Setting the Perimeter - Just Put It in a Box

This blog is the second in a four part series How to Solve a Puzzle.

The phrase “think outside the box” is very cliché. We have all heard it and know when we hear it, it’s time to put on our creative hats. However, in this post, I want to focus instead on putting it—the fraud investigation—inside a box. The second step in solving a jigsaw puzzle is putting the perimeter of the puzzle together. The perimeter is important because it gives you a boundary. Plus, it’s an easy way to get started since you only have to worry about connecting two sides of each piece rather than four.

First, I want to tell you about the “fun” my family is having putting together a 1000-piece jigsaw puzzle, and with that statement, I am being sarcastic. This weekend, we completed steps one and two of the process (turning all of the pieces face up and putting the edges together), and when I say “we,” I mean that I did most of the work. My children put in about fifteen minutes of work before quitting. I believe they quit because these first two steps require a significant time investment, and it is difficult to see the fruits of your labor in the early stages of the process.

It has been at least a year since we have tackled a puzzle this size, and I had forgotten how much work (and fun) putting together a puzzle can be. We poured it out on the floor and got started. Wow . . . that’s a lot of pieces! And once all the pieces were spread out, they were everywhere! We are missing about four edge pieces, which I’m sure we’ll find by the end of this thing.

I also realized this weekend that I am getting old. I sat on the floor working on this huge puzzle. After fifteen minutes or so, I got up to move to the other side of the pile of puzzle pieces and it took me two or three minutes to get the stiffness out of my knees and back. Putting this puzzle together on the floor probably wasn’t the best decision.

What does all this have to do with a fraud investigation? The perimeter of the jigsaw puzzle sets the boundaries of the puzzle, which is the same as putting an investigation in a box. The box will help focus efforts and minimize unnecessary distractions. Below are some ways to help put it in a box:

1. Who are the potential fraudsters and could others be involved? It is usually easy to identify the potential fraudsters, but sometimes it can be difficult determine if the fraudsters are colluding with someone else or if someone else has knowledge of the suspected fraudulent activity. By identifying the potential wrongdoers, you narrow the focus of the investigation only to areas that the fraudsters could impact.
2. What areas can the potential fraudsters manipulate? The fraudsters work in certain processes (e.g., collections, vendor payments, inventory management) within the company. It is important to identify these areas because this can save precious time and help prioritize the investigation steps. The fraudsters could be in management and have the ability to manipulate all processes, which means every area is within the box and should be an area of focus.
3. How long have the fraudsters been at the company or involved in a certain process? The answers to these questions will help narrow the time frame of the possible wrongdoing and help define the scope of the investigation.
4. Is there a minimum threshold amount for possible fraudulent transactions? It is a good idea to discuss this at the beginning of the process to focus investigative resources on higher dollar transactions. However, this doesn’t mean you should ignore small variances because sometimes variances lead to identifying a much larger fraudulent transaction. The minimum threshold is intended to minimize the level of effort chasing a $10 cab fare that wasn’t documented properly versus $10,000 in expenses for an entire trip to an exotic location without a legitimate business purpose.

Essentially, these are ways to prepare the scope of an investigation. Scoping is important to ensure efficient use of resources and timely completion of the investigation.

The next two steps are the most exciting because you can start to see the end result—and everyone wants to be there when the puzzle is completed. We may be fighting over that last piece! For now, it’s time to soak in a hot bath and pray that I am not too sore tomorrow. Stay tuned for next week’s blog.