Box clever

In the course of his IIR masterclass “Managing a Fraud Investigation”, Ian Henderson , Managing Director of Advanced Forensics Ltd led two instructive investigative case studies. In a previous issue editor Timon Molloy covered the search for collusive parties in a procurement fraud. This month he wants some answers to why boxes contain bricks rather than electronics stock in a warehouse.

Ian Henderson CISA FCA may be contacted on tel: +44 (0) 20 7226 0303; mobile: +44 (0) 7940 540399; email: irh@advancedforensics.com

Ian Henderson opened with the question, “How should you respond to an initial suspicion of fraud?” He answered by means of a checklist: “First, assume the worst and plan accordingly.” He said that if at the end of a hard-hitting investigation the matter does not turn out to be as serious as anticipated at the outset it will be all to the good, but better that than to start half-heartedly and under-resourced, only for the problem to assume much more threatening, even overwhelming proportions. “Second, think like a crook,” advised Mr Henderson, “develop a fraud theory and test it. This will involve, and we’re now at point four, a covert phase initially, unless, that is, the assets are at imminent risk of dissipation.” Number five on the list, is the bald statement, “To do nothing is not an option” and, allied is the injunction, “Prove or disprove the suspicion(s) totally.” Nothing is more damaging to morale in an organisation than an allegation left hanging accusingly over a person’s head. “At seven is the warning not to rush to the police, auditors or insurers until you are confident of your ground and have obtained some corroboration.” Outlining the case scenario, Mr Henderson, explained, “You are the General Manager of Advanced Widgets plc, a leading manufacturer of components for the telecommunications industry.” It has been a fairly uneventful week but now on Friday afternoon your day and, you reflect grimly, probably the weekend have been spoilt by a telephone call from a member of staff who claims to have uncovered a major warehouse fraud, possibly going back years. It concerns slow-moving stock and he says that he has discovered a lot of boxes filled with bricks rather than electronics items. The employee nearly dialled the police direct rather than contacting you internally and is clearly panicky. What should you do?