Fraud Examination, 3E

Chapter 9: Conversion Investigation Methods

COPYRIGHT © 2009 South-Western, a part of Cengage Learning

Learning Objectives• Explain why finding out how perpetrators

convert and spend their stolen funds is important.

• Understand how federal, state, and local public records can assist in following the financial “tracks” of suspected perpetrators.

• Access information via the Internet to assist in the investigation of a suspected fraud perpetrator.

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Learning Objectives• Perform net worth calculations on

suspected fraud perpetrators and understand how net worth calculations are effective in court and in obtaining confessions.

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Conversion SearchesPerformed for two reasons: (1)to determine the extent of embezzlement (2)to gather evidence that can be used in

interrogations to obtain a confession

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Conversion SearchesInformation can be gleaned from:(1)federal, state, and local agencies and

other organizations (2)private sources of information(3)online sources of information(4)using the net worth method of analyzing

spending information

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Conversion Searches

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Public Records

Internet SearchesOnline DatabasesPrivate SourcesGovernment

FederalStateLocal

Utility RecordsPrevious AcquaintancesTrash CoverCredit AgenciesFinancial Institutions

SubscriptionPer-search FeeFree

GoogleAltaVistaEtc.

Private Sources of Information • Utility records (gas, electric, water,

garbage, and sewer• Private Acquaintances • “Trashing”• Shredded documents • Original files on computers

**Be sure you have the legal rights to gather and use the information

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Online DatabasesExamples:• Accurint• AutoTrackXP• Black Book Online• ChoicePoint• EBSCO Publishing• PublicData• Public Record Finder• SEC’s EDGAR Database• Web Detective8

The Net Worth MethodAssets – Liabilities = Net Worth

Net Worth – Prior Year’s Net Worth = Net Worth Increase

Net Worth Increase + Living Expenses = Income

Income – Funds from Known Sources = Funds from Unknown Sources9

The Net Worth MethodHelen Week’s Example (from Chapter 2)

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Financial Data for Helen Weeks

End Year 1 End Year 2 End Year 3

Total assets $206,000 $212,000 $246,000

Total liabilities $100,000 $ 50,000 $ —

Net worth $106,000 $162,000 $246,000

Net worth increase $ 56,000 $ 84,000

Plus total expenses 30,800 32,800

Total Income $ 86,800 $116,800

Less known income 40,000 42,000

Income from unknown sources $ 46,800 $ 74,800

 [RM1]Comp: Right align numbers, align $, and use single and double rules as shown.