic you're discussing at that time should be pursued further.

Other times spotting a liar can be straightforward. I’ve found just looking at a person as if they're one of your children lying to you can be very helpful. If you have a feel for the person, I think you discern when they're lying. 

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.