Chapter 12
Potential Missteps: Considerations When Fraud Is Suspected
This chapter explores some of the unintended consequences that may arise when well-intentioned, competent auditors and company executives detect the possibility of fraud and understandably want to reach an immediate resolution. A good knowledge of the more significant potential missteps should help both auditors and their clients in the proper conduct of an investigation. As discussed in earlier chapters, when there is a suspicion of fraud, the surest path is to employ appropriate experts and to do so early. Most of the missteps put the natural desire to shed immediate light on the problem ahead of the painstaking professional approach that is far more likely to uncover the truth, expose the issues to the fullest possible extent, obtain desired legal outcomes, improve control remediation efforts, and increase recoveries.
CONFRONTING SUSPECTS
One step commonly taken by executives or auditors untrained in fraud investigation is to confront a suspect with certain facts immediately after discovery. Such executives or auditors are understandably eager to resolve the apparent discrepancy and take what they believe to be the quickest path to resolution, but they may unknowingly complicate future investigation and actually increase the cost of resolving the allegations. By way of illustration, consider the following. A corporate controller is reviewing quarter-end journal entries and ...
