REPORT WRITING

MANUAL
Writing Fraud Examination Reports

III. WRITING FRAUD EXAMINATION REPORTS

Report Structure
Report formats vary widely. Some organizations, especially governmental investigative bodies, use
report forms so that case information is provided in a consistent manner. Therefore, you should first
check with your client or supervisor to determine if there is a report format that you are required to
use. If not, then the format provided below will prove helpful.

Suggested Standard Format

Fraud examination reports are not “one size fits all” items. Obviously, no format can cover every
specific case, company, or situation. However, a standard format is a good place to start. The ACFE
recommends that the following be included in most reports. A sample report is included in the
Appendix, and portions are included in this section as examples. We have also included this report
and a template based on this report in Microsoft Word™ on the accompanying disc.

Background
The background section should generally be about two paragraphs. It should state very succinctly
why the fraud examination was conducted (e.g., an anonymous tip was received, an anomaly was
discovered during an audit, money or property was missing).

You may also state who called for the examination and who assembled the examination team.

EXAMPLE
On January 28, 2010, the fraud examination unit at Bailey Books received an anonymous
telephone call on its fraud hotline from an unidentified man who claimed that he was a former
supplier to Bailey. The caller alleged certain improprieties in the bidding and procurement process.

Based upon this initial predication, a fraud examination was conducted, which included reviews of
relevant records and interviews of appropriate personnel.

Executive Summary
For a simple fraud examination, the executive summary should be no more than four or five
paragraphs. For a more complex case, the summary may reach a page or two in length.

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In this section, you should also summarize what actions you performed during the fraud
examination, such as reviewing documents, interviewing witnesses, or conducting analyses or tests.
It provides the reader with an overview of what you did during the examination process.

At the end of this section, you should summarize the outcome of the examination. For example,
“$50,000 in checks was deposited into an account owned by Bob Wilson. When confronted with
this information, Wilson stated that he had only borrowed the money and meant to pay it back.”

EXAMPLE
The fraud examination commenced when Loren D. Bridges, CFE, received a telephone call from an
unidentified man who said that he had been a long-term supplier to Bailey for sundry office supplies
and paper. The caller said that ever since Linda Reed Collins had taken over as Purchasing
Manager, he had been gradually “squeezed out” from doing business with Bailey.

Linda Reed Collins has been employed in the purchasing department of Bailey Books since June 1,
1997. She was promoted to Purchasing Manager effective November 8, 1999.

The Fraud Examination Team reviewed selected purchases from 2005 to 2009 and conducted
interviews of key participants and Bailey employees who we believed may have information regarding
the misappropriation of assets. The Team reviewed purchasing guidelines, personnel files of
interviewees, and various financial documents relating to both Bailey Books and Linda Reed
Collins.

After obtaining sufficient documentation, the Team interviewed Linda Reed Collins, who gave a full
signed confession of her misdeeds.

Scope
This section should consist of only one paragraph explaining the scope of the fraud examination.
For example, “Determine whether inventory was misappropriated from the warehouse,” or
“Determine why money is missing from the bank account.”

EXAMPLE
The objective of the Fraud Examination Team was as follows:
• Determine the existence of a possible misappropriation of assets of Bailey Books, Incorporated.
The examination is predicated upon an anonymous telephone call alleging improprieties on the
part of Linda Reed Collins, Bailey’s Purchasing Manager.

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Approach
This section gives a brief description of the following items:
• Fraud examination team members
• Procedures (generally, what documents were reviewed or what tests were conducted)
• Individuals interviewed

It provides a handy reference to who was involved in the fraud examination, what the team
reviewed, what tests or analyses were conducted, and what individuals the team interviewed.

EXAMPLE
Fraud Examination Team Members
Loren D. Bridges, CFE, Bailey Books; Tonya Vincent, CFE, Bailey Books

Procedures
As part of the examination of this matter, the Team took the following actions:
• Obtained, reviewed, and analyzed memoranda pertaining to the anonymous
call described previously.
• Conducted surveillance activity in order to determine whether the two key
individuals in the matter were involved in an illicit relationship.
• Obtained, reviewed, and analyzed Bailey Books’ financial documentation,
including purchase records, invoices, and canceled checks.
• Obtained, reviewed, and analyzed records from the St. Augustine County
Courthouse regarding civil actions in which Edward J. Collins and Linda
Reed Collins were named; records from the Florida Secretary of State’s
Office regarding Collins Marine Corporation; records from Chattel
Mortgages regarding Linda Reed Collins and Edward Collins; financial
records from Dun & Bradstreet regarding Collins Marine Corporation; and
public records regarding the financial condition of Linda Reed Collins and
Edward J. Collins.

Individuals Interviewed:
The following individuals were interviewed in person by members of the Fraud
Examination Team:
Mark W. Steinberg, CPA (Chief Financial Officer, Bailey Books)
Roger Donald McGuire (Purchasing Agent, Bailey Books)
Mary Rodriguez De La Garza (Purchasing Department, Bailey Books)

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Sara Louise Dawson (Former Employee, Bailey Books)

Findings
This section contains the details of the fraud examination. It will generally consist of several pages.
In this section, you should describe what tasks you performed and what you found. Provide enough
detail so that the reader understands what occurred, but not so much detail that the reader begins to
lose interest or becomes bogged down in the details. The reader wants to know how many invoices
were forged, who was involved, how they did it, and what proof you have.

If the findings section is long, you might wish to use subheadings for particular topics or individuals
to make it easier for the reader to stay organized.

The information can be presented either chronologically or by topic—whatever makes it easier for
the reader to follow.

EXAMPLE
Based upon the documents reviewed, information collected, and interviews
conducted during the course of the fraud examination, the Team’s findings are as
follows:

Did the Fraud Examination Team determine the existence of a possible

misappropriation of assets of Bailey Books Incorporated?

Yes. The documents and information reviewed and interviews conducted by the
Fraud Examination Team during the course of the examination indicate that
Linda Reed Collins, together with James R. Nagel, did knowingly embezzle
approximately $197,773 from Bailey Books over four years. During the fraud
examination, the Team used financial documents and interviews to corroborate
the statements of an anonymous caller. The following is a summary of the
evidence and information supporting the Fraud Examination Team’s findings.

Summary
This section should be one or two paragraphs and should succinctly summarize the results of the
fraud examination. It should be similar to the outcome stated at the end of the Executive Summary
section.

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EXAMPLE
This report reflects that Collins, a purchasing agent for Bailey Books, Inc.,
furnished a signed statement on May 1, 2010, indicating she had accepted at least
$197,773 in commercial bribes and other illicit income in a conspiracy with
James R. Nagel, an account representative for Orion Corporation, St. Augustine,
Florida.

The statements made by Collins are corroborated by the documentary evidence

and the interviews of other witnesses as described herein.

Impact
Here you should describe how the fraud affected the victim organization. In this section, you can
provide an estimate of the dollar losses or any other kind of tangible or intangible damage already
suffered or that may occur in the future.

EXAMPLE
Over the course of four years, Linda Reed Collins, in partnership with James R.
Nagel, misappropriated an estimated $197,773 from Bailey Books, Incorporated.

Additional amounts were lost due to Bailey overpaying for merchandise sold to
the company by Nagel. Those amounts have not been calculated.

Recommendations
This section is optional. There may be instances in which you wish to discuss remedial measures or
specific recommendations in a separate document. If you do wish to include this section, you should
state what follow-up action is necessary or recommended, including remedial measures such as a
review of internal controls, introduction of a hotline, or increased security.

EXAMPLE
It is the policy of Bailey Books to report such matters to the appropriate
authorities and to assist in criminal prosecution. A full review of internal controls
should be conducted to determine how such incidents can be detected in the
future.

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Long-Form Report and Reporting Documents

The basic reporting documents are:
• Memoranda
• Exhibits, documents, or enclosures
• Indexes
• Cover page
• Transmittal letter

The long-form report will consist of copies of these documents. The Linda Reed Collins case study
report, included in the Appendix, illustrates this approach.

The heart of the documentation is the memoranda of interview, and one memorandum should be
prepared for each official contact. Once all the memoranda of interviews are completed, they are
typically assembled in chronological order and indexed.

Memoranda
Use memoranda to document all interviews and other pertinent information discovered during the
examination. Each memorandum should contain the following information where appropriate:
• Heading
• File number or control number
• Name of person reporting
• Case name or subject
• Subject of memorandum
• Date
• Details of facts
• Interview was voluntary
• Indicate that one provided one’s identity
• The witness was informed of the nature of the inquiry
• Date of inquiry
• How the interview was conducted (in person, by telephone, etc.)
• If the interview was electronically recorded
• Facts learned during the inquiry

Cover Page or Letter

A cover page summarizes the examination’s salient points. The cover page should be direct and
succinct. If a report is submitted to an outside agency (such as law enforcement or outside counsel),

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a cover letter should accompany it. The cover letter should recapitulate information in the report
and summarize the principal weaknesses. It is not necessary to list all witnesses, only those who are
most valuable.

Exhibits
As a general rule, copies of exhibits should be included in the report and not attached separately.
However, bulky files (including working papers and similar exhibits) might be attached separately
and referred to in the body of the report. The chain of custody should be maintained over original
documents.

Visual Aids
A well-executed visual aid can make a report more powerful and effective, and it can even be
preferable to text if you have to present complex, number-heavy information. You have many
options to choose from when it comes to visuals, and you should know which one is best in any
given situation. For instance, a pie chart might be the best illustrator if you need to show
proportions, while a line graph is better if you are trying to show change or progress over time.
Common computer software programs make creating charts, graphs, and tables simple.

Charts and Graphs

Bar Graph
Bar graphs are helpful when you need to compare amounts of various items in one, single time
period. For example, you can use a bar graph to represent the inventory in a warehouse. Rather than
writing, “The company had 500 widgets, 300 doodads, and 180 whatsits,” you can create a visual
representation of the inventory.

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Pie Chart
Pie charts are often used to demonstrate percentages. In our inventory example, we could use a pie
chart to show what percentage of our inventory is composed of widgets versus doodads versus
whatsits.

Line Graph
Line graphs are most commonly used to show progress over time. For example, if we wanted to
track the amount of inventory we had during the last three years, we could use a line graph to clearly
show changes.

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Organizational Chart
Organizational charts are used to visually display hierarchy. If it is important to show where a
suspect falls within a company’s structure, an organizational chart can be used.

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Flow Chart
Flow charts are helpful if you need your reader to follow a series of steps or a process. For instance,
if a suspect executed a series of events prior to committing fraud, and that series is important for
readers to understand, a flow chart might be better than text.

Other Charts and Graphs

The charts and graphs discussed above are only a few of your choices. Other graphs you might want
to consider include area charts, scatter charts, Venn diagrams, cycle diagrams, and pyramids. Take
some time to explore the different options in Microsoft Word™ and Excel™ (the easiest programs
to use if you are not familiar with visual aids), and consider adding one to your next report.

Tables
Tables are best if you need to present your reader with numbers in an organized, clear manner.
Compare the following information. Which is more understandable?

Narrative Format
The first year, the account had a starting balance of $8,500, withdrawals of $7,000, deposits of
$5,000, and an ending balance of $6,500. The second year began with a balance of $6,500 and had
similar withdrawals as the year before—$7,250. However, deposits in year two totaled $18,500. The
balance at the end of year two was $17,750.

Table Format
Year 1 Year 2
Beginning Balance $8,500 $6,500
Withdrawals $7,000 $7,250
Deposits $5,000 $18,500
Ending Balance $6,500 $17,750

Link-Network Diagrams
Link networks show the relationships between people, organizations, and events. Different symbols
are used to represent different entities: a square can symbolize an organization; a circle, a person; a
triangle, an event; and so forth. It doesn’t matter which symbols you use as long as you use them
consistently. Confirmed connections between entities can be represented by a solid line or enclosure
within another symbol. Speculative or presumed relationships can be indicated by broken lines. To
achieve its intended purpose, a graphic should always be clear. Don’t cross lines if possible.

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EXAMPLE
Smith is vice president of the ABC Corporation and president of the DEF Corporation, a subsidiary of
ABC. Jones is general partner in the First and Second Partnerships. Brown and Green are limited
partners in the First Partnership. Brown and Black are limited partners in the Second Partnership.
Black is also a general partner in the Third Partnership. Smith also might have an interest in the First
Partnership.

LINK NETWORK DIAGRAM

Here is an example of another, more sophisticated chart created with the software program i2
Analyst’s Notebook:

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