Forensic/Investigation report writing techniques

Forensics/Investigation Report writing Techniques

Compiled and Presented

BY

Godwin Emmanuel, Oyedokun ND (Fin), HND (Acct.), BSc. (Acct. Ed), MBA (Acct. & Fin.), MSc. (Acct.), MSc. (Econs & Fin.), MTP (SA), ACA, FCTI, ACIB,

AMNIM, CNA, FCFIP, FCE, CICA, CFA, CFE, CPFA, ABR, CertIFR, FILEX

Chief Technical Consultant/Managing Partner

OGE Professional Services

[email protected] +2348033737184, +2348055863944

Being a paper delivered, at the Fraud Investigation and Forensic Accounting Course of

OGE Professional Services Ltd.

On July 20 - 21, 2016

This presentation will cover the following major sub topics as follows:

Introduction

Mistakes in report writing

Importance of Report Writing

Types of Reports

Report do last forever

Importance of Report Writing

Tips for Writing Fraud Examination Reports

Types of Reports

Assessing your Audience

Planning the Report

Avoiding Common Reporting Mistakes

Tips to Keep in Mind When Writing an Expert Report

Additional Considerations for Written Reports

Conclusion

2

Contents

3

• Assume you are the head of a corporation and you

suspect potential fraud within your organization.

• You meet with your senior management and decide to

engage the services of a local fraud examiner to find out if

one of your employees is defrauding your company.

•

• After several weeks of work, the fraud examiner provides

you with the following report:

•

Introduction

4

The fraud examination commenced when I got a call from Bob Johnson, C.E.O

of Lambert Co. They believed that one of their employees got bribes or

kickbacks from a vendor. I looked and saw that the company was doing 400%

more business with DeLorien Paper than it was before. The purchasing person

was Darrin Donaldson.

I interviewed people in the office. They told me Darren had a new Mitsubishi car

and taken a recent vacation to the Bahmas. I interviewed Darrin and asked him

how he had bought this new car and he told me a relative had died but when I

asked who that relative was he didn’t have any good answer. I told him he should

cooperate now and finally he told me that a friend at Delorian Paper had helped

him out.

I got him to confess and right out a statement.

Introduction

5

• Even though this individual may have done a good investigation,

these three simple paragraphs bring doubt to the credibility of the

fraud examiner and his work.

•

• How many mistakes can you spot?

• There are numerous misspellings.

• The vendor company's name is spelled two different ways.

• There are run-on sentences, extra spaces between words, two

different fonts, disagreement between subjects and verbs, and the list

goes on.

• But despite the grammatical errors, the writer doesn't even provide a

good description of what happened. We don't know whom he

interviewed, whether anyone from DeLorien (or Delorian) was

involved, how Darrin actually spells his name, how much he received,

or what the statement contained.

• The report raises more questions than answers.

Mistakes

You are judged by what you write. Everyone, including the best writers, has room for improvement Improving your report writing skills will help you to better document your investigations and bi your reputation.

Documenting results is a particularly important function in fraud examinations. In many instance the written report is the only evidence that the work was performed. Cases can be won or lost the strength of the written report. It conveys to the litigator all the evidence and provides to the fraud examination and to the examiner's work.

If you conduct fraud examinations internally, a well-written report shows your manager, senior management, and the board of directors your skills and capabilities.

Further, the act of writing the report forces the examiner to consider his actions during the fraud examination and organize them in a logical fashion that describes what the examiner did, what facts were uncovered, and how those facts lead to a conclusion. A good report omits irrelevant information, thereby allowing pertinent facts to stand out. A first-rate written report is evidence first-rate examination.

6

Introduction Continue

Report do last forever The records or reports must be accurate and understandable so that

others may know what transpired without having to speak to the report's author. In other words, the report must speak itself.

It will exist for many years as an official record in that case.

An important point to remember is that an investigation is often judged not by what was uncovered, but by the way in which the information is presented.

It may help to keep in mind the three most important purposes of a report:

Conveys evidence. A well-written report conveys all evidence necessary for evaluation of the case.

Adds credibility. Because the written report is completed in a timely manner, it adds credibility to the investigation or examination and can be used to corroborate earlier facts.

Accomplishes the objectives of the case. The knowledge that a written report must be issue after the examination is completed forces the examiner to consider his actions beforehand. 7

Importance of Report Writing Report writing is one of the most important functions in fraud examinations

for the following reasons:

In many instances, the written report is the only evidence that the work was performed.

Cases can be won or lost on the strength of the written report.

The written report conveys to the litigator all evidence needed to evaluate the legal status of the case and indicates how best to proceed.

The written report adds credibility to the fraud examination and to the examiner.

The written report forces the examiner to consider his actions during a fraud examination by requiring documentation of uncovered material.

The written report omits irrelevant information gained during the fraud examination, thereby allowing pertinent facts to be clearly presented and understood.

A satisfactory written report is based upon a satisfactory' examination.

8


Know your reader. Readers of fraud examination reports include company insiders, attorneys, defendants, witnesses, judges, juries, and the media.

Understand your purpose. The primary purpose of a fraud examination report is to communicate the results of a fraud examination and document the work performed.

Use clear, simple language that is not subject to various interpretations. Where necessary, explain the meaning of complex or technical terms. Avoid jargon, slang, and colloquialisms as the fraud examination report might be read by people, including jury members, who are not familiar with such language.

Prepare the fraud examination report during the course of the examination and not long after the fact in order to mitigate the risk of omitting or distorting important data.

Transcribe interviews as soon as possible after the questioning and, upon completing the examination, prepare a final or interim report without delay.

Timeliness preserves your memory of the interviews, enhances the accuracy of witness testimony, and ensures that opposing counsel cannot claim that the interview is unreliable because it was not recorded in a timely manner.

9


Prepare a separate memorandum for each potential witness in order to safeguard confidentiality and avoid subjecting the entire fraud examination report to discover)' by opposing counsel.

List the memoranda in the order in which you conducted the interviews so the reader can follow the examination process as it progresses from one witness to the next.

Be mindful that information in the fraud examination report may be disclosed to adverse third parties, including opposing legal counsel.

Choose your wording carefully, as you may have to defend every word.

10


Deal with sensitive company considerations, such as internal control deficiencies, in separate communications in order to maintain their confidentiality; fraud examination reports will likely be reviewed by people outside the company, including the general public and the opposition.

Include only those matters that are relevant to the examination in the fraud examination often yield information of which the relevance is not immediately such cases, opt for completeness.

Maintain impartiality by including all relevant information regardless of which side it favors or what it proves or disproves.

Reconfirm the facts and ensure that the fraud examination report is accurate. Errors in dates, amounts, spelling, and even the most seemingly unimportant facts or details can leave the entire report open to question and criticism. Fraud examination reports are used as a basis for litigation and prosecution; defense attorneys can cite the smallest error as evidence that the entire document is inaccurate.

11


Use visual aids, including financial statement graphs, time flow diagrams, and matrices, to help the reader understand the case, especially when there are multiple witnesses, events, or other complex relationships involved.

Clarify the fraud examination report until conclusions are self-evident. Your job as a fraud examiner is to find and present facts—not to express opinions or draw conclusions regarding guilt or innocence. The facts of your report should stand on their own, without embellishment or commentary.

Proofread the fraud examination report multiple times for content, accuracy, format, spelling, word usage, grammar, and punctuation.

A poorly written report cannot communicate message effectively to the reader.

12

Friday, July 22, 2016 13

• Fraud Examination/Investigation Report

• A fraud examination report is a document written at the conclusion of a fraud

examination.

• Generally, an organization will have an allegation or a suspicion of fraud and

will conduct a fraud examination to determine whether fraud occurred, who

may have been responsible, and_ the amount of loss.

• It may vary in length and style across entities and types of investigations, but it

generally offers the same message to a similar audience, no matter the entity.

Depending upon the structure of the organization, these reports may be written

for management, the board of directors or audit committee, and possibly the

internal audit team.

• There is customarily an executive summary at the beginning of the report,

which includes the overarching themes of the investigation, as well as a

conclusion, if possible. It also usually includes a detailed explanation of the

activities performed in the investigation, evidence obtained, and justification for

the conclusion that the fraud examiner reached.

• These reports may be very formal documents or simply internal memoranda.

Types of Reports


• Fraud Risk Assessment

• A fraud risk assessment report is generally quite different from most other

reports that a fraud examiner might write.

• It is likely to include less narrative and more charts, graphs, and other visual

means to show the areas of highest risk (and thus, the greatest concern) to the

organization.

• These reports are usually not publicly issued to avoid displaying particularly

weak controls, audits, etc., to fraudsters that could take advantage of such

information.

• Fraud risk assessments are frequently not issued as reports at all, but rather

are kept in documentation for developing audit plans (for auditors) and

mitigating controls (for management). When fraud risk assessment reports are

issued, they are typically high-level discussions of the general risks to the

organization so as not to publicly divulge the detailed information.

Types of Reports


• Audit Report

• There are two different types of auditors (external and internal), each of whom

will issue differ types of reports. These reports may be standard boilerplate

reports or ma}" be customized for t particular audit engagement.

•

• External Audit Report

• The most common and well-known report from external auditors is an opinion of

the entity's financial statements, which is issued in conjunction with the entity's

annual report. Since many part)- users prefer, or even require, financial

information to be certified by an independent external auditor, many auditees

rely on auditor reports to certify their information in order to attract investors,

obtain loans, and improve public appearance. Such reports are typically derived

from standard template used by the CPA firm performing the audit.

•

Types of Reports


• In addition to the report expressing an opinion on the financial statements, other

examples of external audit reports include:

1. Certification audit reports (e.g., an ISO 9000 audit report)

2. Compilations (not an audit, but requires a report)

3. Due diligence

4. Environmental audit report

5. Financial forecasts

6. Filing of a public company's Form 10-Q and Form 10-K

7. Agreed upon procedures

8. Internal audit reports

9. Compliance audit reports

10.Regulatory inspection reports

11.Review of financial statements (an overview with very limited auditing

procedures)

12.Fraud and materiality memo

13.Second opinion

14. Reports on internal controls

15.Employee benefit plan audit reports

Types of Reports


• Internal Audit Report

• Internal Audit's principal product is the final report in which the auditor expresses

opinions, presents the audit findings, and discusses recommendations for

improvements. Different entities use different formats for audit reports. For example, one

entity might issue the entire report in a table that includes very few details regarding the

procedures performed.

• Another entity may issue entirely narrative reports with specific details of the procedures

performed, findings, and recommendations.

• The structure of the report depends upon the end users' needs and desires, but typically

includes (at a minimum) the five C's:

• Condition. What is the particular problem identified?

• Criteria. What is the standard that was not met? The standard may be a company policy

or other benchmark.

• Cause. Why did the problem occur?

• Consequence. What is the risk/negative outcome (or opportunity foregone) due to the

finding?

• Corrective action. What should management do about the finding? What has it agreed to

do and by when?

• Internal Audit Departments may also issue reports summarizing the quarters or the

year's issued reports. These reports are similar in nature to the initial audit report, except

that they will be at a higher level than the specific area-level audit report content.

Types of Reports


• Insurance Loss Report

• If a loss is covered by insurance, a report may need to be prepared to the

insurance company detailing the nature and amount of the loss.

• For example, many companies have a fidelity bond that insures an

organization against losses due to any fraudulent or dishonest acts of its

employees. In order to seek reimbursement under the terms of the bond, the

insured organization may be required to submit a detailed report to the insurer

outlining how the loss occurred, who was responsible, and how the amount of

loss was calculated.

•

• Additionally, the insurance company may require the filing of a "proof of loss"

form or report.

• The insurance company will typically dictate what specific items may be

required in the report.

• Generally, it is best to be as precise as possible when calculating or estimating

losses because once the claim is paid, the insured may be prohibited from

claiming any additional amounts due to that particular loss.

Types of Reports


• Although your report can end up anywhere, you should start by at least assessing your initial target

audience. This is the primary group that you are trying to communicate to in this particular report. As

discussed previously, however, do not make the mistake of assuming that only these individuals will

view the report.

•

• Company Insiders

• Managers and executives will probably review reports of cases involving internal frauds and

misdeeds. However, because these documents will likely be reviewed by persons outside the

company as well, be careful about how you address internal control deficiencies, management or

other sensitive company issues. Depending on the circumstance, it may be better to hand matters in

a separate letter or other form of communication.

• Attorneys

• Reports will be read by attorneys from within the organisation and without. If you prepare a report at

the request of your own counsel, mark each page of the report "privileged and confidential." This

procedure will document any privilege claim. As we've seen, however, marking the report in such a

manner will not necessarily ensure that the privilege will be sustained by a judge, but it will help

identify those items that may be privileged so that they can be protected from disclosure until

otherwise ordered by a judge.

•

• Defendant(s)

• In either civil or criminal litigation, the defendants will eventually see most, if not all, of a report.

• Any inaccuracies or conclusions in the written material will definitely be attacked.


20

• Witnesses

• If the case reaches court, the witnesses you identified and interviewed in your report will be

provided with copies of their own statements, if not the entire report.

• Press

• In some instances, the press may gain access to a report. Report data may be obtained from

information disclosed during litigation or, in some instances, from confidential sources. The

press is particularly adept at uncovering mistakes committed during the preparation of report

information, or any conclusion that has been drawn by the fraud examiner.

• Judges

• A judge may review the report as the fact finder (if there is no jury) or to rule on its

admissibility.

• Juries

• While most legal disputes are settled or otherwise disposed of before a jury trial, a fraud

examination report should be constructed with a jury in mind. If the case reaches trial, the

jury will usually receive your entire report for review and analysis.

• For this reason, the report should be accurate and without bias. You should understand that

juries do not normally have a background in business and accounting matters.

• Therefore, you should prepare your report to be as simple and easy to understand as

possible.

• Remember, of all the important individuals who might review your report, the members of the

jury will by far be the most important.


21

• A fraud examination report should stand on its own. It should adequately answer the classic

questions of who, what, why, where, when, and how. If the report is prepared properly, the

reader should not have to refer to any other documents in order to understand the issues.

• Before you begin writing, take some time to think. Review all of the documents and evidence

you have accumulated to make sure that you are thoroughly familiar with the parties and facts

before you begin your first draft.

•

• It may be helpful to first create a timeline to help you focus on the crucial facts that occurred

and in what sequence they happened.

• Likewise, if there are numerous people involved, you may need to create a list of each person

and a brief description of that individual's identity and role.

•

• Don't create your first draft too soon. As you review the facts, you can jot down notes about

you want to be sure to include, but don't short change the thought process.

• A complete review of all the evidence before writing the report is crucial and will help you

when you include the facts in your report.

•

• Also, it is important to allow yourself plenty of time to create the report. If you write the report

the night before it is due, you are guaranteed to have a poorly written report.

• Allow several days to review the material and create the report.

•

Planning the Report

22

• Outlining

• In the next chapter, we provide you with a sample report format. The format is an outline of

the report should contain. Some report writers probably do not need to create their own

outline especially for short reports. Other writers feel it is an invaluable step. We recommend

simply the standard report writing format as your outline, and as you review the evidence,

simply ma notes of facts and points you want to be sure to include in the final report.

•

• Write, Revise, and Repeat

• For many (including seasoned authors), the biggest obstacle to overcome in a report is the

initial blank page on your monitor. Begin with the background and then move into the other

section you get tired, stop and take a break. Do not do all of your editing on the computer.

You read and see things differently in different formats. Don't be afraid to print out copies of

your report and review the hard copies. Things often look different in print and you will notice

things you didn’t see before.

•

• Above all, allow yourself plenty of time. Creating the report is a process of writing, revising,

revising, revising, and revising.

• You should allow yourself time to review and revise your work. You should also allow time for

others to review your report and allow time to incorporate any good suggestions they may

have.

Planning the Report

23

• Avoiding Common Reporting Mistakes

• Conclusions and Opinions

• In a report-writing context, it is a common error to treat conclusions and opinions as equals. It

is important to keep in mind the following distinctions to avoid improper reports.

• Conclusions

• Conclusions are based on observations of the evidence, whereas opinions call for an

interpretation of the facts. The fraud examiner/investigator must be very circumspect about

drawing conclusions, in most situations, the conclusions from the examination should be self-

evident and should not need to be pointed out in the report. If the conclusions are not

obvious, the report might need to be clarified.

• Opinions

• You should not state opinions regarding the guilt or innocence of any person or part}'.

• The Association of Certified Fraud Examiner's Code of Professional Ethics specifically

prohibits statements of opinions regarding guilt or innocence, as this is the job of the judge or

jury. Opinions regarding technical matters are permitted if the fraud examiner is qualified as

an expert in the matter being considered.

• For example, a permissible expert opinion might be in regard to the relative adequacy of an

entity's internal controls. Another opinion might discuss whether financial transactions

conform to generally accepted accounting principles.


24

• Evidence

• Legal standards provide guidelines for handling evidence and preserving the chain of custody, and if

these standards are not followed, evidence may be inadmissible during a legal proceeding. The fraud

examiner can avoid problems of evidence maintenance by simply documenting—in memorandum form—

the receipt or release of all evidence.

• The memorandum should include the item's title/description, the date custody was transferred part taking

custody, and the signature of the party taking custody, if possible.

• Copy Documents

• Most evidence in fraud cases will be in document form. When operating under a lawful court order that

compels a custodian to furnish original documents, the examiner should copy those documents

(preferably in the presence of the custodian). Then the examiner should furnish the custodian with a

receipt describing the documents copied or taken.

• Safeguarding and Maintaining Documents

• After obtaining documents, the examiner should secure them for evidence. Be sure that only those

people with an absolute need for the documents can gain access to them. For practical purposes, it is

usually best to copy all documents (original documents are usually not included in reports). Mark all

original documents in a unique manner, preferably by using initials and dates. To avoid defacing originals,

use a small but distinctive tick mark or other form of identifier.

• When documents are voluntarily furnished, leave the originals in place and work with the copies.

• Don't take shortcuts with evidence, and certainly do not lose or misplace crucial documents.

• It is inexcusable for a fraud examiner to mishandle evidence; doing so will almost certainly compromise

the case.

•


25

1. Be Honest and Stick to What You Know

2. Beware of Wandering into Legal Territory

3. Talk to Your Attorney Before You Put Anything in Writing

4. State Only the Facts

5. Write for a Lay Audience

6. Be Brief

7. State Things Clearly and Directly

8. Use Precise Language

9. Use Active Voice

10.Use Objective Language

11.Avoid Bias

12.Avoid Argumentative Language

13.Do Not Comment on the Credibility of Witnesses

14.Avoid Broad Unsupported Statements of Opinions

15.Do Not Speculate or Guess

16.Expert Witness Report Must Be Consistent and Accurate

17.Be Professional


26

• There are numerous things an expert can do to make his report more

professional.

• The following list provides some examples:

1. Place the report in a report cover or binder.

2. Use a 12-point font that is easy to read and looks professional.

3. Use 11/2 lines of space between each line, which will make the report easier to

read and will provide space for the reader to make notes.

4. Include a well-drafted coyer page, which should include a title, case citation, the

expert's name, and the expert's address.

5. Provide an executive summary, especially when reports are long. An executive

summary should include a brief summary of the expert's conclusions with

supporting rationale.

6. Use topic headings to break up the report, making the report easier to read and

navigate.

7. Headings may also be very useful to the expert who is using his report while

testifying.

8. If the report is long, use tabbed dividers.

9. Number the pages because the lack of page numbers often gives the report a

sloppy and unprofessional appearance.


27

1. When preparing an expert report, keep the following issues in mind:

2. Clearly state the task or engagement:

a. Audience

b. Purpose

c. Limitations

d. Arrangement for fees

3. Identify participants.

4. Provide an executive summary of findings, conclusions, and recommendations.

5. Provide an analysis of transactions:

i. Chronology

ii. Transaction-by-transaction

6. Include charts and graphs.

7. Summarize important facts.

8. Provide references to industry standards, if applicable.

9. Provide specific references to the data used to support the expert's opinions should be

made, including references to any industry standards, market data, or other economic

analysis that have been considered.

10. Provide analysis of alternatives and possible defenses.

11. Present in narrative, graphic and financial statement formats.

12. Summarize qualifications.

13. Summarize materials reviewed and/or relied upon.

14. List witnesses and provide copies of statements.

15. Provide findings, conclusions, and recommendations.

Additional Considerations for Written Reports

28

• Good writing takes time.

• It takes time to plan, write, and revise your report.

• But it also takes time to review your writing style and correct bad

habits.

• A report can end up anywhere: Always remember that you never

know where your report will end up.

• It could surface anywhere.

Conclusion

30

• Albrecht W. S (2006), Fraud Examination, Thomson South-Western Publishing, 2006.

• Association of Certified Fraud Examiners’ Manual, (2014)

• Association of Certified Fraud Examiners, www.acfe.com

References

Economy & Finance

Forensic/Investigation report writing techniques