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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: Wiley Corporate F&A
- Sprache: Englisch
Straightforward, practical guidance for working fraud examiners and forensic accountants In Data Sleuth: Using Data in Forensic Accounting Engagements and Fraud Investigations, certified fraud examiner, former FBI support employee, private investigator, and certified public accountant Leah Wietholter delivers a step-by-step guide to financial investigation that can be applied to almost any forensic accounting use-case. The book emphasizes the use of best evidence as you work through problem-solving data analysis techniques that address the common challenge of imperfect and incomplete information. The accomplished author bridges the gap between modern fraud investigation theory and practical applications and processes necessary for working practitioners. She also provides: * Access to a complimentary website with supplementary resources, including a Fraud Detection Worksheet and case planning template * Strategies for systematically applying the Data Sleuth® framework to streamline and grow your practice * Methods and techniques to improve the quality of your work product Data Sleuth is an indispensable, hands-on resource for practicing and aspiring fraud examiners and investigators, accountants, and auditors. It's a one-of-a-kind book that puts a practical blueprint to effective financial investigation in the palm of your hand.
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Seitenzahl: 477
Veröffentlichungsjahr: 2022
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Table of Contents
Cover
Title Page
Copyright
Dedication
Foreword
Preface
Acknowledgments
Chapter 1: Building a Data Sleuth Team
THE FIRST TEAM
THE FORENSIC ACCOUNTANT
TECHNICAL AND STRATEGIC
THOROUGH AND EFFICIENT
DETAIL-ORIENTED AND EFFECTIVE COMMUNICATION
ACCOUNTING KNOWLEDGE AND LEGAL KNOWLEDGE
MEETING DEADLINES AND DEVELOPING BUSINESS
FORENSIC ACCOUNTANT PROBLEMS
THE SCALABILITY PROBLEM
THE STRATEGY PROBLEM
THE REVIEW PROBLEM
THE SUSTAINABILITY PROBLEM
DATA SLEUTH SOLUTIONS
THE SCALABILITY SOLUTION
THE STRATEGY SOLUTION
THE REVIEW SOLUTION
THE SUSTAINABILITY SOLUTION
NOTES
Chapter 2: The Data Sleuth Process
ENGAGEMENT TYPES
SIMULTANEOUSLY MANAGING CLIENT EXPECTATIONS AND OBJECTIVITY
PROFESSIONAL STANDARDS
THE DATA SLEUTH PROCESS
NOTES
Chapter 3: The Data Sleuth Necessity
FORENSIC ACCOUNTING ENGAGEMENTS VERSUS EXTERNAL FINANCIAL STATEMENT AUDITS
THE EVOLUTION OF FORENSIC ACCOUNTING
THE CASE OF THE CASH BACK PAYROLL SCHEME
START WITH THE EVIDENCE, NOT THE SCHEME
THE CASE OF THE GAMBLING EXECUTIVE DIRECTOR
Chapter 4: Data Sleuth Considerations
INVESTIGATIONS AFFECT REAL PEOPLE
THE CASE OF THE NONEXISTENT INVENTORY
THE FRAUD FORMULA
STAYING ON TASK WITH PURPOSE IN MIND
THE INVESTIGATION DECISION TREE FOR A DATA SLEUTH
RECOVERY AVENUES
THE CASE OF THE MAN CAVE
NOTES
Chapter 5: Client Communication and Involvement
THE CASE OF THE INITIAL CLIENT MEETING
CLIENT EXPECTATIONS
DATA PROCUREMENT
CLIENT INVOLVEMENT DURING AN INVESTIGATION
ONGOING CLIENT COMMUNICATION
Chapter 6: The Data Sleuth Case Plan
THE DATA SLEUTH PROCESS
THE CLIENT'S INVESTIGATION PRIORITIES
EVALUATE THE SUBJECT'S ACCESS THROUGH RISK-BASED ANALYSIS
DATA SLEUTH ANALYSIS FRAMEWORK
FROM CONCEPTUAL VENN DIAGRAM TO COMPARATIVE DATA ANALYSIS
THE DATA ANALYSIS PLAN
DATA AND INFORMATION GATHERING
COMMUNICATION OF THE CASE PLAN
THE CASE OF THE DUPLICATE PAYROLL – CONCLUSION
Chapter 7: Risk-Based Analysis
THE CASE OF THE PUZZLING ENTRIES
RISK FOCUS IN AUDITS VERSUS RISK FOCUS IN INVESTIGATIONS
THE CASE OF THE MOM OF THE YEAR
EVALUATING RISK IN DIVORCE CASES AND ESTATE AND TRUST DISPUTES
Chapter 8: Data Sources and Data Processing Techniques
DATA SOURCES EXPLAINED
QUANTITATIVE AND QUALITATIVE DATA SOURCES
DATA SOURCES FOR QUANTITATIVE EVIDENCE
DATA SOURCES FOR QUALITATIVE EVIDENCE
USING QUANTITATIVE AND QUALITATIVE DATA SOURCES
DATA PROCESSING TECHNIQUES
RELEVANT PERIOD
GETTING ORGANIZED BEFORE BEGINNING DATA PROCESSING
CONSIDERATIONS BEFORE PROCESSING DATA
ACCOUNT SCHEDULING STEPS
FORMATTING ACCOUNT SCHEDULES AND NORMALIZING PAYEES
NOTE
Chapter 9: Standard Data Sleuth Analyses: Comparative Analysis and Source and Use Summaries
COMPARATIVE ANALYSIS
THE CASE OF THE CASH FLOW FIASCO
SOURCE AND USE SUMMARY AND ANALYSIS
BANK ACCOUNT SOURCE AND USE ANALYSIS
CREDIT CARD ACCOUNT SOURCE AND USE SUMMARY
Chapter 10: Standard Data Sleuth Analyses: Interesting Data Findings, Risk Indicator Analysis, and Payroll Analysis
INTERESTING DATA FINDINGS
RISK INDICATOR ANALYSIS
PAYROLL ANALYSIS
OVERPAYMENTS OF PAYROLL
NOTES
Chapter 11: Findings, Reports, and Testimony
FINDINGS
REPORTS
A REPORT FOR CRIMINAL CHARGES
REPORT RECOMMENDATIONS FOR LAW ENFORCEMENT REFERRAL
AN EXPERT REPORT FOR CIVIL LITIGATION
AN EXPERT REPORT FOR INSURANCE REIMBURSEMENT
REPORT ORGANIZATION RECOMMENDATIONS
TESTIMONY
NOTES
Chapter 12: Practice the Data Sleuth Process
REVIEW OF THE DATA SLEUTH CASE PLAN
REVIEW OF DATA SLEUTH DATA PROCESSING
REVIEW OF THE DATA ANALYSIS PLAN AND STANDARD DATA SLEUTH ANALYSES
CASE STUDY 1: THE CASE OF THE DISAPPEARING BUSINESS
CASE STUDY 2: THE CASE OF THE SNEAKY CFO
Chapter 13: The Cases that Went Wrong
THE CLIENT WHO BELIEVES HE WAS WRONGED
THE CLIENT WHOSE DECISIONS AFFECT AN INVESTIGATION
Chapter 14: Data Sleuth Expansion
DATA SLEUTH EMPOWERS THE CURIOUS
DATA SLEUTH DIVISIONS
PUBLIC ACCOUNTING FIRMS
CONSULTING AND ADVISORY FIRMS
THE CASE OF THE PHONY PROFESSIONAL
LAW FIRMS
LAW ENFORCEMENT
THE FUTURE OF DATA SLEUTH
DATA SLEUTH AS PREVENTION
LICENSES, CREDENTIALS, AND PROFESSIONAL DEVELOPMENT
Appendix: Case Study Exercise Solution Recommendations
CASE STUDY 1: EXERCISE 1 – SOLUTION RECOMMENDATIONS
CASE STUDY 2: EXERCISE 1 – SOLUTION RECOMMENDATIONS
CASE STUDY 2: EXERCISE 2 – SOLUTION RECOMMENDATIONS
About the Author
About the Website
Index
End User License Agreement
List of Tables
Chapter 4
TABLE 4.1 Examples of bank statement transactions or images and correspondin...
Chapter 6
TABLE 6.1 Comparative analysis of payroll data and timesheet data.
TABLE 6.2 Case plan prepared for George's example case.
Chapter 7
TABLE 7.1 “Money In” section of the Data Sleuth Fraud Detection Worksheet fo...
TABLE 7.2 “Money Out” section of the Data Sleuth Fraud Detection Worksheet f...
TABLE 7.3 Sample daily data sources comparisons.
Chapter 8
TABLE 8.1 Illustration of a data set created from a bank statement data sour...
TABLE 8.2 Example Data Sleuth document inventory.
TABLE 8.3 Example Data Sleuth Account Index.
TABLE 8.4 Example bank account schedule and credit card account schedule.
Chapter 9
TABLE 9.1 Comparative analysis illustration using data sources provided by t...
TABLE 9.2 Sample bank account Source and Use Summary.
TABLE 9.3 Sample credit card Source and Use Summary
Chapter 10
TABLE 10.1 Illustration of month-over-month pivot table
TABLE 10.2 Sample Interesting Data Findings Summary
TABLE 10.3 Example of a risk indicator analysis involving purchasing records...
TABLE 10.4 Illustration of identifying employee records with duplicate socia...
TABLE 10.5 Illustration of identifying employee records without addresses.
TABLE 10.6 Illustration of identifying employee records with duplicate addre...
TABLE 10.7 Illustration of sorting by total risk indicators.
Chapter 11
TABLE 11.1 Example of a Findings Summary.
TABLE 11.2 Example of a table provided to law enforcement as attachment to r...
Chapter 12
TABLE 12.1 Case planning worksheet example for Case Planning Exercise 1.
TABLE 12.2 Data Sleuth Fraud Detection Worksheet example for Case Study 2: E...
TABLE 12.3 Data Sleuth Fraud Detection Worksheet example for Case Study 2: E...
TABLE 12.4 Case of the Sneaky CFO Planning Worksheet example for Case Study ...
List of Illustrations
Chapter 1
FIGURE 1.1 What we know and don't know matrix.
Chapter 2
FIGURE 2.1 Illustration of the Data Sleuth Process used by Workman Forensics...
FIGURE 2.2 Funnel representation of information in an engagement.
FIGURE 2.3 Illustration of the order of key interviews throughout the Data S...
FIGURE 2.4 Illustration of data analysis findings buckets.
Chapter 4
FIGURE 4.1 Illustration of an investigation decision tree.
Chapter 6
FIGURE 6.1 Data Sleuth Process case planning steps flowchart.
FIGURE 6.2 Illustration of using conceptual Venn diagram in engagements.
FIGURE 6.3 Venn diagram illustration comparing expected balance to actual ba...
FIGURE 6.4 Venn diagram illustration comparing commission paid under incorre...
FIGURE 6.5 Venn diagram illustration of excess distributions to Partner B.
FIGURE 6.6 Venn diagram illustration of missing salary in joint bank account...
FIGURE 6.7 Venn diagram illustration comparison of net income with inflated ...
FIGURE 6.8 Check and direct deposit payments to Stacey during 2008.
FIGURE 6.9 Check and direct deposit payments to Stacey during 2011.
Chapter 7
FIGURE 7.1 Illustration of interconnectivity of cash, internal controls, and...
FIGURE 7.2 Pie chart of possible cash uses with an organization.
FIGURE 7.3 Illustration of vouching procedure for deposits in transit on a b...
Chapter 10
FIGURE 10.1 Benford's analysis graph of number of write-offs from patient ac...
FIGURE 10.2 Benford's Analysis graph of suspicious first two digits identify...
Chapter 14
FIGURE 14.1 Illustration of the Data Sleuth Process vision.
FIGURE 14.2 The Data Sleuth convergence.
Guide
Cover Page
Title Page
Copyright
Dedication
Foreword
Preface
Acknowledgments
Table of Contents
Begin Reading
Appendix: Case Study Exercise Solution Recommendations
About the Author
About the Website
Index
End User License Agreement
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The Wiley Corporate F&A series provides information, tools, and insights to corporate professionals responsible for issues affecting the profitability of their company, from accounting and finance to internal controls and performance management.
Data Sleuth
Using Data in Forensic Accounting Engagements and Fraud Investigations
LEAH WIETHOLTER
Copyright © 2022 by John Wiley & Sons, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Names: Wietholter, Leah, author.
Title: Data sleuth : using data in forensic accounting engagements and fraud investigations / Leah Wietholter.
Description: Hoboken, New Jersey : Wiley, [2022] | Series: Wiley corporate f&a | Includes index.
Identifiers: LCCN 2021062798 (print) | LCCN 2021062799 (ebook) | ISBN 9781119834380 (cloth) | ISBN 9781119834403 (adobe pdf) | ISBN 9781119834397 (epub)
Subjects: LCSH: Forensic accounting. | Fraud investigation.
Classification: LCC HV8079.F7 W54 2022 (print) | LCC HV8079.F7 (ebook) | DDC 364.16/3—dc23/eng/20220112
LC record available at https://lccn.loc.gov/2021062798
LC ebook record available at https://lccn.loc.gov/2021062799
Cover Design: Wiley
Cover Image: © DNY59/Getty Images
For Chris, Sherlock, Irene, and Watson
Foreword
“AND WE GET TO carry a gun.”
They are not quite the first words I heard Leah speak, but they are certainly not far off. Her first comments teasingly ribbed the Big Four accounting firms, “I've never worked an 80-hour week.” At the time, I worked for one of them.
Leah was speaking at an event for students studying accounting and finance and led hard into her presentation. After an internship with the Federal Bureau of Investigation (FBI) in Washington, DC, she had gone on to extend her internship into a role on a forensics unit in Oklahoma. She had taken a different path in her studies and was enjoying the chance to share it with others and to inspire others to consider options that may go overlooked for the more traditional. Even then, she was trying to see different ways of doing things. (To be clear to those contemplating an intern with a sidepiece hanging out going through boxes of bank statements, I don't think she personally carried a gun in her internship role, but it was certainly a future job “perk” for agents.)
At the time, I chuckled a bit at her playful audacity. I had been on my own journey and could faithfully say at the time that I had not worked an 80-hour week, despite working for the jokingly villainous Big Four as she had briefly painted them. But I have to admit, her presentation changed my own that would follow. I would have to step up my game.
Looking back, though, I think the spirit behind the person expressed in those two phrases would resonate and only grow as I would get to know her more. Leah is a leader – someone willing to take steps others haven't and someone who looks for ways to bring people along with her on the ride.
Speaking of taking steps, that's actually how we would become friends. In its simplest telling, the story goes that about a dozen people all found their way to an informal ballroom dancing group set up by a mutual friend. Everyone knew someone, but no one knew everyone. And no one knew how to ballroom dance. At all.
For about three months, we would meet up weekly and trade partners and bruised toes and a few laughs and red faces. But we would also trade spots at meals afterward. Then we would trade turns at different people's houses, at volleyball nets, at cookouts, and at ’80s themed birthday parties where we learned an introductory version of the Thriller dance. We would exchange conversations on topics more meaningful about purpose and dreams and courage to take next steps. I will always count it a great inspiration that ballroom dancing lessons would connect people in such meaningful ways. Although some wouldn't find a lasting passion for the tango, we would find lasting passion to see each other accomplish the things that mattered to them.
Leah stands out for her customary boldness. After working with a local accounting firm following her time with the FBI, she realized she had the skill, ability, brand, and nerve to chart her own course. Giving it some intentional thought – but not a second one – she started her own business. She recognized that she had value to offer and that there was a niche she could fill. She didn't need a large accounting firm. She didn't need the FBI. In our conversations, she was certainly grateful for all the lessons and the relationships. But she didn't need the “tried and true” structures and career paths. She was perfectly capable to chart her own course. No, it is more than that – it would have been a compromise not to.
Workman Forensics was born.
There are three factors that are common to most fraud that is perpetrated: incentive/pressure, opportunity, and rationalization. How ironically apropos that these would also be key elements in entrepreneurship, and especially in Leah's entrepreneurship for a business to help detect and prevent fraud. Still, there is something more. As much as it takes incentive and rationalization to make a case to step into the unknown and create something new, it is often seeing and grasping the opportunity that separates entrepreneurs. Although the three sides of that triangle are always relevant, they matter only when someone takes action. Maybe we all see opportunities, find incentives, and can rationalize the journey we would take. But few of us ever do.
It is not only seeing the opportunity, but seizing it, that separates Leah from her peers. And it continues to separate her.
This is a good time to insert a quick observation from those ballroom dance days of old. Leah was determined and present, and I like to think she had a good time, though she did not continue past those three months unless cajoled. She had one main struggle along the way: she had a hard time following. She was always ready to lead, and she knew where she wanted to go. And her eyes were set on bigger things.
As I mentioned, she started her forensics business. She signed the lease on a trendy commercial district in midtown Tulsa and signed up to capture the dream she had described along the way.
It took off.
Under her leadership, the business grew to the point that she had more work than she could do alone. But she was undeterred – she would bring disparate people together to accomplish something more than each could do alone. Faithful to her commitment to community, she found ways to bring others along with her. In fact, she would hire some of those very people we met on the dance floor, with skills ranging from education to accounting and others along the way. They didn't need to be great at every aspect, but their combined skills could lead to greater outcomes.
She trained them and used their varied skillsets, all repurposed as part of a cohesive strategy. From that, Leah was already starting to see how the different pieces fit together that would become the basis for the Data Sleuth. She had to be able to separate the forensics process into manageable activities that she could direct others to complete and bring them back together into meaningful analysis. It allowed her business to grow and for her to take people who didn't have a deep forensics background and teach them to perform integral activities for her thriving business.
But Leah didn't stop there. Instead, the realized dream of Workman Forensics gave flight to others. In the world where podcasts were only being conceived, she worked with others to develop a new concept podcast that would make the world of forensic accounting available – and more important, interesting – to the masses. In a whodunnit series called The Investigation Game, both a training curriculum and a podcast, she would innovate a way of teaching that even the certification and training boards recognized led to meaningful education. She is frequently innovating.
I have been privileged to be surrounded by strong women in my life, who have taught me lessons on courage, strength, and resilience. My grandmother opened a cosmetics business in her 40s after co-owning a hardware store and boarding people at our grandparents’ home. My aunt ascended various tiers in her career to support nutrition needs of children while simultaneously battling a crippling form of breast cancer, earning her PhD while taking bouts of chemo. My mom would face being a single parent and a caretaker for her own mother who lived a thousand miles away while holding down a full-time job and the grace to still share and give into others’ lives with joy and sincerity.
I can't tell if Leah has ever really considered the challenges that she may have uniquely faced in the tango she has been dancing with her own destiny. Like those old ballroom lessons, I think she has continued to be the first mover in that duo, guiding destiny and seeing clearly her own next steps. And in a larger sense, I see how she continues to find an unconventional path, and to inspire others to join her along the way.
Reflecting on those first comments I remember from her all those years ago, I honestly don't know for sure whether she carries a firearm at this stage of her career. Or whether she would still name it as a key perk in the path she's taken. I like to think that in some ways, she's traded it for a machete – a tool to clear new paths – and is leaving markers to help others join her along the way. Or in another sense, maybe the Data Sleuth Process has opened up an entirely different arsenal. She's found that in her business, sidekicks carry better ammunition than sidearms.
James Bowie, CPA
Preface
IN 2013, I RECEIVED the recognition of being one of Oklahoma's 40 under 40, sponsored by Oklahoma Magazine. As part of this honor, I was asked to attend a photo shoot to publish with my bio for the magazine. To my surprise, when I arrived, there was also a video interview component for which I had not prepared. The interviewer asked, “Where do you see your business in five years?” For a moment I thought, Hopefully I'm still in business. I was a little over two years into the entrepreneurship thing and felt as though every day was only about survival. Fortunately, what I heard myself say instead was, “To make forensic accounting accessible to more people.”
But let's start at the beginning. When I was 12 years old, I was obsessed with a radio drama, Adventures in Odyssey, specifically the episode titled, “A Name, Not a Number.” In this episode, the character Tasha Forbes was introduced as a special agent for the National Security Agency. To this point in my life, I had not thought much about careers. If you had asked me then what I wanted to be when I grew up, I would have said I was going to be a teacher. I do think I consciously realized that women could be something other than a mom or a teacher. This episode about Tasha's career as an agent, however, made me realize that I, as a female, could be an investigator. As an avid reader of mystery novels, I determined that I would become an investigator.
I continued with this dream of a career through high school and learned as much as possible about every federal law enforcement agency. Eventually, I decided that the Federal Bureau of Investigation was the agency for me and began to invest in and focus on areas that would increase my chances of becoming an FBI agent. In 2006, I was given the internship of a lifetime as one of the students selected to participate in the FBI's Honors Internship Program in Washington, DC.
My first day in Washington, DC, was a 12-year-old girl's dream coming to life at age 20. Dressed in a black pantsuit and turquoise button-up shirt, I felt smart, strong, and ready to learn all that I could over the 10-week internship. Standing in line with my new internship friends and at least 100 other college-aged students from around the United States, I was ready to go through security to enter the doors of the headquarters of the Federal Bureau of Investigation.
“What's your name?” the security guard asked. “Leah Workman.” He asked a second time, this time asking for my driver's license. This is not a good sign, I thought. My mind started racing through all the paperwork, background check interviews, polygraph testing and wondered if maybe I had missed completing one of the many federal forms. All the students chatting outside of the J. Edgar Hoover Building in nervous excitement about their first day sounded like a loud, constant buzz, but as soon as the security guard said, “You're not on the list. Please step aside,” everything went silent. Blood drained from my face.
The security processing of the interns slowed to a complete stop, and the security guard pulled me out of line. Heads began to turn in my direction as the line stopped moving, and thankfully, before it became even more embarrassing, the internship coordinator for my group stepped forward to save the day. My name had in fact been omitted from the list, and to this day, I still do not know why. After a short discussion with the internship coordinator, the security personnel verified that I was indeed an intern. I was admitted, received my access badge, and was sworn in.
After orientation and exploring DC, my internship group returned to West Virginia for our work assignments. The internship coordinator let us know we would be taking group photos, meeting with management, and receiving our assignments. We made sure to look as professional as possible by wearing suits again that day. As soon as we walked outside to carpool to the office, I realized that I once again was going to be singled out. Everyone was wearing a black suit, and I was wearing a cream suit.
What began as embarrassment and very unwanted attention those first few days of the internship resulted in an incredible pattern that forced me to learn quickly that being the only one or singled out or different did not have to be detrimental. In fact, these uncomfortable moments laid a foundation for a career advantage.
The 10-week internship was just the beginning of my career with the FBI. When I returned to school the following semester, I was not only about to graduate with my accounting degree, but because of a new program, I was able to continue the internship as an actual FBI employee under the direction of an experienced forensic accountant for the following two years. At the end of the two-year assignment, with only one career option in mind, I took the phase 1 assessment to become an FBI special agent. A few weeks later, based on my assessment results, I was not accepted. Devastated, I relived the exam over and over as I felt lost trying to find my next step. The test questions were like that of a personality test coupled with an assessment of my decision-making abilities. Although this is not the intention of the test, I felt as if the FBI was telling me once again, that I, including my personality and decision-making choices, did not fit in.
My lifelong dream career had been denied me, but as it was not the first time, after a brief period of mourning, I decided to do what I heard all “good” accountants do. I applied to work in public accounting. I chose to work in the tax department because I could then at least prepare my own tax returns.
While working for the accounting firm in Tulsa, forensic accounting was becoming a more requested service, and the firm invited me to work on forensic accounting engagements and fraud investigations. While there, I was able to work on several cases including a $3 million embezzlement from a bank, a divorce, and an engagement involving the tracing of millions of dollars of funds. It was really exciting to take what I learned working for law enforcement and under the direction of the FBI forensic accountant and apply it to the private sector. One major problem with this setup remained. In working for a public accounting firm, I still had to prepare tax returns during the busy seasons leading up to the tax deadline. After a couple of years, I started looking for another job. When I found none that interested me, an accounting headhunter suggested, “What would happen if you started your own investigation and forensic accounting business?” In November 2010, I opened Workman Forensics.
Workman Forensics was established to provided forensic accounting and fraud investigation services, and we have continued to provide only these services for over 11 years. I have managed a team as big as 11 employees, and as small as 1– which included only me. In 2014, I realized that the number of hours I was working per week managing deadlines, business development, human resources, and casework was not sustainable. I am grateful to the many team members who have worked with me over the last six years. It is because of their hard work and specialized talents that we were able to begin developing what is now known as the Data Sleuth Process.
Being an entrepreneur and business owner for over 10 years now, I have read so many books and listened to so many podcasts by great leadership and business minds that talk about vision. If I am being honest, after hearing the term “vision” repeatedly, I began to tune it out because my interpretation of the way they defined vision felt materialistic. The goal of a business vision seemed to focus on doing big things to make more money, which is not a bad thing when someone is in business. I just did not want that to be my vision for my business.
In January 2021, I realized that I needed to embrace vision as more than financial goals beginning with the sharing of seemingly enormous ideas and goals I had been cultivating over the last few years. To take it a step further, I chose a word for the year to break down this vision into an action item; the word chosen was “invest.” That one-word vision for the year has since resulted in one team member earning her Certified Fraud Examiner's credential. I passed the Certified Public Accountant exam. Another team member is working to earn the Certified in Financial Forensics credential. We are even now in the process of building an escape room experience. As we continue to move forward, I am amazed by the power of the word I once avoided, vision.
It was actually during the strangeness of 2020 that the concepts presented in this book truly emerged with great promise. When all of our referral sources temporarily stopped referring because the courthouse was closed and clients were asking to pause our casework, our team made continuous improvements to the process and continued to ask ourselves, “When we open again, what are the things we will want to use in a better way?” We focused our working hours to improving the Data Sleuth Process to the point where it can be shared with the readers of this book. Through the improvement of this process, we were able to begin the creation of the subset process Find Money in Divorce – a modular course with training videos and workbooks to help spouses find hidden assets and understated income in divorce cases. It was during this time that we created new game-based virtual case studies qualifying for continuing education for The Investigation Game product line.
Even though Workman Forensics may have started as a story about survival, it is now a story of innovation, as we continue to meet and work with professionals all over the world through casework, The Investigation Game trainings, and The Investigation GamePodcast. Our strategic approach to financial investigations using the Data Sleuth Process has changed my business for the better, and I am excited to experience where imagination and vision take us next.
Acknowledgments
THANK YOU TO MY family and friends who support and listen to my ideas.
Thank you to the past and present Workman Forensics team. Without your encouragement, diligence, and continuous improvement, the Data Sleuth Process would not be what it is today.
Thank you to friends, family, and colleagues who reviewed each chapter. I am forever grateful.
Chapter 1Building a Data Sleuth Team
AT THE INTERSECTION OF the forensic accounting, fraud investigation, and data analysis engagements is the Data Sleuth Process. Born out of necessity from my solo practitioner struggles, the practicality of the Data Sleuth Process is useful for solo practitioners – especially those new to the profession. But the true power of the Data Sleuth Process is realized in a team-centric environment. Most of the skills expected of a solo forensic accountant are those that improve with experience, but in the context of a team, the expectations can be distributed across all of the members instead of relying on one person to be a jack-of-all-trades. Each investigation engagement presents its own unique challenges, and it may feel as though only someone with years of experience can provide a solution; however, with a reliable, duplicative process, a team-centered model can be developed and provide a better work product than had the professional performed the engagement alone.
In the early days of building my practice, I intentionally ignored all of the business professionals who relentlessly talked about scalability being the ultimate business leader's dream with time for vacation and rest. I would think, You preach this method because you sell products or have recurring client engagements and have never worked an investigation. I was convinced that the only duplication that had a chance of happening in my business was by finding someone who I trained to be like me. I tried and failed many times, which only reinforced my cynicism about the scalable dream. The responsibilities and requirements of being a forensic accountant or fraud investigator who provides expert testimony require significant career and life investment. Forensic accounting career opportunities sounded intriguing to team members until they realized the accompanying pressure. They watched as I developed business, while managing client expectations and deadlines, reviewed analyses with extreme scrutiny to reduce the risk of errors being discovered during testimony, and continued study of accounting and legal knowledge. Many team members were happy to play a part in the investigations, but no one wanted to become the forensic accounting expert.
My caseload as a solo practitioner grew so much that I could not physically work each investigation with the level of care needed in the available waking hours of a week. I began hiring team members, but I struggled to find a way to equip team members with the knowledge they needed to make independent decisions to reduce my work. Frustrated with the long hours and my suffering health, I began working with a business coach. During one of the sessions, he asked me, “Leah, if you were at home sick, and I offered to work for you for free, what would you tell me to do? Where would I start?” I stared blankly at him. His response to my seemingly never-ending silence was, “You look like a deer in headlights,” and he repeated his previous questions. I finally responded with great frustration in my eyes, “I would tell you to go home, and I'll finish it when I feel better.” He continued to increase the pressure and questions because he refused to accept that answer, and eventually, he said, “Fraud schemes and the ways in which people steal money are not infinite. Tell me the first answer that comes to mind when I ask, ‘What do you do?’” I blurted, “I find money for people.” We both stopped and realized the clarity of that statement. I find money for people. This mental breakthrough planted the seeds for the Data Sleuth Process to grow where it is now shared with investigation professionals around the world.
THE FIRST TEAM
When my childhood dream of becoming an agent with the Federal Bureau of Investigation seemed to vanish, and public accounting was no longer a means to returning to the FBI, I felt lost. Although I did not realize it at the time, the skills I learned and experience I gained in those first few years of my career were the foundations to opening my own forensic accounting and fraud investigation business in 2010.
One of the factors playing into my decision to leave public accounting was the volume of forensic accounting work I was personally responsible for, including data processing, analysis, and review. Management encouraged the forensic accounting work, but there was no focused development plan for a more robust forensic accounting division. When there was a case requiring full-time hours for months, or a rapidly approaching deadline, I would receive approval to borrow various personnel from the tax department but equipping my ever-changing team to overcome the steep learning curve for them to meaningfully contribute, while also serving as the case manager and lead investigator, was nearly impossible. Regardless of how intelligent or willing the borrowed talent was, with a deadline quickly approaching, it was often easier to work the case alone.
When I decided to open Workman Forensics, I told my manager at the time, “I think I will just take some small cases – maybe even just divorce work – and work from my dining room table for a while. Then I will decide what to do with my life.” I assumed I would work alone on cases like I had been in public accounting, but this time, I would have more control over the types and sizes of the investigations. After three months of marketing and meeting litigation attorneys, I was hired by an attorney for a case with a hearing date rapidly approaching. I knew that preparing what was needed to provide expert testimony before the deadline was impossible without help. The amount of time needed to process data in a financial investigation usually correlates to the amount of revenue generated by an organization, and this case was no exception. For each month of bank statements, 20 to 30 double-sided pages had to be scanned and subsequently entered into a spreadsheet. Additionally, if an investigation requires the manual data entry of check payees and memo lines from check images, the data processing could take weeks – especially as a solo practitioner. The client was needing a two-week turnaround on the project, and I knew there were not enough hours for me to singlehandedly process, analyze, and prepare to testify without a team.
Fortunately, during that same week, an unprecedented snowstorm created an opportunity for roommates and friends at my house to enter bank statement data into spreadsheets working around my dining room table. Although I had not had success at the previous firm explaining the analysis needed for financial investigations, I was confident that I could explain to my friends the steps required for the repetitive data entry of bank statements. My friends were the key to success in meeting the deadline as they worked with me to find a process for processing the data. When all of the data had been compiled into spreadsheets, I worked to calculate the loss and finished the analysis. While I worked around the clock to prepare for the hearing testimony, my phone kept ringing with inquiries from potential clients.
My solo journey lasted six months when I realized it was not going to stay that way. Not knowing how one decides to create a team, I decided to hire someone who could relieve my workload by processing data. I felt confident that I could at least use the process my friends and I created to teach an employee until I discovered my next step. The data processing step being performed by a team member was extremely helpful, but I still had more hours of casework than I wanted to work in a week. That is when I began looking to hire another professional who could be responsible for financial investigations like me. No matter how hard I tried, I could not find someone who remained long term because of the incredible expectations and pressures of a forensic accountant or fraud investigator.
THE FORENSIC ACCOUNTANT
Watching Ben Affleck's character in The Accountant at first glance seemed absolutely ridiculous as he performed a financial investigation, worked through Benford's analysis on the walls of the conference room, and faced violent opponents until I stopped to consider the current role and expectations of a forensic accountant. Knowing martial arts and being an impeccable marksman, or markswoman, is not listed on most forensic accountants’ curriculum vitae; however, the forensic accounting or fraud investigation career, at the testifying expert level, requires a uniquely broad and, at the same time, intricate set of skills.
The experience needed to gain proficiency in the areas essential for a forensic accountant who also testifies as an expert witness requires tremendous focus and effort. Forensic accounting, especially with technological advances, has the power to find missing money and bring clarity to financial disputes. However, the experience factor is the largest barrier to one's entry into the profession. To truly create value for a client, a forensic accountant must be able to clearly articulate findings in a report and through testimony, which opens the expert up to personal and professional scrutiny by opposing parties.
For the next section, I will be using the terms forensic accountant and investigator to refer to an investigation professional who works a financial investigation or litigation dispute engagement from start to finish as a sole practitioner with the expectation that the professional will testify to her findings.
TECHNICAL AND STRATEGIC
A forensic accountant must be technically accurate and use relevant theories and standards in engagements as these are the primary areas in which opposing counsel and the opposing expert will look to exploit to discredit the work by the forensic accountant. A forensic accountant is expected to be extremely proficient in all areas surrounding the financial facts of the case without overstepping her expertise and experience. This could include accounting standards, audit standards, tax preparation, general business, best practices, and so forth.
For example, early in my career I testified to bank statement evidence showing that an executive had paid his personal credit cards using checks funded by the company. As part of my testimony, I stated that the executive had signed the checks. On cross-examination, the defendant's attorney suggested that I should have examined tax returns instead of bank statements. Knowing that bank statements are best evidence and most reliable when compared to tax returns in this situation, I was able to testify appropriately. The defendant's attorney also argued that I could not testify to his client having signed the checks as I was not a handwriting expert. In my response, I was able to then clarify that the name signed on the signature line of the checks was that of the executive.
While being technically proficient, a forensic accountant creates the greatest value when she can partner with legal counsel to understand the attorney's strategy for a case and advise as to what analyses may or may not be performed to support the theory. This part of the work has gotten easier with experience. In the beginning of my career, I did not know how to separate and simplify the details to address the bigger picture objective of the attorney. With experience, however, I now better understand how an expert can be valuable by absorbing the facts and advising counsel of the pertinent investigation findings. Sometimes, the greatest help to an attorney is advising of the evidence that is contrary to his theory for the case and then work to explain evidence from which the attorney can derive another theory. The navigation between technical proficiency and strategy is challenging both during an investigation and in testifying.
THOROUGH AND EFFICIENT
Other areas in which the balance of two responsibilities of a forensic accounting increases with experience are thoroughness and efficiency. Forensic accounting, over the course of my career, has experienced tremendous improvement in efficiency through technological advancements; however, the inherent complexity of the profession remains. The forensic accountant lives in the tension between being both thorough and efficient. The pressure to be both thorough and efficient exists in not only the relationship with the end-client but also with deadlines often out of the forensic accountant's control.
After being in business for six years, I worked a case involving an embezzlement with a total loss exceeding $3 million. At this point, I was working as a solo practitioner and knew from listening to the client's concerns and attorney's strategy the most efficient, yet thorough, way to investigate the case within the client's budget and the attorney's deadlines. I worked the entire case and prepared a report in 40 hours, over approximately two weeks, for which both a civil lawsuit and federal criminal charges were filed. The ability to manage such a thorough and efficient investigation was a result of years of experience and dedication to the profession.
DETAIL-ORIENTED AND EFFECTIVE COMMUNICATION
The stereotypical accountant is personified as someone who is detail oriented, often working tirelessly to ensure that every penny is reconciled. However, the stress of understanding all of the details resulting in effective communication is tricky. The attention to detail that a forensic accountant delivers involves the very details that have been key in assisting clients and their attorneys settle financial disputes. However, navigating through details to find the gem that resolves arguments and then communicating the significance of the findings effectively and clearly is learned through practice.
When testifying as an expert in a criminal defense matter, there were over 20,000 pages of documents provided by the prosecutor. I personally reviewed all of the documents, as I was a sole practitioner, and discovered an email that clearly supported my client's position. My client claimed that he had no knowledge of one of the transactions for which he had been charged. I wanted to include the email in my trial testimony, but when I tried to explain its significance to my client's counsel, she challenged me to simplify my explanation even further as I would be testifying in front of a jury. With her challenge on this one finding, I reworked my entire testimony outline to communicate a story. Communicating in this way contributed to the legal strategy of the attorney, and my client was found not guilty of all but one count.
In this criminal jury trial case, the defense attorney's strength was communicating stories juries could understand. She was gifted at creating demonstrative open and closing arguments that incorporated illustrations the jury understood and remembered. She wanted me as the expert witness to do the same. A few years later, I was asked to investigate and testify for the defense in a bench trial. My task, after performing the investigation, was to explain my findings related to how the husband's assets were separate from that of his wife. His wife had pled guilty to embezzlement, and the business owner was trying to recover from the loss through the husband's separate assets. Remembering the criminal jury trial, I asked our graphic designer to prepare an illustration of the timing and use of funds between spouses. The attorney I was working with did not normally use illustrations in expert testimony, which led to an awkward testimony. Although I believed the illustration helped clarify the use of funds, the resulting awkward testimony did not accomplish the effective communication I had hoped for with the judge.
From these experiences, even when all the details seem important, I have learned to ask more questions of the attorneys and work with them to strategize about the best way to use the most valuable detailed findings.
ACCOUNTING KNOWLEDGE AND LEGAL KNOWLEDGE
Possessing a broad range of accounting knowledge and basic legal process knowledge is vital for a forensic accountant. A testifying expert in the area of forensic accounting will likely encounter engagements that require an understanding of financial accounting and reporting, tax returns, tax strategy, and audit. At the same time, it is helpful to an attorney if the testifying expert has some knowledge of the legal processes to integrate the expert more efficiently into an existing case. Experience, once again, is truly the best teacher in this area. It can be frustrating to professionals because acquiring the knowledge requires someone hiring them to allow opportunities to learn.
The way that I gained knowledge early on was by asking questions of attorneys. Whether an attorney had hired me to help with a case or not, I tried to meet with anyone who would accept an invitation and to ask them as many questions as possible. Before meeting with an attorney about a case or over lunch introduction, I mentally prepared questions to inquire about their preferred methods in approaching cases and about their best and worst expert witness experiences. The feedback was not consistent, as the attorneys seemed to all have varying experiences, but it was helpful in developing a method for me to become a trusted expert and effective expert witness.
One example of the helpful skills I learned through this inquiry method included understanding the difference between testifying in a bench trial versus a jury trial. In a bench trial, attorneys encouraged me to testify with the judge in mind even though the attorneys were asking the questions in front of me. With this in mind, I began sitting in the witness stand to answer questions slightly turned toward the judge to encourage any clarifying questions the judge might want to ask of me. Additionally, if I do not understand a step in the legal process on a particular case, I ask the client's attorney to explain its purpose so that I can know for future reference.
MEETING DEADLINES AND DEVELOPING BUSINESS
A client often realizes that they need a forensic accountant in response to some type of crisis. Although the fraud scheme, hidden assets, or improprieties occurred over a long period of time, a client wants to know what happened, the resulting loss, and his next steps as soon as possible. The emotional response of a client creates urgency, which results in deadlines for the forensic accountant. Also, it is not uncommon that attorneys will wait until the end of the discovery phase in a lawsuit to engage the forensic accountant. To better understand the reason attorneys will wait to hire an expert, I have tried to identify a pattern; however, I have not identified the root cause in cases other than class action lawsuits. In class action lawsuits, a law firm is typically paying all investigation expenses before collecting, and collection on a case is not guaranteed. It appears the delay in hiring an expert is for the attorney to make sure the expert is truly needed before incurring the expense. Whatever the cause, when an attorney delays the hiring of a forensic accountant, some cases are already scheduled for hearings, trials, or other court deadlines that the forensic accountant cannot change. When this happens, the forensic accountant must perform the analysis, review, and be ready to testify by the imposed deadline.
When working on cases with tight deadlines, maintaining consistent marketing and business development is challenging. Business development is especially challenging when deadlines require that weeks, or months, will be spent on one project consuming all the available work hours in a week. When facing the choice between working billable hours and business development, the forensic accountant is most likely to prioritize meeting the deadlines with a work product that solves problems. Although word will spread about the dependability of a reliable expert, through the demonstration of meeting deadlines, the pressure to sustain business development to secure future work exists.
FORENSIC ACCOUNTANT PROBLEMS
As mentioned in the opening of this chapter, I determined that finding others like myself who were willing to take on the level of responsibility and investment necessary to become a forensic accountant – who also testified as an expert – was not common. When observing the problems I faced as a sole practitioner, or the professional involved in every level of the details, I understood why few would want to take on this role. These problems included:
The Scalability Problem.
The inability to enable others to provide meaningful assistance throughout the life of a project in an efficient manner where profit is realized for the firm's owner.
The Strategy Problem.
The difficulty in balancing a strategy perspective while focused on all the details in an investigation.
The Review Problem.
The insecurity to ensuring a high-quality work product able to be used under the greatest scrutiny.
The Sustainability Problem.
The stress of managing highly detailed work that may result in personal credibility and character being attacked, which is not sustainable for all professionals in the long run.
THE SCALABILITY PROBLEM
During my third year of business, entrepreneurship was at the height of trendiness, and an aspiring entrepreneur was especially popular if she could create a scalable business idea and obtain venture capital. To own a scalable business would allow the entrepreneur to earn a lot of money on only few hours of work per week, affording the owner the opportunity to take vacations and to live the life she wanted. Not-for-profit initiatives supporting entrepreneurs were promoted throughout the city. It seemed as if every lunch I attended with other business owners would involve constant conversation around how they were going to grow through scaling in the next few years.
One day, I was invited to share about my business at one of the not-for-profit venture capital events. I thought I had made it clear that I was not looking for investors. The leaders understood, but they needed to fill the second presentation slot, so I agreed to do so. Carefully crafting a six-minute presentation communicating the highlights of my forensic accounting business and the value I looked to create for clients, I ended my presentation and opened the floor for questions. A man sitting in the front row asked, “So what about your business is scalable?” I responded, “Nothing.” He preceded to lecture me, and anyone else in the audience listening, as to the benefits of a scalable business. I will admit that I was entirely offended.
Because it was none of his business, I did not respond, but the lack of scaling was not for lack of trying. I had tried to reduce my work hours to enjoy life, but the constant demands of the work and the struggle to duplicate my efforts had convinced me at the time that scaling a forensic accounting practice was impossible. Not to mention, that if an entire business's success was based on the available hours of one expert technician, like a forensic accounting expert, who would want to invest in that business?
Frustrated by the man's comments at the presentation, I continued to work as a sole proprietor; however, I constantly wondered if it was possible to create a scalable model for forensic accounting and fraud investigations – where the clients were served well, the work product was as consistent, and the attorneys would trust a team approach. I ignored these nagging thoughts until a new client's case involved more than I could handle alone. Cautiously and slowly, I began hiring again.
As a new business owner, I was naïve in believing that I could hire smart people to work investigations without any formal training and stay within a reasonable budget. There were a lot of factors I had never considered before, but because I had no formal forensic accounting training and could still navigate messy financial disputes, I expected the same of the people I hired. Forgetting the experiences and opportunities I had been given to learn about the intricacies of financial investigations, I unrealistically expected the talented people I hired to untangle a financial investigation without training and stay on a budget.
