Home » A Financial Fraud Investigation Finds Several Fraud Risks

SITUATION: When a major healthcare coverage corporation was informed that its newly appointed chief financial officer was accused of embezzlement by his previous employer, the company’s internal audit team requested a targeted investigation to assess the risk that similar fraudulent activities had occurred within its own organization.

FSS was hired to provide a limited-scope assessment. A limited-scope assessment occurs when a client needs a fact-finding review that is focused on a specific allegation or incident. The client may use the information gathered in this initial assessment to inform its next steps, including whether it should pursue a full financial fraud investigation.

STRATEGY: Our analysts—who are experts in financial fraud investigations and forensic examinations— designed a methodology moving from the general to the specific to identify the organization’s most vulnerable areas.

The FSS team engaged in discussions with the healthcare corporation’s key stakeholders and evaluated the access to systems and the roles and responsibilities that had been assigned to the CFO. They also tested transactions and scrutinized data for irregularities. Among the areas they reviewed were:

• bank transactions
• employee expense reimbursements
• accounts payable 
• Payment Protection Program (PPP) loan transactions
• journal entries.

RESULTS: Based upon our assessment, the company decided that a full financial fraud investigation into the CFO’s activities was not required. But the review gave the company another critical data set: A list of potential vulnerabilities in its financial practices that substantially increased the risk of fraud, waste, and abuse. FSS offered a series of recommendations to assist the company in fortifying its internal controls and enhancing its fraud prevention program.

The effort demonstrates the importance of calling upon an experienced investigative team when fraud is suspected. Financial investigators, such as certified fraud examiners (CFE), not only collect and analyze relevant data, but they also have the skill to ensure an assessment is conducted as effectively and efficiently as possible. They can help determine whether wrongdoing has occurred—and propose best practices to prevent fraud from happening in the first place.