Financial investigations: what you need to know

If you find yourself having to conduct a financial investigation, the first steps you take can have a crucial bearing on the success or otherwise of the eventual outcome, writes Sinead O’Neill.

It can be tempting to react immediately when you or a client identifies, or suspects, a problem with the company finances. Careful consideration should be given to all investigative actions from the outset to ensure that the integrity of the outcome cannot be called into question.

First steps

Before commencing any internal investigation, take a moment to consider the following issues:

1. Time sensitivity – Does an investigation need to commence immediately, to prevent or reduce the damage to the business, or protect the evidence?
2. Confidentiality – The matter must be kept confidential to maintain the robustness of the investigation process, avoid any further efforts at concealment, and comply with HR policies. The investigation could be carried out either overtly or covertly. In either case, however, confidentiality is crucial.
3. Legal privileges – While this might not be at the forefront of your mind initially, you should seek appropriate legal advice before taking actions that might compromise the investigation.
4. Expertise – Do you or your client have the necessary skills in-house to investigate the matter properly, or do you need to refer the matter externally or to a local authority?
5. Objectivity – Those investigating should maintain objectivity and ensure there is no conflict of interest that might compromise the integrity of the outcome.

Ideally, you or your client should document the investigation plan, assigning roles, responsibilities, and tasks, to key individuals.

It’s worth bearing in mind that your initial suspicion or hypothesis might not have any merit. Keep an open mind and go where the evidence takes you.

This may mean revisiting and revising your plan of action and timelines for the investigation, so that sufficient time and resources can be given to gathering and analysing evidence as the process unfolds.

Evidence gathering

An essential element in any investigation is evidence and careful consideration should be given to where the evidence is located. Is it on electronic devices? Are the devices owned by the company, or are they personal to the employee? Is the evidence password protected? Does getting the password require interviewing witnesses?

Alongside these considerations, HR policies should be consulted to ensure compliance with internal policies.

It is crucial that the evidence gathered is not compromised in any way. You might need to engage experts to extract the data to protect its integrity. Resist the urge to delve straight into the source of evidence.

Electronic data

It is rare these days that a financial investigations will not involve some element of electronic data. A forensic image should be taken of the data, where possible, and should be used for investigative analysis to maintain the data’s integrity.

Data analytics can be beneficial in any investigation as it can help to identify patterns, trends, and key relationships.

Keywords can be run over copied mailboxes and mapped to individuals, for example, identifying who is discussing the matter in question and to what extent. This level of analysis would be near-impossible if reliant on manual techniques alone.

Full-circle reporting

It is essential to acknowledge that work should not cease upon the conclusion of the investigation. The results of the investigation should be communicated, corrective action taken, and the performance of the investigation evaluated.

This full-circle reporting can be invaluable to a company because it strengthens the organisation’s defences while also discouraging future in-house wrongdoing.

Investigations are not only a critical component of uncovering wrongdoing, such as fraud, but also act as a deterrent to others both within and outside of the business. As such, it is vital that they be carried out correctly.

Sinead O’Neill is the Director of Forensic and Investigation Services at Grant Thornton Northern Ireland.