trull, jonathan without notes

8/14/2019 Trull, Jonathan Without Notes

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Interviewing Techniquesfor Fraud

NSAA IT ConferenceOctober 9, 2008

Presenter: Jonathan Trull


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Learning Objectives

Why interview for fraud?

CommunicationHow does it work?

Understand 3 types of fraud interviews Mechanics of fraud-based interviews

Detecting deception, half truths,

omissions, and inconsistencies


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State Employee Accused ofStealing $11 million
http://www.denverpost.com/portlet/article/html/imageDisplay.jsp?contentItemRelationshipId=1811833


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Why Interview for Fraud?

People actually admit theyve committed fraud,

abuse, or other illegal acts when confronted.

People who have knowledge of wrongdoing but

arent involved in fraud often wont come forthwith information unless asked.

Quickly identifies control weaknesses.

Standards.


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Auditing Standards

Yellow Book

FISCAM (Exposure Draft)

SAS 99


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Government Auditing Standards

auditors should plan and perform the

audit to obtain reasonable assuranceabout whether the financial statements are

free of material misstatements, whethercaused by errors or fraud. (4.27)


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Government Auditing Standards

In planning the audit, auditors should

assess risks of fraud occurring that issignificant within the context of the audit

objectives. Audit team members shoulddiscuss among the team fraudrisks.Auditors should gather and assess

information to identify risks of fraud(7.30)


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Incorporates Government AuditingStandards relevant to financial andperformance audits.

Assess risks of fraud significant to auditobjectives.

References SAS 99.


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If work is performed as part of broader financialor performance audit, the auditor shouldcoordinate with other audit teams.

Communicate fraud risks associated with IT tooverall fraud team.

Hold brainstorming session.

Design procedures to provide reasonableassurance of detecting fraud, if risks aresignificant.


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Specifically highlights ERP systems andthe need to design procedures to identifysystem-based overrides.

Overall, auditor is responsible for beingaware of vulnerabilities to fraud associatedwith the area being audited to identify

indications that fraud may have occurred.


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SAS 99

SAS 99 wants us to ask MORE questions ofmanagement PLUS a bunch of additional

questions of others (governance committee,internal audit, and other staff)

Sometimes people with knowledge of actual orpotential fraud are just waiting to be asked


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SAS 99

The auditor's inquiries of management andothers within the entity are importantbecause fraud often is uncovered through

information received in response toinquiries. One reason for this is that suchinquiries may provide individuals with an

opportunity to convey information to theauditor that otherwise might not becommunicated.


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SAS 99

Making inquiries of others within the entity, inaddition to management, may be useful inproviding the auditor with a perspective that is

different from that of individuals involved in thefinancial reporting process. The responses tothese other inquiries might serve to corroborateresponses received from management, or

alternatively, might provide informationregarding the possibility of managementoverride of controls


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What is Communication?

The process of effectively sending andreceiving information, thought, or feeling.

Whether verbal or nonverbalcommunication, it is essential that weanalyze communication (1) within context,and (2) as a pattern.


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Modes of Communication

Five methods/modes of communication:

(1) Nonverbal (4) Speaking(2) Reading (5) Listening

(3) Writing


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Elements of Conversation

Expression

Persuasion

Therapy

Ritual

Information Exchange

RememberAn interview is just astructured conversation.


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Facilitators of Communication

Fulfilling Expectations

Recognition

Altruistic Appeals

SympatheticUnderstanding

New Experience

Catharsis

Need for Meaning

Extrinsic Rewards


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Inhibitors of Communication

Competing Demand

Demands for Time

Ego Threat

Repression Disapproval

Loss of Status

Etiquette

Trauma

Forgetting

ChronologicalConfusion

Inferential Confusion

UnconsciousBehavior


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Nonverbal Communication

Over half of our communication is madeup of nonverbal communication or bodylanguage, that tone makes up about one-

third of our communication, and that lessthan twenty percent of communication ismade up of the words we use.


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Nonverbal

The Head

Tilted to one side indicates listening

Chin dropped to chest indicates acceptance

of guilt or depression

The Face

Turns pale

Becomes flushed, red, or splochy

Onset of tics


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Nonverbal

The Nose

Touching nose indicates stress

The Mouth

Yawning continuously

Yawning to stall or fake boredom

Placing pens and other objects in mouth

The Eyes

Shifting eye behavior


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Nonverbal

The Eyes

Blink rapidly

Look away during certain responses

Stare intently during certain responses

The Arms and Shoulders

Arms crossed and hands clenched

Shrugging shoulders to questions


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Nonverbal

The Hands

Finger tapping or drumming

Playing with jewelry

Checking watches

Wringing hands

The Legs

Crossing/uncrossing legs

Bouncing legs


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Nonverbal

The Feet

Lightly tapping feet

Stomping feet

Posture

Lean body away from interviewer

Lean body toward door or exit


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Nonverbal Clusters

Nonverbal signals come in clusters.

No signal by itself tells you anything.

Consider all signals as part of a pattern. Examples: Subject sits behind a desk or tableand leans toward the door, quivering chin andcrossed arms with clenched fists, deep sigh

and slumping shoulders, crossing handbehind head and yawning


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Observing Interview Reactions

Proxemics

Chronemics

Kinetics

Paralinguistics


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Tone

Tone is the inflection or sound we give ourworks to express a mood or emotion.

How are you? Fine.

Fine can convey a wide range ofmeanings, including sarcasm, gratitude, orirritation.


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Communication Analysis

What did the subject say?

What did the subject NOTsay?

Vocabulary, parts of speech, syntax, and

structure form the basis for analyzingcommunication.


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Vocabulary

Each word the subject uses has a differentmeaning.

A person maintains consistency in hislanguage to express the same thought.

Change of language reflects a change inthe subjects perception of the account.


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Vocabulary Example

Mr. Smith keeps the blank checks and his

signature stamp in his desk drawer. Hegenerally keeps the drawer locked. Mr.

Smith said I could use his desk to do mywork while he was gone. The drawer wasopen when I sat at the desk on Tuesday

and the checks were taken. I called Johnat home and he told me not to worry aboutit.


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Parts of Speech

Nounsname or identify persons, places,or things.

Verbsdescribe an action, occurrence, orstate of being.

Adverbsqualifiers that modify otherwords.

Adjectiveswords that describe nouns.


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Syntax

The manner or order in which a personchooses to arrange his words in asentence. Complete sentences consist of

a subject, verb, and modifying words thatadd detail to the events.


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Syntax Example

Jane and I signed the check.

My boss Jane and I signed the check.

I signed the check and then Jane did. The check was signed by Jane, I think,

and by me.


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Key Words / Phrases

Adverbs

I usually [but not always] unlock the safe.

I normally [but not always] reconcile the

accounts.

Basically [but not completely], thats what

happened.

Mostly [but not always], I get a secondsignature.


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Key Words / Phrases

Temporal Lacuna

Later on

After

Later

Next

Afterwards

Eventually


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Structure

A narrative has a beginning, middle, and anend.


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Main Points

What is the general importance of the subjects

statements?

Are the references and word choices consistent?

Why did the subject choose certain words orphrases?

Why is certain information presented first asopposed to last or in the middle of the story?


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Types of Fraud Interviews

SAS 99 / Fraud Discovery Interviews

Fraud-Based Interviews

Interrogations

SAS 99 / F d Di


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SAS 99 / Fraud DiscoveryInterviews

Who do we interview?

Everyone

Who performs the interviews?

Financial Auditors

Performance Auditors

IS Auditors

SAS 99 / F d Di


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SAS 99 / Fraud DiscoveryInterviews

What questions do we ask?

Direct & specific

Are you aware of anyone within theorganization who has taken computerresources without authorization?

Have you ever changed source code without

authorization? Hypothetical

If someone was going to ..


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Example Questions

When were talking about fraud in

government, were talking about a big

area. Were not talking about taking a pen

or making a few photocopies. Rather,were talking about a whole range of

activities where employees steal from the

state, lie to management, or taken unfairadvantage. Do you think fraud is aproblem for government in general?


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Example Questions

Do you think this state agency has a problemwith fraud?

If employees or managers are stealing from this

agency, why do you think they do it? Frequently, small thefts by employees can add

up to a lot of money. If you knew anotheremployee was stealing, what would you do?


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Example Questions

Do you know of anyone who might bestealing or taking advantage of the state?

Suppose someone who worked for theagency decided to steal or commit fraud.How could they do it and get away with it?

In your opinion, who is beyond suspicion

when it comes to committing fraud at thisagency?


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Example Questions

Is there any other information you wish toprovide regarding any possible fraudwithin this agency?

M ki ti i i i b t


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Making routine inquiries about

fraud

Inquire of managementabout: Knowledge of any fraud or suspected fraud Any allegations about fraud Risks of fraud in the entity

Programs and controls that mitigate these risks Monitoring of operating locations and business

segments; and any locations or segments that mighthave higher fraud risk

If (and how) management communicates its view on

business practices and ethics Any fraud-related reports it has made to the audit

committee

M ki ti i i i b t


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fraud

Inquire directly to the audit committeeabout:

The committees views on fraud risk

Any knowledge of fraud or suspected fraud

Mitigating controls

How the committee exercises oversight in this

area

Making ro tine inq iries abo t


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fraud

Inquire of internal audit personnelabout:

Their views about fraud risks

Any knowledge of fraud or suspected fraud

Any fraud-related work they have done

The adequacy of managements responses to

any fraud-related findings



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fraud

Inquire of other personnel about the existence offraud or suspicion about fraud: To learn more about or corroborate what others have

said about fraud risk

To allow individuals an opportunity to conveyinformation that might not otherwise becommunicated

To obtain perspectives that are different from that ofindividuals involved in financial reporting

To learn more about managements ability to overridecontrols To determine how effectively management has

communicated standards of ethical behavior


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The auditor has already identified problemsand is seeking to clarify their cause andquantify their impact. These interviews

presuppose that the subject has importantinformation and may be misleading thequestioner or lying.


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Fraud Examination Process

Sources of Information (tips/complaints,anomalies, SAS 99 interviews)

Predication?

Develop fraud theory Theory validated? Or Other theories confirmed?

Obtain documentary evidence

Interview Prepare report


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Evidence Gathering Order


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When should these interviews be used:

Auditor notes an important exception andcannot rule out wrongdoing as a cause.

Wants to follow up a routine discussion ofprocedures and controls.

Gets a tip that possible wrongdoing has

occurred.


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Mechanics of the Interview

Venue

Introductory Phase

Introduction of Subject Matter andPurpose of Interview

Questioning the subject

Review of material with subject Closing and relationship building


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Venue

Interviews should be in person

Location places subject at ease

Ensures privacy

Avoids distractions


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Introductory Phase

Personal Introduction

Social Amenities

Open Discussion


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Introductory Phase

Take Charge / Provide the Introduction Establish Rapport

Establish the Interview Theme

Observe Reactions Theme Development

Methodology

Physical Contact (handshake) Establish Purpose of Interview


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Subject Matter / Purpose

Be cautious when introducing the purposeof the interview.

Example: I am responsible for gathering

information regarding the agencyscontract with ABC, Inc. I learned you wereon the RFP Selection Committee. Can

you help me by answering a fewquestions?


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Questioning the Subject

The interviewers role is not to answer

questions or provide information.

The interviewer should spend a minimal

amount of time talking, no more than 15%.

Allow the subject the opportunity toanswer the questions completely and fully

without interruption.


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The interviewer should allow a fewmoments of silence each time the subjectappears to have stopped talking.

The interviewer should confirm with thesubject at the end of the interview theinformation the subject provided.

Encourage the subject to speak.


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Use a line of questioning moving from theleast sensitive topics to the most sensitive.

Follow-up on answers by using thesubjects own words.

Focus on establishing who, what, when,where, and why.


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FraudQuestion Typology

Introductory

Informational

Closing

Assessment

Admission-Seeking


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Open Questions

Cant be answered with yes/no response.

Pros: Useful when youre not sure of what

information you need or if you want to

know how someone feels about an issue.

Cons: Can take a lot of time and requiresmore note taking, more difficult to control,

and interviewee may not be sure of whatyou want.


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Closed Questions

Answered restricted to a few choices(yes/no)

Pros: Useful when answers require little or

no explanation, saves time, and makes iteasy to tabulate results.

Cons: Limits information that can be

obtained


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Probing/follow-up Questions

Asking another question to clarify or obtainfurther information about a intervieweesresponse.

Pros: Useful when the intervieweeprovides inadequate answers, stimulatesdiscussion, and can be used to resolveinconsistencies.

Cons: Can make interviewee becomedefensive


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Confronting the SubjectAvoid confrontation until later in the interview

Handle and manage confrontation to your

advantage - better to focus on clarification

Im confused. You told me that you always got

a second signature on checks over $500.However, you told me you signed the check toABC, Inc. and mailed it. Am I missingsomething?


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Go from broad to the specific.

Move from the indirect to the direct to elicitinformation.

Allow the subject to speak. The role of theinterviewer is to observe, to guide, tosteer, to collect, and most importantly, to

listen.


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Review of Interview Material

Confirm with subject that the informationprovided is accurate.

Go critical point by point and get

affirmative verbal responses from subject.Make corrections where necessary.

Is there any other information relevant to

our discussion that we havent covered?

Closing and Relationship


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Closing and RelationshipBuilding

Thank subject for time.

If applicable, thank subject forcooperation.

May be good to repeat question about anyfurther information not covered.

C d ti th I t i


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Conducting the Interview

If something is notclear, keep asking

Use follow-up

questions as neededto clarify issues

Drill-down on an issue

Dont let your

question gounanswered


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A ti Li t i


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Active Listening

Non-verbal techniques Maintain appropriate eye contact

Occasionally nod and display understanding

and interest Pause occasionally to let interviewee know to

continue

Voice inflections Body Language

I t i D t


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Interview Donts

Dont ask more than one question at a time.

Dont jump to conclusions

Dont assume you know the response

Dont interrupt or debate with the interviewee Dont monopolize the conversation (70/30 rule)

Dont think about the next question

Dont read documents Dont be annoying (finger tapping, clock watching)

B ildi R l ti hi


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Building Relationship

To establish a balanced relationshipbetween the interviewee and yourself

Your voice should be calm

Show interest in what the person is saying

Dont indict the person during the interview

B ildi R l ti hi


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If the subject perceives you as aprofessional and someone that is honest,they are more likely to be helpful during

the interview.

B ildi R l ti hi


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If individual is reluctant: Keep calm, dont become frustrated

Use positive language

Use gentle persistence in asking questions

If need to, reschedule the interview

N t T ki


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Note Taking

Note taking tips: Dont tape record the interviews

Take accurate and complete notes, but dont

distract the interviewee Try to avoid taking notes when the

interviewee is talking about a sensitive subject

Begin each interview on a clean page.

N t T ki


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Note Taking

Identify the date, time, and place of theinterview and all individuals present duringthe interview.

Obtain biographical data for the subject,including telephone numbers, position,title, etc.

Initial and date the notes.

N t T ki


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Note Taking

Document the interviewers questions.

Take verbatim notes if possible,Concentrate on subjects responses to:

Nouns

Pronouns

Verb Tense

Qualifiers Indicators of responsibility, innocence, or guilt

N t T ki


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Note Taking

Do not document conclusions orinterpretations.

Report any unusual changes in body

language. Turn notes into typewritten report

IMMEDIATELY!

Habits of Successful Fraud


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Interviewers

Takes minimal notes

Does not interrupt the interviewee

Asks open-ended questions

Follows a logicalusually chronologicalquestion sequence

Advanced Interviewing Skills


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Advanced Interviewing Skills

More experienced auditors, not new staff,should do these interviews

Be prepared, but dont follow a checklist

Put the subject at ease

Be conversational

Make good eye contact

Get the subject talkinglet subject talk

Interview versus Interrogation


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Interview versus Interrogation

Interview Purpose: gather info.

Nonaccusatory

Free-flowing

Interviewer speaks 5% Stay within social zone

Note taking O.K.

No Miranda warning

required 30-60 minutes

Interrogation Purpose: get a

confession

Accusatory

Structured Interrogator speaks 95%

Start at personal zone,move to intimate zone

No notes (until afterconfession)

No time limit

References


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References

Interviewing and Interrogation, by DonRabon

Beyond the Numbers: Professional

Interviewing Techniques, by ACFE

Finding the Truth, by Erwin Sulak


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Thats All Folks!

trull, jonathan without notes

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