There is art to conducting admission-seeking interviews.
As discussed in part one, to conduct a proper interview, Holmes will he intimately familiar with the five types of questions that legally can be asked (see exhibit, page 71). To close the circle of suspicion, Holmes will interview those involved in the suspected fraud. For purposes of illustration, assume the purchasing agent conspired with a widget manufacturer in a rebilling scheme where the purchasing agent got 90% of the illegal proceeds, the vendor the remainder. Legally, all participants in a conspiracy a re equally culpable--regardless of the split. But in the order of conducting interviews, it would be better to have the statement of the coconspirator (in this case, the vendor) before confronting the perpetrator. Holmes will use the same techniques, described below, to interview the coconspirator. The more evidence amassed that implicates the suspect, the more likely the investigator can convince him or her to voluntarily confess.
Commencing an interview is often one of the most difficult phases because it requires the interviewer to accomplish several things simultaneously (see "Ten Steps to a Top-Notch Interview,". JofA, Nov.02, page 99) or online at www.aicpa.org). The interview of the purchasing agent normally is conducted by surprise to avoid providing advance notice that will allow the employee ample time to think of an alibi. Here are the four steps in the introductory phase of questioning:
Provide the introduction. Assuming the purchasing agent doesn't know Holmes, the introduction is straightforward: The investigator will smile, make eye contact, state his name and title and shake hands. Smiles are comforting, and eye contact conveys sincerity; shaking hands is disarming.
Explain the purpose. Holmes first will need to explain why he's there, but he won't jump right in and start asking important questions. The explanation will be the essence of simplicity; he has some questions about the company's accounting procedures. He is purposely vague so as not to be off-putting. Holmes won't be cagey because the suspect will sense it and become suspicious.
Establish rapport. At the beginning of any interview, Holmes wants the person to be comfortable. That's because his primary goal is to gather information. If the person feels threatened or ill at ease, the examiner will have much more difficulty gathering facts. Holmes will begin with easy questions about the employee's favorite topic, himself, and about his duties and ideas for improvements. As the speaker talks, Holmes will lean toward him slightly, as if what he says is important.
Observe reactions. At the same time, Holmes carefully will watch how the person reacts. His goal is to put people at ease so he later can see how they handle stress. This procedure (called "calibration" or "norming") is vital when an antifraud expert is interviewing someone whose truthfulness is in question. (For more information on detecting deception, see "A Fish Story--Or Not?" JofA, Nov.01, page 114 or online at www.aicpa.org.)
Once Holmes has gotten the preliminaries out of the way, he will get down to business. Now he will have the opportunity to ask the purchasing agent just about anything except "Did you do it?" That is because he will assume he has only one opportunity to develop the information he needs to resolve whether to confront the suspect.
Any action taken at this point that makes the suspect uncomfortable will restrict the flow of facts. If--based on what the agent says here--Holmes believes the suspect has committed fraud, he'll ask about that later. Regardless of the kind of interview, the interviewer uses three types of questions that are constructed to elicit different responses.
Open questions call for an extended response and are difficult to answer "yes" or "no" to. Generally, interviewers use them extensively during the information-gathering phase. Holmes' goal is to get the subject talking and furnishing facts. Note that he phrases the sample questions below as subtle commands. This permits the detective to psychologically control the interview:
* Please explain the process by which a new vendor is selected and approved.
* Please tell me about the internal accounting controls over check disbursements that originate in your department.
* Please help me understand the functions of the employees you supervise.
Closed questions call for a "yes" or "no" answer. Obviously, constructing closed questions with limited responses is not the best way to engage the subject in conversation. Holmes will save this technique for later when he's reconfirming the facts.
Leading questions such as "Are you still embezzling money?" contain the suggested answer in the question. Interviewers use leading questions to help get confessions. But during the information-gathering phase of the interview, this kind of questioning is inappropriate. Holmes will want to obtain the facts as the suspect sees them.
WHEN THERE'S NO REASON TO SUSPECT FRAUD
If Holmes has interviewed the purchasing agent and is convinced nothing is amiss, it is time to close the interview. Nonconfrontational interviews have three phases: introduction, informational questions and close. The purpose of the close is multifold.
* Reconfirm facts. Once Holmes thinks he understands the facts, it is time to reconfirm them. He can accomplish this by asking closed questions. Here is an example of how he might proceed: "Mr. Agent, I appreciate your time. Let me make sure I understand what we've talked about. Your duties include the approval of all purchases for the company, is that right? And you also approve all of the new vendors, is that correct?"
* Obtain additional information. Another part of the interview's closing involves giving the subject the opportunity to say whatever he or she wants. Holmes may approach the agent on this issue with a simple statement as follows: "Mr. Agent, you have been very helpful. Is there anything you wish to say about what we have discussed? Is there something I forgot to ask you?"
* Retain goodwill. A final objective of the closing is to retain good-will with the person. That's important because the fraud examiner may need to contact the subject again. Here is one way to phrase the last part of the conversation: "Mr. Agent, I greatly appreciate the time you have given me today. After I review my notes, I may have additional questions. Is it OK for me to contact you again?" Unless the interview has been unpleasant, the great majority of people will answer "yes." Once Holmes is ready to leave, he again will smile, make eye contact and shake hands.
BUT WHEN THERE'S DOUBT
Assume Holmes has interviewed the purchasing agent and still doubts his truthfulness. Rather than close the interview, he will proceed to the next phase where he can ask a series of innocuous-sounding questions that will give him an idea of the agent's attitude toward honesty. Here are just a few examples of such assessment questions that Holmes may ask. However, he will not draw conclusions from any one question; it is the pattern of answers that will allow him to decide whether to confront the purchasing agent.
Who could have committed this offense? A guilty person does not want the circle of suspicion to close in on him or her. A dishonest response could be: "It could have been anybody." An honest response would be: "It couldn't have been me, because I didn't do it" or "If the scheme involves purchasing irregularities, I would think someone there would be responsible."
What should happen to the person who did this? Honest people usually have little tolerance for theft. They therefore will say something such as: "He or she should go to jail" or "The person should be fired." In contrast, someone dishonest likely will be more sympathetic, saying something like: "Well, it depends on why he or she did it" or "Maybe the person had a good reason."
What would you say if someone you worked with said you did this? If the purchasing agent is responsible, he will worry someone actually did tell you about his involvement. Rather than denying the charge directly, his response will more likely try to convince you why he didn't do it--trying out various alibis in the process. He also may try to find out who has been talking. The honest individual typically will answer: "I don't care what anyone says. I didn't do it."
PREPARATION TO GET A CONFESSION
If Holmes still is convinced the purchasing agent is culpable, it now is time to confront him. Before commencing this part of the interview, Holmes will make sure his documents are in order. When tie is ready to confront the subject, he will lay out the evidence one piece at a time--not all at once. This technique will place even more stress on the subject, as he will not know what is coming next. The more stress the agent feels, the more likely he will confess to alleviate it.
At this point, Holmes will bring an other investigator into the room. This is important to counter any allegations by the purchasing agent that he was mistreated or forced to confess. Remember, all interviews are voluntary. Holmes, a skilled interviewer, will ask the admission-seeking questions. Dr. Watson, his protege, will sit to the side and take notes.
The investigator will conduct the admission-seeking interview in private, behind closed but unlocked doors. Holmes won't create any barrier--real or perceived--that would prohibit the suspect from leaving. To do so leaves him open to an allegation of false imprisonment, tie won't allow the subject's supervisor or coworker to sit in; he knows it is difficult for any suspect to confess in front of friends or colleagues. (If the subject is a union employee, he may have certain rights to representation during the interview. See your attorney for details.) Holmes prefers the purchasing agent not sit behind a desk. He wants the subject in the open, where he will not have any "barriers" to hide behind. This will further increase his stress level--a major component in obtaining a confession. Holmes knows not to read the purchasing agent his rights; only sworn law enforcement authorities are required to provide Miranda warnings. Nonetheless, if the subject demands to see an attorney before answering questions, the interview must be stopped.
Confronting a subject for the purpose of obtaining a confession is not for the timid or faint-of-heart. That's because--up until now--the questions were polite and straightforward. But effectively getting someone to confess (which is counter to anyone's instinct for survival) requires Holmes to be polite and relentless--not mean or cruel, just relentless. To begin, he will confront the person directly.
Right way: Mr. Agent, we are aware you have been taking money from the company.
Wrong way: Mr. Agent, we think you might have something to do with money missing from the company.
The direct, unequivocal confrontation is necessary to set the tone of the admission-seeking interview and to psychologically "trap" the subject. At this point about a third of culprits will confess without any additional prompting; but the other two-thirds, if given a way out, will take it.
Once Holmes has confronted the subject (assuming he doesn't immediately confess), he will expect him to deny culpability--whether he is innocent or guilty. The problem is the more a guilty subject says, "I didn't do it," the harder it becomes for him to later admit that he did. So the interviewer has to cut off the denials. With a guilty individual, the denials will become weaker; with someone who is innocent, the denials will get stronger. Holmes will not expect this phase of the interview to be easy or quick. But he will have patience and stick to his guns. Here are a few ways he may handle denials.
* Mr. Agent, we wouldn't be here unless you were responsible.
* Mr. Agent, I understand what you are saying, but the documents say something else.
* Mr. Agent, I will give you an opportunity to talk later. For now, please just listen.
If necessary at this stage, Holmes will provide documents or other evidence to the subject--again, one piece at a time.
Once Holmes silences the subject, he follows a plan to make a confession more palatable to the purchasing agent. Even though people who steal from their employers are thieves, he knows that calling them that is not a good way to get them to admit wrongdoing. Instead, the purchasing agent more likely will confess if he perceives he has a morally (not legally) acceptable excuse for his behavior. Under no circumstances will Holmes promise immunity from criminal prosecution in exchange for a confession; only the authorities can do that. Here are some examples of morally acceptable themes he might use in his approach. Holmes knows these themes might not be the real reason for the purchasing agent's conduct. But when faced with the thought of being labeled a thief, a guilty subject frequently seizes on one of these excuses to save face.
* It's clear to me you wouldn't have done this if you hadn't been in a big financial bind.
* It is obvious you were going to pay this money back once you got ahead.
* If the company had treated you right in the first place, this never would have happened.
OBTAIN AN ADMISSION
Assuming the subject has adopted one or more of these themes, Holmes next will attempt to obtain a tacit admission of guilt. He will ask a leading question that allows the subject to choose one of two answers, both of which constitute a benchmark admission, but one of which portrays the subject in a bad moral light: Mr. Agent, did you do this because you are dishonest, or did you do it because you were in a financial bind?
CONFESSION AND WRITTEN STATEMENT
Once the suspect makes the benchmark admission, the remainder of the confession should be relatively easy. To begin, Holmes will reinforce that admission with a positive comment:
Right way: Mr. Agent, it takes a lot of courage to admit you are wrong. You're doing the right thing. By cooperating, you are making it easier on everyone.
Wrong way: That's better. I knew you were lying to us all along.
To obtain the details in the oral confession, Holmes will start in chronological order. He will take his time and continue to provide encouragement for answers--but he'll make sure he doesn't overdo it. Once he has all the facts, he will put the important ones in a written statement for the subject's signature.
Confronting suspects and getting them to confess is not easy. But the master detective knows from experience the subject will feel an enormous sense of relief once he has admitted his guilt. How will Holmes know whether he's done it right? This may be hard to believe, but it has happened countless times with fraud examiners: The subject actually will thank him for allowing him the privilege of confessing.
Once he obtains the confession, Holmes will prepare a written report that sets forth the documentary evidence and summaries of the witness interviews. He then will furnish the report to concerned parties: the client, attorneys, law enforcement and insurance companies. Holmes is aware the purchasing agent also will, at some point, get a copy of the report if the case ends in litigation. The final document also will be the basis of Holmes's testimony in court, should it be required. Holmes knows that as a CPA, he must avoid expressing opinions on the accused person's guilt or innocence as this is for the jury to decide. (If Holmes also is a certified fraud examiner, he is governed by Article V of the CFE Code of Ethics, which, in part, states, "A CFE shall not express an opinion on the guilt or innocence of any person or party.") Finally, once he wraps up the case, Holmes will suggest to the auditor and client ways to avoid similar problems in the future.
In this two-part series, we have learned that the responsibilities of auditors and fraud examiners are different. While the auditor is responsible for the initial discovery of clues, it is the fraud examiner's job to investigate allegations using the fraud theory approach. If adequate predication exists, the investigator will interview the target or suspect for the purpose of obtaining a voluntary and legally binding confession. Upon conclusion, the fraud examiner will prepare a written report that can, among other things, be used as a basis for courtroom testimony. Finally, he will make recommendations to the client or auditor for preventing fraud.
Facts About the Fictional Sherlock Holmes
* Holmes's adventures were chronicled in four novelettes and 56 short stories.
* Holmes had no friends, save his biographer and protege, Dr. Watson, whom he met when the two become roommates.
* Holmes never married and had a strong disdain for women.
* The world's greatest detective smoked tobacco like a chimney and ingested copious quantities of cocaine.
* Holmes had a brother, Mycroft. Nothing is known about the rest of his family.
* Holmes failed to solve many cases.
* Holmes never said, "Elementary, my dear Watson."
October 2-3, 2003
National Conference on Advanced Litigation Services and National Conference on Fraud
Fontainebleau Hilton, Miami, FL
www.cpa2biz.com/conferenras or call 1-888-777-7077.
CPA's Handbook of Fraud and Commercial Crime Prevention (# 056504)
Financial Reporting Fraud: A Practical Guide to Detection and Internal Control (# 029879)
Introduction to Fraud Examination and Criminal Behavior (# 730275)
Identifying Fraudulent Financial Transactions (# 730244)
Finding the Truth: Effective Techniques for Interview and Communication (# 730164)
To order, go to www.aicpa.org.
AICPA's Antifraud and Initiatives
Antifraud and Corporate Responsibility Resource Center,
* SAS no. 99 information.
* Management Antifraud Programs and Controls (SAS no. 99 exhibit).
* Fraud Specialist Competency Model.
* Free corporate fraud prevention training and CPE.
* Academia outreach and assistance.
* Other antifraud activities.
The World's Funniest Holmes-Watson Joke
According to Laugh Lab (www.laughlab.co.uk), the following was judged to be the World's Funniest Holmes-Watson Joke.
Sherlock Holmes and Dr. Watson were on a camping trip. After a good dinner and a bottle of wine, they retired for the night. Several hour's later, Holmes awoke and nudged his faithful friend.
"Watson, wake up and tell me what you see."
"I see millions of stars, Holmes.
"And what do you deduce from that, Watson?"
Watson pondered the question and finally said, "Well, astronomically it tells me that there are billions of galaxies and planets. Astrologically, I observe that Saturn is in Leo. Horologically, I deduce that the time is approximately a quarter past three. Meteorologically, I suspect that we will have a beautiful day tomorrow. Theologically, I can see that God is all-powerful, and that we are a small and insignificant part of the universe. What does it tell you, Sherlock?"
Holmes rolled his eves. "Watson, you idiot! It tells me that someone has stolen our tent!"
PRACTICAL TIPS TO REMEMBER
* If the investigator suspects there is a coconspirator(s) working with the employee who has perpetrated the fraud, he should interview that person(s) first in order to amass as much evidence as possible before confronting the perpetrator.
* Among the questions the investigator will avoid when interviewing the suspect is "Did you do it?"
* Before confronting the suspect, the investigator will already have assembled and have ready all the papers and documentation related to the crime.
JOSEPH T. WELLS, CPA, CFE, is founder and chairman of the Association of Certified Fraud Examiners and a professor of fraud examination at the University of Texas at Austin. Mr. Wells is a member of the Journal of Accountancy Hall of Fame for winning awards for the best JofA articles in 2000 and 2002. Mr. Wells' e-mail address is email@example.com.