Chapter 7

 Surveillance: also called observation, it involves watching and recording the physical facts, acts,
and movements, which are part of the theft act of fraud
 Surveillance & Covert Operations
o Rely on senses like hearing and seeing
o 3 types of surveillance
 Stationary or fixed point
 Can be conducted by anyone, locate scene that needs to be observed
and anticipate action most likely to occur. (Ex: stakeouts)
 Moving or tailing
 Much more risky (chances of failure and financial cost are high), rewards
are much higher (id’ing the receiver of stolen goods)
 Electronic
 Frequently used. Wiretapping, email monitoring. Etc. May have limited
value in the investigation of employee frauds b/c of concerns regarding
employee privacy
o Undercover investigations should only occur when:
 Large scale collusive fraud, other methods fail, investigation can be closely
monitored, significant reason to believe fraud is occurring, strict compliance w/
the law, investigation can remain secretive, law enforcement informed when
appropriate evidence has been accumulated
o Observing someone’s activities is a fraud detection tool that attempts to catch fraud and
other types of crime at the theft act stage.
 Theft Investigative Methods
o Surveillance & Covert Operations
o Invigilation
o Seizing and searching computers
o Physical evidence
 Concealment Investigative Methods
o Document examination
o Audits
o Electric searches
o Physical asset counts
 Inquiry Methods
o Interview and interrogation
o Honesty testing
 Conversion Investigative Methods
o Searching public records
o Online resources
o The net worth method
Chapter 8

 Documents important
o Most fraud experts will choose a document over eye witness testimony b/c they do not
have the flaws humans’ have (perjury, biases, etc.)
 Chain of Custody: a record when a document is received and what has happened to it since its
receipt
o Careful records must be maintained any time the document leaves the care, custody, or
control of the examiner
o Memos should be written when the document came into the hand of examiner and a
subsequent memo written whenever there is a change of status
 Marking Evidence
o When documentary evidence is received, it should be uniquely marked so it can be
identified later.
 Transparent envelopes w/ date received & examiner’s initials
 Copy should be made
 Copies used during investigation and trial and should be kept in file w/ original
 Original can be removed for trial if needed
 Pg.245: Audits; doctor fraudulent check example
o Auditors conduct seven types of tests to gather documentation
 Tests of mechanical accuracy, analytical tests (test of reasonableness),
documentation, confirmations, observations, physical examinations, inquiries
 Proper sampling procedures need to be accounted for (Ex: 40 checks, 0
fraudulent ones = no fraud for that sample. Can easily be false when looking for
fraud)
o Discovery Sampling: simple statistically based method of analyzing a subset of
transactions from a larger pool. It allows investigator to decide on an acceptable risk
level for sampling. Only used when full population analysis using a computer is not
possible. 2 steps:
 Testing a random sample
 Using probability theory to draw inferences about the population form the
sample
 Pg.249: Hard to get Documentary Evidence
o Often only 3 ways to get documentary evidence
 Subpoenas
 Search Warrant
 Voluntary Consent
Chapter 9

 Fraudsters always live beyond their means; improve lifestyle

 Pg.265: County & Local Records
o County Clerks maintain numerous records on local citizens including voter registration
records and marriage licenses, both of which are highly useful in investigations
o County land offices & tax assessor’s office contain real estate records for land located in
county. Useful in identifying assets purchased and liens removed by a perpetrator.
 2 ways to trace real estate records:
 Land ownership is normally found in the county land office r in the
office or the recorder of deeds.
 Property tax records maintained by the county assessor’s office also
contain property records
o County Sheriff Office contains records of criminal charges , indictment statements,
incarceration information, and probation information
o Local Courts (wills, probate, criminal history, etc.)
o Permit Departments can help identify the nature and location of a business, new leases,
and recent construction
 Conversion searches: searches performed for two reasons (to determine the extent of
embezzlement & gather evidence that can be used in interrogations to obtain a confession.
o To become proficient at conversion searches one must understand info can be gleaned
from:
 Federal, state, & local agencies
 Private sources
 Online sources
 Using the net worth method
 Conversion investigative methods:
o Interviewing
o Bank accounts
o Trusts
o Third party ownership
o Bank statement manipulation
o Internet searches
o Going through trash

Chapter 10

 Anyone can be interviewed; people who are believed to be close to the situation or case
 Characteristics of a good interview
o Sufficient length and depth to uncover relevant facts
o Focus on pertinent information and quickly steers the topic away from irrelevant
information
o Good interviews are objective; they endeavor to gather information in a fair and
impartial manner
  Characteristics of a Good Interviewer
o Outgoing and interact well with others
o Comfortable around people and they help other feel at ease.
o Willing to share information and display information
o Performed in a low key or informal manner tend to be more effective
o Professionalism
 One person at a time when interviewing
 Pg. 287 language of an interview
o Use short questions confined to one topic, clearly understood
o Ask questions that require narrative answers
o Avoid questions that suggest part of the answer
o Require witnesses to give the factual basis for any conclusions they state
o Prevent witnesses from wandering aimlessly
o Don’t let witnesses lead you away from topic
o Don’t let witnesses confuse the issue
o At all times concentrate more on the answer than the next question
o Clearly understand each answer before you continue
o Maintain control of interview
o Point out some but not all of the evidence
o

Chapter 14

 Fraud against organizations usually happens through employees

 Pg.512-513; asset misappropriation
o Employees have 3 opportunities to steal assets:
 Steal receipts of cash and other assets as they are coming into an organization
 They can steal cash, inventory, and other assets
 They can commit disbursement fraud by having the organization pay for
something it shouldn’t pay for or pay too much for something it purchases
o Joseph Wells divides asset misappropriation into 2 categories
 Thefts of cash
 Larceny, skimming, fraudulent disbursements
 Thefts of inventory and other
 Misuse, larceny
 Larceny: intentionally taking an employer’s cash or other assets w/o the consent and against the
will of the employer after I has been recorded in the company’s accounting system
 Skimming: a scheme in which cash is stolen from an organization before it is recorded on the
organization’s books and records; a process where fraudsters use information storage cards or
other bar encoded documents
Chapter 16

 Divorce fraud
o In divorces, assets are given to spouses and attorneys representing spouses. Transfers
of assets to offshore bank accounts, relatives, friends, and other hidden places are all t
common in bankruptcy, divorce, and tax fraud
o Bankruptcy: a legal process that either allows a debtor to work out an orderly plan to
settle debts or liquidates a debtor’s assets and distributes them to creditors
o Roles Fraud Examiners play in divorces:
 Serve as examiner or a trustee in bankruptcy cases
 Assist in recovering assets for creditors in both divorce and bankruptcy cases
 Serve as a private investigator to find hidden assets or examine lifestyles of
divorce or bankruptcy
 Tax fraud: committed against any governmental or other organization that collects taxes,
including the federal government, state government, local governments, or other taxing
authorities
o Citizens should pay the least amount of tax that they legally owe
o Fake social security number
o Two sets of books
o Lying about ailments
o Claiming false dependents
o Overstating income not taxable income
 IRS criminal investigation (pg.578)
o CI Division is directed at the taxpayers who willfully and intentionally violate their
known legal duty of voluntarily filing income tax returns or paying the correct amount of
income, employment, or excise taxes.
o Mission of the CI is to investigate potential criminal violations of the internal revenue
code and related financial crimes in a manner that fosters confidence in the tax system
and compliance with the law.
o Trained to follow the money.
 Tasks to become IRS special agent (pg.581).
o College degree
o Not older than 37
o US citizen
o 15 semester credits in accounting
o CPA