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Litigation Services Handbook: The Role of the Financial Expert, 5th Edition by David P. Hoffman, Daniel G. Lentz, Roman L. Weil

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Chapter 37

Financial Statement Investigations

Dean C. BunchKaren M. CheekAmy M. HawkesRandy C. Joshi

37.1 Introduction

When allegations of misconduct surface, investigations are conducted to evaluate the veracity of the allegation, assess the depth and breadth of identified misconduct, identify wrongdoers, and remediate the elements that allowed the misconduct to occur. Financial statement investigations refer to specific investigations conducted in response to allegations of fraud and related misconduct that affects financial statements, related disclosures, and public filings. These investigations, often referred to as internal investigations, are not led by or conducted by external regulators or external enforcement personnel such as the Department of Justice (DOJ) or the Securities and Exchange Commission (SEC). Instead, a company's personnel, board of directors, audit committee, or a special committee of the board will lead the internal investigation. Outside lawyers, forensic accountants, in-house counsel, and members of internal audit, among others, can all have a role in an internal investigation. The specific facts and circumstances will factor into the decision of which of these parties will best lead or conduct an internal investigation.

This chapter explores many of the factors that lead to the launching of an internal investigation. It also discusses various factors that companies often consider when identifying who should lead an investigation and who should conduct ...

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