Fraud is a pervasive issue that affects businesses, organizations, and individuals across various industries. Often, an organization is surprised to find itself a victim of fraud, especially when the perpetrator is a trusted employee. According to the Association of Certified Fraud Examiner’s Occupational Fraud 2022: A Report to the Nations, organizations lose approximately five percent of revenue to fraud each year with the average loss per case totaling more than $1.78 million. [1] Chances are that if you have not discovered fraudulent activity in your company yet, it’s only a matter of time. When you discover that an employee is stealing from your organization, it is important to handle the situation carefully and responsibly.
Fraud investigations are complex and multifaceted processes that require a systematic approach. For many companies and owners, this is new territory, and most are likely unsure what to do next once fraud is discovered.
However, the first steps in a fraud investigation are crucial to setting the tone and can set the stage for a successful, or lack thereof, investigation. This article details the first steps a company should take when initiating a fraud investigation, what experts will be necessary to uncover illicit behavior, and what parties need to be notified.
As a business owner or executive, you may have a nagging feeling that something isn’t right within your organization, or your company may receive an anonymous tip through its fraud hotline. Once the suspicions of wrongdoing have been substantiated through an initial analysis, it is now time to follow these important steps in order to protect your company. The following measures are crucial to a successful investigation and may need to be addressed concurrently due to the urgency of the matter.
Conducting a successful fraud investigation requires meticulous planning, thorough execution, and collaboration among investigators, experts, and legal professionals. Throughout the investigative process, it is important to handle the situation legally, professionally, and ethically. By following the outlined steps and adhering to best practices, investigators can maximize their chances of uncovering fraud, mitigating losses, and implementing preventive measures to safeguard against future fraudulent activities.
We would like to thank Natalie Lewis for providing insight and expertise that greatly assisted in this research.
Natalie Lewis is a Senior Vice President in J.S. Held’s Economic Damages & Valuations Practice. As a Certified Public Accountant and Certified Fraud Examiner, who is also certified in financial forensics, Natalie specializes in forensic accounting and the analysis of economic damages. She provides consulting and expert services for both plaintiff and defense law firms throughout the country. Natalie has conducted fraud investigations for companies of all sizes as well as government entities. Her investigations have spanned the globe and include various internal investigations, embezzlement, Ponzi schemes, commercial crime insurance claims, Foreign Corrupt Practices Act (FCPA), and asset misappropriation.
Natalie can be reached at [email protected] or +1 470 852 4601.
[1] Occupational Fraud 2022: A Report to the Nations, Association of Certified Fraud Examiners
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