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PART One
Financial Forensics Tools, Techniques, Methods, and Methodologies
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CHAPTER 1
Foundational Phase
Forensic operators must initiate assignments by clearly identifying and documenting the entities, parties, and ownership interests in the matter at hand. This phase is essential and cannot be disregarded since it charts the vector for the remainder of the assignment, notwithstanding subsequent refinements.
ASSIGNMENT DEVELOPMENT STAGE
Purpose of Stage
This action anchors the forensic assignment and shapes the context and defines the framework for assignment execution. See Exhibit 1.1.
The objective of this action is to complete necessary policy and procedural due diligence before taking any steps toward launching the assignment. This is the starting point for all forensic assignments.
Specific actions include:
- Identify all parties in the matter, internal and external. This includes, but is not limited to: plaintiff and defendant, petitioner and respondent, prosecutor and defendant, claimant and disputant, etc., including legal and regulatory parties.
- Correlate the matters of law, as applicable.
- Establish technical requirements.
- Uniquely identify the assignment with a client or case number or both.
References
This action confirms access to pertinent technical references, whether currently available or requiring acquisition. Technical resources comprise written materials and training, including self-study, webinar, and live classroom training.
The objective of this action is to ensure that necessary technical resources are at hand.
Specific actions include:
- Search, for example, the Internet for pertinent technical reference sources.
- Develop a list of required sources.
- Compare required sources against currently available sources.
- Acquire sources not otherwise available.
Example of Reference Sources
The following reference sources serve to jump start the forensic operator. The Key Internet Sites and Key Reference Materials are not all-inclusive but provide starting points from which to build resources. Also, refer to the bibliography.
Key Internet sites
- All forensic operators
www.financialforensicsacademy.com
www.fjc.gov - “Reference Manual on Scientific Evidence,” Reference Guide on Economic Losses in Damages Awards, by Mark A. Allen, Robert E. Hall and Victoria A. Lazear.
- CPA forensic operators
www.financialforensicsacademy.com
Key Reference materials
- All forensic operators
- Financial Forensics Body of Knowledge, published by John Wiley & Sons.
- CPA forensic operators
- Litigation Services Handbook: The Role of the Financial Expert, 4th ed., published by John Wiley & Sons. Also, earlier editions and supplements contain significant additional material.
Tasks to Be Performed
This action outlines likely tasks but is not a checklist since each forensic assignment is unique. Use the tasks as a guideline and modify according to the unique facts and circumstances of the assignment.
The objective of this action is to ensure that the forensic operator thinks through the assignment from inception to completion before launching activities.
Specific actions include:
- Initiate full-and-false inclusion1
The full-and-false inclusion technique is foundational to financial forensics yet is foreign to many forensic operators and thus routinely overlooked. It is the single most important element of financial forensics yet is unknown or disregarded by untrained forensic operators. The technique is indispensable because it identifies the evidence essential to the forensic assignment at hand.
Full-and-false-inclusion testing serves as the real-time map continuously constructed by the GPS-like capabilities of financial forensics. (See the following chain of custody.) - Initiate chain of custody2
The chain of custody is the fraternal twin of full-and-false inclusion. The term is familiar to forensic operators with criminal investigation backgrounds. Chain of custody likewise applies in civil and mere dispute matters just as it applies in criminal matters. (See full-and-false inclusion, above.) - Formally clear conflict.
- Confirm the expectations of the responsible party(s). This could include a testimony role, consulting role, advisory role, or other capacity.
- Confirm the applicable laws, jurisdiction, regulations, precedent, and other requirements to ensure compliance.
- Confirm internal technical capabilities or alternatively, identify technical assistance, or initiate specific training.
- Search for pertinent technical reference sources via, for example, the Internet.
Example Chain of Custody Form
Note: The following example chain of custody form (see Exhibit 1.2) permits all forensic operators to establish and maintain a contemporaneously documented trail of data and evidence. There are no generalized requirements for chain of custody forms except those unique to the forensic operator's organization. Nonetheless, it is often essential in both criminal and civil matters.
Descriptors: Each portion is self-explanatory regarding completion, with N/A indicated as necessary.
Custody: The prenumbered chain of custody forms trace to the chain of custody issue log. Both the chain of custody issue log and the chain of custody forms are permanently maintained in the evidence (work paper, library, etc.) room or locker.
Potential Issues
This action prompts the forensic operator to consider the boundaries of the people, parties, entities, timelines, data, output, cost, technical standards, and related criteria pertinent to the respective assignment. The suggested list is not an all-inclusive checklist since each forensic assignment is unique. Use the tasks as a guideline and modify according to the unique facts and circumstances of the assignment.
The objective of this action is to ensure that the forensic operator contemplates exigencies that may surface during the assignment. The forensic operator can minimize exigencies (to the extent possible) by diligent attention to this action.
