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t takes a combination of careful observation and inquiry to conduct an effective audit. Although auditors are adequately trained to be alert at a client site, most learn on the job how to ask questions to elicit specific information.This is a matter of no small importance because CPAs frequently have to inquire about operations and procedures, to document internal controls and—on occasion—to question the honesty and integrity of management and employees. For practitioners who want to improve their interviewing skills, this article will emphasize what not to do or say to uncover wrongdoing. A question is one of the most powerful tools available to auditors. When conducting audits or fraud examinations, they are free to ask any employee about anything in which they have a legitimate interest. But to do this effectively, you must recognize that interviewing is more art than science. As in many artistic endeavors, you have to hone this skill through practice—making mistakes before you master the essential elements of a good interview. Imagine this situation. While conducting a routine audit, you discover the company’s internal controls over cash disbursements are weak. Looking further, you find a series of questionable checks paid to JJSS Enterprises, a company not listed in the telephone book. You suspect one or more employees have concocted a phony vendor scheme (see “Shell Companies That Don’t Deliver,” JofA , Jul.02, page 76). After reviewing the paperwork, you still have a lot of questions. Since this matter may involve criminal fraud, you know you have to talk to the employees involved. Here are the 10 steps you should take to frame and conduct a constructive interview. 1. Prepare. As incredible as it may seem, some interviewers don’t prepare in advance. Those with a lot of experience often are the worst offenders, believing their skills can overcome a lack of preparation. Wrong. If you don’t know specifically what you want to ask a person, you are not ready to conduct an interview. Before asking the first question, spend time reviewing documentation such as checks, invoices and ledgers, personnel files and other information such as witness statements. Jot down the key areas you want to explore. 2. Think as you go. In preparing for an interview, you may be tempted to write your questions in advance. But don’t—for two reasons. First, writing the questions is limiting; if something comes up during the interview that’s not on your list of questions, you’re likely to overlook it. Instead, refer to your key-points list. That’ll keep your interview on target. The second reason is a practical one: Often, the person being interviewed can sneak a peek at your questions, see what you’re going to ask next and—if he or she is dishonest—think of a plausible lie. 3. Watch nonverbal behavior. When asking questions, it’s easy to get caught up in what is being said and to ignore how the person says it. Behaviorists claim more than half of communication is nonverbal. People have a natural body language when they’re relaxed, but act differently when stressed. You must therefore observe how someone reacts to easy questions, and then measure the differences—if any—when the questioning gets tougher. This process is called calibration and is an integral part of assessing a witness’s truthfulness (See “‘Why Ask?’ You Ask” ( JofA , Sep.01). 4. Set the tone. Surprisingly, the introduction can be the hardest part of the interview. That’s because you have to create the proper impression, enlist the person’s cooperation and explain the nature of your inquiry—all at once. This is easier to do if you understand the components of an effective introduction.
To create the proper impression, dress appropriately for the person you are interviewing, introduce yourself, smile, make eye contact and shake hands. All of these steps are equally important as they help put the person at ease. Begin by gaining the person’s cooperation with a simple statement: “I’m working on a matter and I need some help. Do you have a few minutes to assist me?” Most people will say “yes” without even knowing why you’re asking. At this point, it isn’t necessary or desirable to explain yourself further; you’re simply trying to get the person to commit to answering questions. If your subject is evasive or declines to be interviewed, attempt to determine why. Do your best to overcome the person’s objections, but realize that interviews are voluntary. In cases involving reluctant witnesses, you may need to spend more time explaining your purpose. 1. jpg” width=”400″ height=”341″> Once you have the commitment for assistance, explain your purpose only in the broadest terms: “We’re looking into some matters concerning the company’s books.” Do not overexplain your reason for the interview; the person might become confused or defensive. 5. Pace your questions. Let the interview flow naturally, progressing from the easy to the tough questions. Before you get to the “meat” of your interview, establish a rapport with the person. The timing must be right before you start asking important questions. If you don’t spend enough time warming up your subject, he or she will be less forthcoming; if you take too long, the person is likely to be put off and become suspicious. 6. Do more listening than talking. Interviewing someone, especially a person who may have significant information, can be stressful for the interviewer. Some compensate by talking too much. If you’re talking more than a quarter of the time, you’re probably revealing more information than necessary. But always remember: Interviewing is a two-way street; you must give information to get it. 7. Be straightforward. Approach interviews in an honest and open way. Some interviewers cannot overcome a tendency to be cagey when trying to obtain information. However, many people react to this by becoming withdrawn and defensive. For example, it is common for the subject to ask, “What’s this all about?” If you hedge in your answers, the person is less likely to cooperate.
| 8. Take your time. Have you ever questioned someone and come away believing you didn’t get all of the facts? In those situations, trust your instincts and keep pressing—in a nice way—for answers. Honest people usually won’t mind; they will understand your mission. Guilty individuals typically display impatience for a reason: The longer the interview lasts, the more likely they will make contradictory statements. 9. Double-check the facts. Some interviewers—even experienced ones—make the mistake of not reconfirming key facts with the interviewee before concluding the session. That’s a mistake; nothing is more embarrassing or damaging to your case than to have your own witness contradict the facts as you have reported them. So take a few extra minutes before the end of the interview to make sure you have the story right. Unless you believe it is likely the interviewee will recant his or her statement, tape-recording the interview is unnecessary and can be off-putting to your subject. | The Written Confession
If, during the course of an audit or fraud examination, a person confesses to illicit or illegal conduct, get it in writing. A written confession should make three key declarations: that the statement is voluntary, that it is truthful and that the confessor knew the conduct it describes was wrong. Either the confessor or the interviewer can prepare the confession, which should be as brief as possible. Note the following example. New York, New York
June 27, 20XX I, John Smith, furnish the following free and voluntary statement to Bob Jones, who has identified himself to me as a certified public accountant. No threats or promises were made to induce this statement. I am the controller for ABC Corp. Over the last 12 months, I devised a scheme to defraud my employer of approximately $200,000 by causing certain company checks to be issued to JJSS Enterprises. I converted all $200,000 to my own benefit. The money was used to pay pressing debts. I knew my actions were unlawful. No one else in the company knew of or participated in my illegal scheme. I have read this statement consisting of one page, and I now sign my name below because the information contained herein is true and correct to the best of my knowledge. /Signed/John Smith
/Witness/Bob Jones | | 10. Get it in writing. Many people confess to their misdeeds in the heat of the moment when you are questioning them. That’s the time to get the confession down in writing. To avoid wrongful accusations, don’t confront your subject unless you are convinced you have enough evidence to prove your case even without a confession. There is usually no more powerful evidence of wrongdoing than a person affixing his or her own signature to a written confession. But sometimes interviewers will obtain an oral admission and fail to get it on paper.
There’s usually only one opportunity to get a written and signed confession: immediately after the oral admission. If the person leaves the room without signing such a document, chances are he or she never will. (Don’t worry about Miranda warnings; they apply only to police who have a suspect in custody. See your attorney for details.) THE UPSIDE IS CLEAR
A well-framed interview has innumerable benefits: As an auditor, you help discharge your fraud-related responsibilities, you learn a great deal about human action and reaction, you develop a more complete picture of what’s going on outside the books and you get better at coping with the adversarial nature of uncovering fraud. And best of all, you have the satisfaction of knowing you did all you could to uncover the truth.
JOSEPH T. WELLS, CPA, CFE, is founder and chairman of the Association of Certified Fraud Examiners in Austin, Texas, and professor of fraud examination at the University of Texas. Mr. Wells’ article, “ So That’s Why It’s Called a Pyramid Scheme ” ( JofA , Oct.00, page 91), won the Lawler Award for the best article in the JofA in 2000. His e-mail address is joe@cfenet.com . |
