Spry Control Fraud proven Investigation Methodology help the cause-effect and evidence gathering work

Spry Control Fraud Investigation Methodology

Businesses are becoming more involved in the prevention, detection, and investigation of fraud and seeking professional help to perform proactive or reactive fraud-related services. Fraud costs organizations money and also intangible damages. Almost all organizations experience fraud and abuse in one form or another, ranging from minor employee theft to material fraudulent financial reporting.

Phase 1: Exploration and Evaluation

Before any work can begin, the client and Spry Control define the problem, the issues involved, and the scope of the engagement. Then a projection of the timeframe, cost, and expected deliverables for each phase is determined.

In identifying the areas to examine, consideration must be given to both the direct and the indirect cause-effect relationship. We identify what information is needed and then gather the information to perform an initial review to conclude whether there is a potential cause of action. The conclusion indicates if additional information and documents are needed, a recommendation on how to proceed, and the identification of any potential risks.

Phase 2: Expansion of Scope

Client's approval is obtained for Phase 2 including: tracking, tracing and in-depth analysis of source documents, records, books and transactions. Also included is the verification of certain findings from third parties. Several approaches, or a combination of them, are used in the analysis of books and records to reconstruct or formulate a true cause-effect relationship:

Specific account analysis;
Specific time-period analysis, or a comparison of similar data for similar time periods;
Account-by-account analysis;
Interrelated account analysis; and
Payee-by-payee analysis.

Preparing the analysis. In preparing an analysis, it is important to trace transactions from beginning to end and from end to beginning, cross check and to review supporting documentation.

With electronically generated books and records, a review of systems controls, backups, and logs is critical, as it is much easier for one to alter information today than when transactions were recorded in separate physical books. The verification and documentation have become significantly more difficult.

Reconstruction of books and records. At times, reconstruction of books and records, or specific transactions, from incomplete information is also required. Third-party verification and confirmation is also employed. Additionally, interviews with inside and outside persons are also conducted to interpret or corroborate the available information. We look for information or evidence to support or reject the initial hypothesis.

Third-party verification and confirmation. At times, the forensic accountant may need to obtain third-party verification to confirm matters that arise during the investigation. These third parties may include vendors, customers, and banks.

Phase 2 concludes with the delivery of a report to the client. The report has detailed findings, any additional potential risks that we believe are present, any additional information that might still be needed, and a recommendation as to whether there is sufficient evidence or information for the process to continue.

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