Every stage of an internal investigation, and the decisions made at each stage, carry significant importance. However, the initial stage of assessing allegations can be considered the “first button of the shirt.” During this brief phase, swift and accurate decision-making is essential. Errors in this initial assessment can lead to one of the following outcomes—or worse:
- Failing to investigate a matter that requires attention, potentially resulting in financial losses.
- Investigating a matter unnecessarily, leading to wasted time and resources.
To avoid such adverse outcomes, the initial evaluation of allegations or suspicions must be conducted meticulously and completed as promptly as possible. The Association of Certified Fraud Examiners (ACFE) recommends completing this stage within three days of the emergence of allegations or suspicions, provided the situation is not overly complex.
The key actions required during this phase can be summarized in three steps:
- Understanding the issue
- Reviewing applicable policies and procedures
- Examining the allegations or suspicions
Understanding the Issue
To determine the strategy for addressing allegations or suspicions and to identify the appropriate steps to take, it is crucial to gain a comprehensive understanding of the issue. Failure to adequately grasp or accurately define the problem can lead to misdirection, wasted time, and the need to revisit the issue from the beginning to arrive at an accurate assessment.
Reviewing Applicable Policies and Procedures
Professionals conducting the investigation might not have the same level of insight into the process as the process owners, which is to be expected.. Therefore, when evaluating allegations or suspicions, it is vital to review applicable laws, regulations, company policies, and procedures to understand what constitutes proper conduct. This approach facilitates the identification of any violations—whether of legal requirements or internal policies.
Examining Allegations or Suspicions
The final step in the evaluation phase involves conducting a limited inquiry into the allegations or suspicions. Whenever possible, begin by interviewing the individual who raised the concern (e.g., an employee, former employee, customer, supplier) to understand their claims, ask pertinent questions, and make their sometimes abstract allegations as concrete as possible. Next, without alerting the subject of the allegations, speak with employees or managers involved in the process who may serve as witnesses. Finally, review all the information and documents gathered up to that point and decide on the appropriate course of action to conclude the assessment phase.
Additional Considerations When Evaluating Allegations
One critical consideration is recognizing that current or former employees may sometimes bring forward allegations driven by ulterior motives. For example, a former employee might seek to harm their previous manager or colleagues, or an employee vying for a promotion might make accusations against a competitor. It is essential to remain mindful of such scenarios based on past cases.
Finally, no matter how straightforward an allegation may initially appear, investigators must avoid forming a presumption of wrongdoing. Even seemingly clear findings can have alternative explanations. Evaluations must be conducted with complete objectivity, acknowledging the possibility of different interpretations.
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