John Gill, J.D., CFE
Vice President – Education
I’ve been at the ACFE for more than 25 years, and there’s one topic I’ve been asked about more than any other: How does a fraud examiner avoid declaring guilt or innocence?
Here’s the tricky part. Fraud examiners work in so many different areas, and the rules can be slightly different if you are an expert witness, a member of law enforcement or an auditor.
To clear this matter up, let’s start with the basic rule and a short section from the Fraud Examiners Manual that discusses this topic.
The basic rules on declaring guilt or innocence
Think of the Certified Fraud Examiner (CFE) as a good reporter. In the report, the CFE says, “Here are the facts.” Someone other than the examiner will read the report and make a decision. The CFE’s responsibility is to provide the evidence needed to make that determination. That being said, there may be times where it is appropriate to offer an explanation of what the facts could mean.
For example, before the late Bernie Madoff’s conviction, you may have been asked, “Is he running a Ponzi scheme?” If you start off by saying, “It’s my opinion he’s running a Ponzi scheme,” then all of the attention focuses on you — who are you, your expertise in Ponzi schemes, and if you’re saying he’s guilty. But if you present the facts:
He took people’s money.
They thought he was investing it.
Anyone who was paid was paid with subsequent investors’ money.
You can then say, “Mr. Madoff’s actions are consistent with that of a typical Ponzi scheme promoter.” You could even list out what the elements of a Ponzi scheme are. That way the reader sees that the facts match the elements of the offense. The conclusion should be self-evident — here are the elements of a Ponzi scheme; here’s what Madoff was doing; they match.
That is a long way from saying he is guilty. Guilt or innocence is a legal determination made in the criminal justice system. I can’t declare anyone guilty of anything. However, I can present facts based on evidence, and I can explain to the reader that if these facts are proven, they could constitute a violation of the law.
But you can’t go beyond that. And remember, someone is paying you for your report. You need to make sure that what you say is consistent with the policies of your employer or client. For example, audit reports and law enforcement reports have different rules for what may or may not be appropriate in the particular situation.
Some extra clarification from the manual
Here is a section of the Fraud Examiners Manual which may help you as well.
Opinions Regarding Guilt and Innocence (excerpt from the Fraud Examiners Manual, 2021, p. 4.1016):
Additionally, this rule prohibits ACFE members from making statements of opinion as to the guilt or innocence of any person or party. Determining whether a person is guilty or innocent of a crime is not a decision for fraud examiners; it is a decision reserved for a judge or jury.
This is a rule of prudence. Clearly, it is prudent for a fraud examiner to refrain from usurping the role of the judge or jury. In a courtroom, no good attorney would ask a fraud examiner for such a conclusion, and no alert judge would allow such testimony.
Take your report writing to the next level
As a CFE, you know that report writing is a critical part of the fraud examination process. A strong report conveys evidence and gives credibility to the fraud examination and to your work. An examination is often judged not by what was uncovered, but by the way the information is presented.
We offer a self-study course that will help you ensure that the results of your next fraud examination are not lost in the report . Report Writing provides a thorough review of the report writing process including expert tips and a downloadable sample report you can use on your next examination.
SOURCE: ACFE Insights – A Publication of the Association of Certified Fraud Examiners