Fraud & White Collar Crime 2018 Expert Guide
Investigations covering complex and sophisticated corruption schemes often end up focusing on a company’s internal controls to understand if and how potentially improper payments were made and whether existing internal controls were insufficient to detect and deter those payments. In recent years, internal controls investigations have taken on heightened importance in Foreign Corrupt Practices Act (FCPA) investigations where enforcers have increasingly relied on the FCPA accounting provisions or books and records charges to resolve investigations. Indeed, since 2015, almost half of all FCPA resolutions were books and records-related. Additionally, the vast majority of these internal controls cases involve efforts to hide improper payments through third-party vendors.
Internal controls or books and records investigations typically require following complicated financial transactions through a labyrinth of vendor invoices and contracts, bank accounts, supply chains, and emails, and are by nature complex and time-consuming. With the U.S. Department of Justice expecting greater and faster cooperation, and companies demanding quick, targeted investigations, forensic accountants are positioned best to help law firms, their clients, and companies more quickly and efficiently identify potential improper payments, weaknesses in internal controls, identify when internal controls have been circumvented, or give comfort that the company’s internal controls were not circumvented, and assist with remediation. Using forensic accountants to follow the money also provides an independent eye and helps mute suggestions that an internal investigation was not thorough or the law firm did not look hard enough for nefarious conduct in an effort to please a client.
In other words, just like when your doctor refers you to a specialist to ensure you are getting the right diagnosis and treatment for a complicated medical issue — forensic accountants are the specialists in internal controls and can provide invaluable insight and, when the government is involved, can test the government’s theory in a way that a company’s advocate may not be able to when sitting across the table from the enforcers. Indeed, even the government itself uses forensic accountants to review transactions and internal controls to help build its own cases.
Though each internal control investigation is unique and requires painstaking attention to detail, there are core principles that guide these investigations. These principles are summarized below and case examples are provided to demonstrate how these core principles work in practice.
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