How do financial forensics investigators work?
In: Economics
A forensic accountant will look at historical data of a business or industry data analysing the trends in things like gross margin (sales less cost of sales), expenses compared to budget or previous months all in an effort to identify irregularities. If the business has cash sales and funds are going missing then the gross margin will be declining or when a stocktake happens there will be a stock discrepancy. It is important to review the original supporting invoices for expenditure. I have detected frauds where there was invoice falsification with different payment terms, slight changes in vendor names, changes to address details and bank account details for wire payments by comparison to legitimate invoices. A forensic accountant will also review the internal controls. Look at new suppliers added to creditors master files also. Returning checks to persons responsible for authorising invoices is a no no! Having a register administered by someone independent of payments for checks collected is also a good idea. Also if someone looks like they are living a lifestyle beyond their income it’s possibly a pointer to fraud (the creditors clerk has a nice new shot Porsche in the company parking lot, expensive holidays, etc).
Some of the frauds I have detected were perpetrated by the fraudsters falsifying invoices and establishing fake companies with names similar to legitimate suppliers and fake invoices made through basic desk top publishing software. I sourced copies of the paid checks and examined them for evidence of cashing. The additional expenses and variances from budget were explained away by the perpetrator as unforeseen expenditure on a mining company exploration program.
I hope that gives you some insight as to what to look for!
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