Data Sleuth

Straightforward, practical guidance for working fraud examiners and forensic accountants

In Data Sleuth: Using Data in Forensic Accounting Engagements and Fraud Investigations, certified fraud examiner, former FBI support employee, private investigator, and certified public accountant Leah Wietholter delivers a step-by-step guide to financial investigation that can be applied to almost any forensic accounting use-case. The book emphasizes the use of best evidence as you work through problem-solving data analysis techniques that address the common challenge of imperfect and incomplete information.

The accomplished author bridges the gap between modern fraud investigation theory and practical applications and processes necessary for working practitioners. She also provides:

• Access to a complimentary website with supplementary resources, including a Fraud Detection Worksheet and case planning template
• Strategies for systematically applying the Data Sleuth® framework to streamline and grow your practice
• Methods and techniques to improve the quality of your work product

Data Sleuth is an indispensable, hands-on resource for practicing and aspiring fraud examiners and investigators, accountants, and auditors. It’s a one-of-a-kind book that puts a practical blueprint to effective financial investigation in the palm of your hand.

Foreword xi

Preface xv

Acknowledgments xix

Chapter 1: Building a Data Sleuth Team 1

The First Team 2

The Forensic Accountant 4

Technical and Strategic 4

Thorough and Efficient 5

Detail-Oriented and Effective Communication 6

Accounting Knowledge and Legal Knowledge 7

Meeting Deadlines and Developing Business 8

Forensic Accountant Problems 8

The Scalability Problem 9

The Strategy Problem 10

The Review Problem 12

The Sustainability Problem 13

Data Sleuth Solutions 14

The Scalability Solution 14

The Strategy Solution 16

The Review Solution 18

The Sustainability Solution 18

Chapter 2: The Data Sleuth Process 21

Engagement Types 21

Simultaneously Managing Client Expectations and Objectivity 25

Professional Standards 28

The Data Sleuth Process 30

Chapter 3: The Data Sleuth Necessity 41

Forensic Accounting Engagements versus External Financial Statement Audits 42

The Evolution of Forensic Accounting 44

The Case of the Cash Back Payroll Scheme 45

Start with the Evidence, Not the Scheme 47

The Case of the Gambling Executive Director 48

Chapter 4: Data Sleuth Considerations 53

Investigations Affect Real People 54

The Case of the Nonexistent Inventory 55

The Fraud Formula 58

Staying on Task with Purpose in Mind 59

The Investigation Decision Tree for a Data Sleuth 60

Recovery Avenues 63

The Case of the Man Cave 66

Chapter 5: Client Communication and Involvement 71

The Case of the Initial Client Meeting 72

Client Expectations 75

Data Procurement 77

Client Involvement During an Investigation 78

Ongoing Client Communication 81

Chapter 6: The Data Sleuth Case Plan 83

The Data Sleuth Process 83

The Client’s Investigation Priorities 86

Evaluate the Subject’s Access through Risk-Based Analysis 86

Data Sleuth Analysis Framework 88

From Conceptual Venn Diagram to Comparative Data Analysis 96

The Data Analysis Plan 97

Data and Information Gathering 99

Communication of the Case Plan 101

The Case of the Duplicate Payroll – Conclusion 102

Chapter 7: Risk-Based Analysis 105

The Case of the Puzzling Entries 106

Risk Focus in Audits versus Risk Focus in Investigations 118

The Case of the Mom of the Year 118

Evaluating Risk in Divorce Cases and Estate and Trust Disputes 126

Chapter 8: Data Sources and Data Processing Techniques 129

Data Sources Explained 129

Quantitative and Qualitative Data Sources 130

Data Sources for Quantitative Evidence 130

Data Sources for Qualitative Evidence 134

Using Quantitative and Qualitative Data Sources 135

Data Processing Techniques 136

Relevant Period 136

Getting Organized Before Beginning Data Processing 139

Considerations Before Processing Data 144

Account Scheduling Steps 145

Formatting Account Schedules and Normalizing Payees 149

Chapter 9: Standard Data Sleuth Analyses: Comparative Analysis and Source and Use Summaries 151

Comparative Analysis 152

The Case of the Cash Flow Fiasco 153

Source and Use Summary and Analysis 156

Bank Account Source and Use Analysis 157

Credit Card Account Source and Use Summary 164

Chapter 10: Standard Data Sleuth Analyses: Interesting Data Findings, Risk Indicator Analysis, and Payroll Analysis 169

Interesting Data Findings 170

Risk Indicator Analysis 175

Payroll Analysis 180

Overpayments of Payroll 189

Chapter 11: Findings, Reports, and Testimony 193

Findings 193

Reports 196

A Report for Criminal Charges 197

Report Recommendations for Law Enforcement Referral 199

An Expert Report for Civil Litigation 200

An Expert Report for Insurance Reimbursement 201

Report Organization Recommendations 202

Testimony 203

Chapter 12: Practice the Data Sleuth Process 207

Review of the Data Sleuth Case Plan 207

Review of Data Sleuth Data Processing 208

Review of the Data Analysis Plan and Standard Data Sleuth Analyses 208

Case Study 1: The Case of the Disappearing Business 209

Case Study 2: The Case of the Sneaky CFO 213

Chapter 13: The Cases that Went Wrong 219

The Client Who Believes He Was Wronged 219

The Client Whose Decisions Affect an Investigation 225

Chapter 14: Data Sleuth Expansion 231

Data Sleuth Empowers the Curious 232

Data Sleuth Divisions 234

Public Accounting Firms 235

Consulting and Advisory Firms 236

The Case of the Phony Professional 237

Law Firms 239

Law Enforcement 240

The Future of Data Sleuth 240

Data Sleuth as Prevention 240

Licenses, Credentials, and Professional Development 241

Appendix: Case Study Exercise Solution Recommendations 243

Case Study 1: Exercise 1 – Solution Recommendations 243

Case Study 2: Exercise 1 – Solution Recommendations 244

Case Study 2: Exercise 2 – Solution Recommendations 246

About the Author 249

About the Website 251

Index 253

Leah Wietholter is a Certified Fraud Examiner, private investigator, Certified Public Accountant, and CEO of Workman Forensics in Tulsa, Oklahoma. She previously worked with the Federal Bureau of Investigation and as a Senior Certified Fraud Examiner at a public accounting firm in Tulsa. She runs The Investigation Game, an interactive continuing education experience and podcast that explores financial investigation strategies.

Data Sleuth presents a practical, hands-on approach to forensic accounting engagements and fraud investigations. The book offers processes, best practices, step-by-step explanations, and overarching strategies to help financial investigators and forensic accountants deliver results for their clients and grow their practices.

In the book, former FBI student trainee, Certified Fraud Examiner, private investigator, and Certified Public Accountant, Leah Wietholter, explains her proprietary Data Sleuth^® process, why it’s necessary, and how it fits into typical forensic accounting engagements and fraud investigations. She also lays out a complete framework for its implementation.

Data Sleuth explores the importance of proving the twin purposes of using data to uncover personal benefit and intent to prove fraud and examines the concept of risk-based analysis in financial investigations. It explains a variety of analysis methods, as well as the centrality of best evidence in the investigation process.

Readers will discover how to analyze financial data in the Data Sleuth^® process using Excel to systematize common steps in the investigative process resulting in consistent, reliable work products. They’ll also learn the ethical importance of retaining an independent and evidence-based point of view, especially when testifying as an expert witness.

Including downloadable supplemental resources, like a Fraud Detection Work sheet and other Data Sleuth^® process organizational templates, Data Sleuth offers techniques for using the best available data sources for working through problem-­solving processes that address the ­challenges of imperfect information.

An indispensable resource for forensic accountants and fraud investigators, Data Sleuth answers foundational questions and provides critical frameworks for effective financial investigations in real-world situations where information is often incomplete.

Praise for DATA SLEUTH

"Until now, everyone thought it was impossible to standardize fraud investigations and scale a forensic accounting practice. Data Sleuth lays out the process of developing a case plan, doing the analysis, and reporting the results in a way that can be duplicated. This book features techniques and processes that actually work in the real world. Data Sleuth is a must-have for any serious forensic accountant."
—TRACY COENEN, CPA, CFF, Sequence Inc. Forensic Accounting

"I loved Leah's easy-going style and real-world examples, struggles, and triumphs which she masterfully transitioned into practical techniques and detailed analysis. Learning from her journey, experience, and knowledge is something that every investigator should do."
—BRIAN WILLINGHAM, CFE, Diligentia Group

"The book is written in an engaging manner with clearly elucidated ties to accounting. It is well-suited to experiential learning for clients, data sleuths, and students alike!"
—VAIRAM ARUNACHALAM, Director, School of Accountancy, University of Missouri

"Leah has used her knowledge and experience to create an excellent resource to educate on how forensic investigations can follow a standardized process and be successfully data driven."
—ROBYN SHAW, CPA, CFE, Facts & Figures Forensics