Non-Financial Evidence in Financial Fraud Investigations

This document provides a comprehensive overview of obtaining and evaluating non-financial evidence in financial investigations. It explores various sources of non-financial evidence such as interviews, document examination, and handwriting analysis. The document delves into the significance of body language and non-verbal behavior during audit interviews, highlighting the role of stress signs in identifying potential fraud. It also explains the SCAN (Scientific Content Analysis) technique used by auditors to analyze interviewee statements for signs of deception. Furthermore, the document discusses visual accessing cues and other deception cues, such as emotional stress and verbal content, that aid in identifying lies. The document also differentiates between questioning in audits and fraud investigations, emphasizing the need for precise and direct questioning in the latter. Finally, it outlines an interviewing procedure for financially sophisticated victims, including preparation, setting the tone, asking questions in flow, and verifying evidence, and obtaining written statements.

Obtaining & Evaluating Non-Financial Evidence

Contents
Contents...........................................................................................................................................1
1. (i).............................................................................................................................................2
1. (ii)............................................................................................................................................2
1. (iii)............................................................................................................................................2
1. (iv)...........................................................................................................................................2
1. (v)............................................................................................................................................2
2. Discussing the statement....................................................................................................2
3. Interviewing procedure for a financially sophisticated victim.........................................3
REFERENCES..............................................................................................................................5
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1. (i)
Non financial evidence sources are the sources such as interviews, document
examination and handwriting analysis which are related to financial fraud but are not
financial in nature (Lu, Zhao and Dai, 2018).
1. (ii)
When an audit conducts an interview for fraud investigation, the body language
plays an important role. It is considered that body language of an individual changes
when they are under stress, so it is important for auditor to observe the gestures and
non verbal behaviour. If the interviewee has committed the financial fraud, then there
are high chances for them to show stress signs and these signs can be caught by
observing body language.
1. (iii)
SCAN is used by auditor as an investigation technique in which auditor analyse
the statement given by interviewee. The statement is analysed by using scientific
content analysis in which auditor seeks any signs of indirect deception. Interviewee’s
choice of words, verbal trickery and ignorant behaviour are analysed under SCAN to
investigate the fraud.
1. (iv)
Visual accessing cues is a language of eyes which is used for communication.
There are cues related to eye language such as eye movements, blinking and more.
Eyes of the victim helps an interviewer as when the interviewer asks about their recall
something, the rolling of eyes help in identifying that whether the thought process is
truthful or not.
1. (v)
Other cues which help to identify lies are deception cues that includes emotional
stress, verbal content, psychological statements and interpersonal interactions.
2. Discussing the statement
Asking of questions in audit is quite different from the asking of questions in a
fraud investigation (Manes-Rossi and et.al., 2018). This is so because in an audit there
is more focus on the investigation of financial statements and accounts of a particular
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company. While in fraud investigation the focus should be made on the analysis of the
overall working within the organization to find out whether a fraud has been made in the
financial statements.
In Auditing Questions are asked in a more detailed manner as there are chances
that there can be fraud as well as malicious practices within the accounts which can
lead to creation of problems. While in Fraud Investigation the questions need to be very
precise and direct relating to the subject matter itself.
As Auditing is conducted every year by the Chartered Accountant of a company
there are more questions which can be asked in it. However as Fraud Investigation is
conducted when the company's managers think that there is something which is not
correct with the working pattern. The questions in auditing do not focus on critical
examination while the questions in fraud investigation are required to be focused on the
critical judgement as well as analysis of the situation and then taking the desired action.
When Auditing is done, the questions which are asked are quite general in nature
relating to the financial statements of the company. However in the case of fraud
investigation the questions can be more specific in nature relating to the multiple
aspects of financial information.
3. Interviewing procedure for a financially sophisticated victim
The interviewing procedure for a financially sophisticated victim can be as
follows-
 Preparation- It is essential to be prepared in order to conduct the interview in an
effective manner (Eneizan and et.al., 2016). For this it is required to identify the
questions to be asked to the victim.
 Thinking- There is a lot of thinking which needs to be done before the interview
process actually takes place. Thus in this case there is a requirement of making
sure that the right approach can be adopted for interviewing the victim.
 Setting Tone- When the interview is started it is important to set the correct tone
to be followed. Therefore in the case of investigation with the victim the right tone
must be set.
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 Right Behaviour- In the process of interview the right behaviour must be
initiated. In investigation, it is important that there should be right non-verbal
behaviour with the victim.
 Asking questions in flow- There is an importance of questions to be asked in a
flow with the victim. Thus in the case of investigation it becomes necessary.
 Being direct- It is important that the interviewer comes straight to the point
instead of being indirect in the process (Venturelli and et.al., 2019). For
investigation of victim this is important.
 Doing more listening than talking- For investigation purposes, it is crucial to
listen more rather than talk. The victim must be given sufficient time to express.
 Taking time- It is important for the investigators to take appropriate time to
conduct the interview process. This helps in doing detailed analysis.
 Verification of evidence- Evidence which is presented in the interview process
should be verified in the correct manner. This helps in the performing of right
analysis.
 Getting in writing- There is a requirement of getting a written statement from
the victim in the case of fraud investigation. This will be helpful in further analysis.
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REFERENCES
Books and Journals:
Eneizan, B. M. and et.al., 2016. Effects of green marketing strategy on the financial and
non-financial performance of firms: A conceptual paper. Arabian Journal of
Business and Management Review (Oman Chapter). 5(12). p.14.
Lu, C., Zhao, X. and Dai, J., 2018. Corporate social responsibility and insider trading:
Evidence from China. Sustainability. 10(9). p.3163.
Manes-Rossi, F. and et.al., 2018. Ensuring more sustainable reporting in Europe using
non-financial disclosure—De facto and de jure evidence. Sustainability. 10(4).
p.1162.
Venturelli, A. and et.al., 2019. The state of art of corporate social disclosure before the
introduction of non-financial reporting directive: A cross country analysis. Social
responsibility journal.
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