Managing Client Emotions in Forensic Accounting and Fraud Investigation. Stephen Pedneault
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bring all those records to the school the next day – 24 hours from that point. The administrative employee could tell each person that auditors were looking for the school's financial records and needed to have the statements and records back at the school to continue their audit. We told her we would return tomorrow to retrieve the bank records. Once again, we told her that we really appreciated her help and we looked forward to meeting with her again tomorrow. At that point, she seemed much more relaxed than when we'd first met her.
The next day, when we returned to the school, the administrative employee told us that the finance manager had not come to work again, but that she had dropped off a box of bank statements in her office. The finance manager must have come to the office after school hours and left the box on her desk. The administrative employee had gone through the box that morning, sorted the statements by bank account, and organized them for us. She also told us that others had brought their account statements to her that morning, and she had those records organized as well.
We took out the list of accounts we had created with her the day before and asked her if statements for all of the accounts she'd identified had been received. She said that they all had, except for one. When we asked her what account it was, she said it was a sports account, which the athletic coach and his wife managed from their house. We asked her if she had requested that the coach bring all of the statements to her at the school this morning. She said she had, but that she hadn't yet received anything. We then asked her to tell us about the sports program and the coach.
She said that the coach and his family had been running the sports program at the school for many, many years. She said that they handled the account on their own, receiving their statements directly at their house and taking care of their own deposits and payments. She said that her office really had nothing to do with the sports account, and it had been that way as long as she had been at the school – some 10 or more years – and that she didn't think there was a lot of activity involved with the sports account.
She said that families paid for their children to participate in the various sports teams and programs and that the costs associated with those programs were paid from the sports fees collected. We asked her what the coach and his family were like, where they lived, and what she knew about them. She said they lived right around the corner, in a house not far from the school, and as far as she knew, this was the coach's only job. She said the family had two children who attended the school (tuition‐free, since they were school employees). She said she believed the coach's wife had a job, but did not know what she did or where she worked. She thought the coach had obtained a credit card in the school's name to use with the sports program, but she had never seen any of the credit card statements.
She seemed to be getting nervous again, and she asked us if the coach was in trouble. We told her it wasn't her fault if someone did not bring in their records and that we were only seeking the bank statements and financial records for the school so we could review them. However, we now also needed to know why the coach had not brought the sports account records to the school as requested.
We asked her to call the coach and tell him that the auditors were at the school and wanted him to bring the bank statements and financial records to the school that morning. We left her to make the call and went into a conference room to review the records that she had organized for us.
About 45 minutes later, the administrative employee came into the conference room and said that the coach was in the lobby with a box of records. We went to meet the coach and introduced ourselves. He looked very nervous. We then asked the coach to join us in the conference room. We told him we were conducting a review of the school's finances and as such we needed all of the school's bank statements. He still looked nervous.
Rather than diving right into things, I decided to take a different approach and see if his nervousness continued or diminished as we spoke. I asked him to tell us about the sports programs at the school. He described the various sports programs and teams and his family's involvement. He said that he and his wife had attended the school when they were younger, and now their children attended. During the conversation, his nervousness did not diminish. I asked him how the finances worked for the sports programs, and he told us about the fees and the nature of the program's expenses, like uniforms, field rental costs, and referee fees. Everything he said appeared straightforward and consistent, but he remained anxious.
We asked him if he'd brought all of the bank statements, paid invoices, and deposit records for the program, and he said that he had. When we asked him why he maintained the records at his house rather than the school, he said it had always been that way, and it was easier to keep everything together at his house. He said no one had ever asked him for the records in the past. We asked him why he hadn't brought them this morning as requested, and he said that he wanted to be able to explain them to the auditors when they reviewed them. His agitation grew.
We thanked him for bringing in the records and told him that we would go through them, along with all of the other accounts, and would circle back with him if we had any questions. As we finished our conversation, we asked him one final question: When we went through the financial records for the sports program, would we find anything that could be a potential issue regarding the finances and how they were handled?
He said that that was what he wanted to talk to the auditors about. He was now the most nervous he had been since we began talking. We asked him if he would like to tell us why he was so nervous. He said that when we went through the bank account, we would see expenses unrelated to the sports programs. We asked him to describe these types of expenses, and he said he wasn't sure if he should be talking with us. We told him that we understood and that we would get to the truth one way or the other once we reviewed the records. We also already knew about the credit card. We told him we weren't meeting with him to judge him, but rather we just wanted to get his side of the story about the school's sports program funds.
When he heard that, his face relaxed a bit, and he said that the check payments and credit‐card charges were for personal and family expenses rather than school‐related expenditures. We asked him to provide some detail about these expenses and spent the next hour or so going month by month through the bank statements, having him identify the personal expenses he'd paid with the school's sports funds. He also detailed how not all of the sports fees collected had been deposited, because he and his family had needed the funds at times to pay their mortgage or other expenses. Then he took us through the monthly credit‐card statements, which revealed that the credit‐card activity had nothing to do with the sports programs.
After reviewing all of the records, we thanked him for meeting with us. We told him he could have gone another way, by discarding all the records and declining to speak with us, but by being forthcoming, at least it was now all out on the table and we could work with the school, counsel, and him to resolve the issue of his misuse of school's funds. He looked much less stressed and nervous as we ended the meeting.
At the outset of this matter, we'd had no idea there was a problem with the school's sports funds. We knew there had been an issue with the finance manager and with tuition and fees not being receipted and deposited into the school's bank accounts. However, we had no idea there was a completely separate issue with the sports program's finances. By listening respectfully to the administrative employee's story – and then treating the coach the same way – we were able to uncover a completely separate problem that was easier to quantify than the original issue.
ROLLERCOASTER
During a fraud engagement, individuals may become frustrated, angry, or depressed. They may break down and start crying during parts of their story and then turn angry during others. It is prudent to prepare for mood changes and expect a rollercoaster ride of emotions. Throughout it all, actively listen to clients and allow them time to regain their composure as needed. The impact of being a victim of fraud, or being accused of fraud, is very personal and the individual will likely be under a significant amount of stress. Their emotional state may be very unstable, and they may feel violated, especially if trusted family members or friends are involved in the matter, which is often the case.
It is important to note that while