When Employees GO BAD

Conducting internal investigations, part one


This FraudBasics article is adapted from part of the ACFE course, "Conducting Internal Investigations." For more information on this and other courses, visit Seminars.   

In a perfect world, employees wouldn't steal from their employers. However, this is far from a perfect world. Here are some basics in beginning an internal investigation.

As a new internal auditor at Jenkins Manufacturing Company, you've been reviewing work from previous audits. Two years ago, an audit was conducted of the purchasing function of a small division of the company in which the purchasing director, Thomas Brackens, was extremely uncooperative. While that might be a fairly common occurrence in audits, this audit was never completed.

There's a notation in the file that the CEO of the company asked the department to conduct another audit of an area that had been having serious problems as soon as possible, which required all resources to be pulled to satisfy his request. The internal audit department had planned to finish that audit but never did. The auditors who worked on the purchasing audit have since left the company as has the internal audit manager.

There were some notations that the auditors were having trouble locating some invoices and requisitions that had been selected for audit and that there were some purchases that looked like they had been split. The internal audit department had previously audited the area but they didn't note any major findings. In fact, there's a memo in the file from Jim Miller, the former director of purchasing (now retired) who thanked the internal audit department for its assistance and that he would implement its recommendations immediately.

With too many flags flying, you've decided it's time to start an examination. Here are some tips to get you started.





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