Managing Client Emotions in Forensic Accounting and Fraud Investigation. Stephen Pedneault
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Either they will eventually get to the point in discussing the present matter or, once they feel they have provided you with all the details, they will stop talking. This moment is when you can guide them to discussing the present matter – the reason they need your services. It is important that, even if you make this transition for them by focusing them on the issue at hand, you do not make them feel as if the details they have provided up to that point have been unimportant or irrelevant. Recognize that it is all important and relevant to them.
Often, clients will ask you what you think of all of the details they provided. It is critical for you to be genuine, objective, and respectful, regardless of how irrelevant those details may seem. Building a rapport with clients starts with listening to their story, and sometimes the little details that appeared irrelevant in the beginning can prove useful later in the fraud examination.
In the end, every fraud examiner wants to know the same two things – why the individual needs a fraud examiner and what the individual hopes will be accomplished by using a fraud examiner. To that end, the examiner may be tempted to borrow an approach from the 1950s series Dragnet: “Just the facts, ma'am.” That's certainly an approach I understand: Just tell me why you called my firm and what you hope we can do to help you resolve your matter. Let's keep this meeting as brief as possible. However, I have found that that approach is simply not effective in reality.
My experience has shown me that, as much as I may want to surgically extract the pertinent facts and keep irrelevant conversation to a minimum, that strategy is not successful in helping to resolve the client's matter. It's far more effective to take a little extra time to listen to their full story.
Listening to clients’ stories will not be limited to that first interaction. I use every interaction as an opportunity to interview the individual. Some interviews are more formal than others, but if I approach every one as an opportunity to learn more information, I may discover details that were omitted in previous meetings, which will only help me in my fact‐finding process. Sometimes, a subsequent opportunity to ask questions and listen to a client's responses has led to my discovering details of other activities that I'd known nothing about up to that point. This proved to be the case in the following engagement.
We were working with counsel on a matter involving a school finance manager who appeared to be stealing funds from the school. Families were sending tuition and other payments to the school, but the funds were not reaching the school's bank accounts. Although the school's enrollment was strong, the school was in poor financial health, and its reserve funding was depleted.
We scheduled a time to meet with the finance manager at the school, gain an understanding of the school's finances, and obtain access to all the financial records, including bank statements, paid invoices, and deposit details. When we arrived, a very nervous administrative employee who worked with the finance manager met with us. She said the finance manager had not come to work as planned, and that if we wanted to meet with the finance manager, we would have to reschedule for another day. It was obvious that the woman was nervous, as well as caught in a difficult position, since her supervisor hadn't provided any notice or explanation for her absence. We used the interaction to provide the administrative employee with assurances that we simply needed her help and the fact that the finance manager had not shown up was in no way a reflection on the administrative employee. We then sat down with her to gain a general understanding of the school's finances, systems, and operations. In other words, we started to establish a rapport with her.
Seeing that we were at the school and had not received notice of the finance manager's absence, we assumed that the finance manager must have realized her illegal actions were about to be uncovered. She would avoid meeting with us and having to explain her actions, buying herself perhaps a few more days. (It turned out we were right: The finance manager's unauthorized diversion of funds was uncovered, and she was ultimately held accountable for her thefts.) However, the goal in our initial meeting was not to reveal any of this to the administrative employee. We needed her to help us, so we needed to minimize – in her mind – our involvement in this matter.
While we were at the school, we had the administrative employee identify the location of the financial records, including the bank statements. The administrative employee showed us to the file cabinets and told us that the bank statements were all maintained offsite. We asked her how many bank accounts there were, and she said there were many. We asked her why the bank statements were kept offsite. She couldn't explain to us why they were not maintained in the file cabinets with the school's other financial records. She said that most of the accounts were maintained by the finance manager, but that there were other smaller accounts maintained by other individuals involved in the school. We created a list of these accounts and identified the individual associated with each account's records.
We collected two years’ worth of financial records from the file cabinets and secured them in our cars to transport them to our offices for safekeeping. We thanked the administrative employee for her help and told her how much we appreciated her helping us find the financial records.
We then asked the administrative employee to contact anyone who maintained any of the school's bank account information or any other type of school financial records and instruct them to bring all those records to the school the next day – 24 hours from that point. The administrative employee could tell each person that auditors were looking for the school's financial records and needed to have the statements and records back at the school to continue their audit. We told her we would return tomorrow to retrieve the bank records. Once again, we told her that we really appreciated her help and we looked forward to meeting with her again tomorrow. At that point, she seemed much more relaxed than when we'd first met her.
The next day, when we returned to the school, the administrative employee told us that the finance manager had not come to work again, but that she had dropped off a box of bank statements in her office. The finance manager must have come to the office after school hours and left the box on her desk. The administrative employee had gone through the box that morning, sorted the statements by bank account, and organized them for us. She also told us that others had brought their account statements to her that morning, and she had those records organized as well.
We took out the list of accounts we had created with her the day before and asked her if statements for all of the accounts she'd identified had been received. She said that they all had, except for one. When we asked her what account it was, she said it was a sports account, which the athletic coach and his wife managed from their house. We asked her if she had requested that the coach bring all of the statements to her at the school this morning. She said she had, but that she hadn't yet received anything. We then asked her to tell us about the sports program and the coach.
She said that the coach and his family had been running the sports program at the school for many, many years. She said that they handled the account on their own, receiving their statements directly at their house and taking care of their own deposits and payments. She said that her office really had nothing to do with the sports account, and it had been that way as long as she had been at the school – some 10 or more years – and that she didn't think there was a lot of activity involved with the sports account.
She said that families paid for their children to participate in the various sports teams and programs and that the costs associated with those programs were paid from the sports fees collected. We asked her what the coach and his family were like, where they lived, and what she knew about them. She said they lived right around the corner, in a house not far from the school, and as far as she knew, this was the coach's only job. She said the family had two children who attended the school (tuition‐free,