Reporting and Litigation

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In this chapter:

  • Stick to the Facts
  • Keep It Simple
  • Background Information
  • Investigation Procedures
  • Opinions
  • Attachments
  • Draft Reports
  • Unfavorable Opinions
  • Follow-up to the Fraud Investigator’s Work
  • Being an Expert Witness
  • Preparing for Testimony
  • Deposition Testimony
  • Trial Testimony

An important part of a final report on a fraud investigation is a discussion of the investigative procedures used on the project. From the book:

Once a proper foundation is laid for the fraud investigation, the report should move into the investigative procedures and the investigator’s findings. This is the portion in which there may be a detailed discussion of the documents examined, witnesses interviewed, and investigative techniques performed. The description of these things varies considerably from case to case. In general, you will likely describe the accounting system and the transactions you examined. The fraud investigator will describe the work of examining the evidence and tabulating or cross-checking numbers. Use good judgment about the level of detail included in your work. It is not necessary to list every document that was cross-checked. Rather, it is important to give a general overview of  the procedures performed.

It is important to carefully explain calculations that were used to arrive at conclusions. This should be done in the simplest manner possible, because the report may ultimately be used by people with little or no accounting experience. Any estimates that were used during the investigation should be carefully explained and supported. What was the methodology? Why was that selected? Why is it reasonable? Where did you get the numbers for your estimates? Why are they reliable, in your opinion? How might a change in your estimate affect your final conclusions?

As you are working through your detailed explanation of your work and conclusions, remember that visual aids can help support your methodology and can assist readers in understanding your conclusions. For example, consider a case in which a company is claiming it lost revenue because of your client’s actions. You have looked at detailed sales records and see that sales actually went up during the time they have claimed there was a decrease. In addition to writing a paragraph about this increase, you may also want to provide a table showing a summary of the numbers. You may further clarify the issue by adding a graph that clearly demonstrates the sales increase. By explaining this conclusion with three different tools (narrative, table, chart), you have increased the chances that a wide variety of readers of your report will understand and accept your conclusion.

Avoid industry jargon in a report unless it is absolutely necessary in order to understand some of the work or evidence. If you have to use technical terms or jargon, be sure that you have explained exactly what those terms mean in the context of this case. For example, it may be necessary to discuss accrual basis accounting versus cash basis accounting, and how these affect your opinions. These are not commonly understood terms, so it will be necessary to clearly define them and differentiate between them.

Always think ahead to the potential for a case to end up in the hands of a jury. The jurors may have no experience with accounting issues or with fraud issues. How will you get them to understand what you have done and what your conclusions are? For this very reason, your report should be written as simply as is practical. Never assume that the readers of your report have a working knowledge of accounting, finance, or fraud.