Internal investigations and the use of auditors and accountants

Via The Fraud Files Blog.

When whistleblowers report potential ethics violations within companies, the first step the company must take is an internal investigation. The best internal investigations are independent and led by outside counsel, for a variety of reasons.

But what about the part of the investigation that involves analyzing accounting records, financial statements, and SEC filings? Management often wants to use internal finance professionals or their outside auditors for this task. It seems to make sense to utilize the expertise of people who are already familiar with the company’s finances.

However, this is not the right approach in most situations. It is important to use outside experts – - usually forensic accountants with significant experience in fraud investigations – - to maintain independence, avoid conflicts of interest, and retain privilege in the investigation.

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