Welcome to Count Me In,

the podcast that explores the world of
business from a management accountants

perspective.

My cohost Rouba Zeidan spoke with
our special guest Leah Wietholter.

Leah is a certified fraud examiner and
the author of the new book Data Sleuth:

Using Data in Forensic Accounting
Engagements and Fraud Investigations.

Leah began her career supporting forensic
accountants at the FBI and has since

branched out to lead her own forensic
accounting and private investigation firm.

Forensic investigations are the center
of so many great crime shows these days,

and it was exciting to
hear how accountants expose
fraud and other problems

lurking in bank accounts, credit
card statements, and payroll reports.

I hope you enjoy the conversation.

Good morning, Leah. And thank
you so much for joining us.

Thank you so much for having me.

I'm really looking forward to
learning more about your very kind of

interesting arena and industry,

which is and you have a
wonderful background in the FBI.

So maybe you can drop in some
examples on that part of it.

So can you tell us a little bit
about forensic accounting and

forensic accounting engagement?
What does it entail?

Yeah,

so I work forensic
accounting engagements as a

private consultant.

So I'm not affiliated with law
enforcement or anything like that.

I own a forensic accounting
practice in Oklahoma,

and the majority of our engagements
are solving some sort of

financial problem that's either in

litigation or could end up in litigation.

So we work a lot of embezzlement
investigations or fraud investigations.

Then we also work to help sort through

partnership dispute or
a shareholder dispute,

so if someone believes the general
partner or whoever's managing the money,

usually, has been taking
more than their fair share,

we get involved there and kind
of our third other largest

category of a forensic
accounting engagement is in
divorce matters when the two

parties are looking to get
divorced and they need to

split their assets.

Then usually one party is
not familiar with how the

marital funds were handled.

And so they wanna make sure that
when they go to divide those assets,

that they're getting their fair share.

So we help them either get comfortable
with the known assets or try to find any

other hidden assets within that situation.

And we usually only work divorce
cases. If there's a business involved,

there's a lot of opportunities when
people have closely held businesses where

they can hide assets or just,

they own things that maybe
their spouse doesn't know about.

So those are kind of the
three types of engagements

that fall under the three types of
cases that are typically involved in a

forensic accounting engagement for us.

Interesting. I mean, that,

that kind of implies that there are
numerous kind of legal consequences and

circumstances you know,

that might come into the equation
and most well known would be maybe

investigating alleged fraudulent
activities like you, you know,

in your experience,

how prepared is the average finance and
accounting professional to handle such

circumstances?

I would say that the
accounting and financial

professionals that I run into, they're
familiar with what fraud looks like.

They're familiar with, you know, the
concept of, we talk about this a lot,

cuz we use data analytics, but
a lot in our investigations,

but we talk about what
should have happened,

the framework what should have
happened versus what happened. And so

finance and accounting professionals
know what should have happened.

And then they also know what happened,

but taking that information and then
putting it in a format that could be

explained to a judge or a jury or
even to the client themselves is

where our specialty usually shows up.

As opposed to, you know,

maybe someone working in corporate or
even in audit connecting those dots.

One of the things that I've been
focusing on lately with my team is,

okay, I understand that these
journal entries, for example,

these journal entries look strange
and we can tell the client, Hey,

these journal entries look strange, but
we need to tell them why that matters.

Why should they care about it?
And what is the risk to them?

What is the financial loss to them?

And being able to connect what
we know about accounting to

losses, to the story of what happened,
because that's what helps in,

if it does result in litigation, that's
what helps communicate the findings.

So we've gotta be able to
connect what we know as financial

professionals with a group
of individuals that this is

not their specialty. And
so connecting those dots,

understanding a lot of times finance and
accounting professionals are very good

at understanding what all the financial
statements say and what that means,

but then to translate that into,
okay, why should my client care,

which is usually connected to
what actual dollars are missing

which would be found on bank statements
and credit card statements and payroll

reports.

So just knowing where to go for that
information to best communicate what

happened. And the corresponding loss is
kind of where this forensic accounting

niche comes into play.

Did you find that the need for forensic
accounting has grown over the past few

years and more specifically, you
know, post the COVID era? And if so,

how and why?

So when I first started in forensic,

so my background,

I worked for two years with the FBI
under the direction of a forensic

accountant. And that's how I got
into this niche so early in life.

But then when I joined

I started doing this
from the private sector.

It wasn't as popular and that
would've been like 2009. It,

it was becoming more popular.

The more that technology
has advanced and the

access that we have that keeps
growing to different kinds of data and

understanding what that data
can tell us. And you know,

how we can use that to understand
what's happening and just to understand

and put our arms around those facts.

Then I think forensic
accounting is becoming more
popular in the private sector.

And I haven't really
noticed a huge increase

in the need of forensic accounting.
I think a lot of people after COVID,

I tell my team, I think people
are just mad at each other.

So we have a whole lot more like the
volume of partnership disputes is so much

greater than it was before. We're starting
to see an uptick in divorces as well.

So I don't really know that
COVID affected how much forensic

accounting or, you know,
increased that need. But

I have seen an increase in over the
course of the last 12 years or 15 years of

my career in that, because there's so
much more information readily available,

that

it is possible to find out what happened
without relying on law enforcement to

get involved and law enforcement,
especially in the US,

they already have too much work as it is.

So if people want answers to their
questions and they want it timely,

then I think the best resource for them
is a forensic accountant in financial

investigations. So that's what I
have kind of noticed in, you know,

this basically has consumed
my entire career, this field.

And so just noticing the trends that
way, you know, and like I said, COVID,

I don't know that it increased
the need for forensic accounting.

It's just that there seem to be
even more disputes since COVID.

And so then that means that there's a
lot more volume for not just forensic

accountants,

but I like to stay connected with the
investigation community as a whole private

investigators and other consultants.

And even they have seen a huge
increase in their caseloads as well

since COVID.

And I mean,

which kind of institutes or agencies
make the most use of forensic

accounting, your experience.

From a law enforcement perspective,

I typically work with the FBI and the IRS

criminal division,

but there are forensic
accounting positions within

all types of investigative agencies.

I mean,

kind of what we're seeing in the US as
a whole is just that there's a shortage

of individuals and the same is true
in the forensic accounting field,

especially within law enforcement
agencies, I've recently learned,

but I think other
industries that aren't law

enforcement we're definitely
seeing in public accounting firms,

public accounting firms are,

have been adding and are adding forensic
accounting divisions where they didn't

necessarily have them before or they'll
have a litigation support division

that does business valuation.

But then since they're already involved
in these legal matters from a valuation

standpoint, then they're often
asked, you know, oh, Hey,

could you also do this forensic
accounting engagement or this fraud

investigation? So that's
definitely becoming more popular.

And are you seeing an increase in forensic
accounting for compliance purposes?

I think that there is an interest in using

forensic accounting to - let

me say it this way. So I don't
deal with compliance specifically,

but knowing how forensic
accounting solves so

many problems for our clients,
you know, we're able to tell them,

they'll say I'm worried
someone's stealing money from me.

So we're able to investigate
and identify, okay,

was this individual stealing
money? And you know,

what is the best evidence to base
this on? And then what is the loss?

So those same procedures
that we use can be used in

compliance as well. I don't know how
many people are actually applying them,

but I know based on attendance
and interest in what I do,

there are a lot of people in compliance
or internal audit who are looking

to implement,

or at least understand these approaches,

if and when they run across
things that look strange.

But I do think that when an
investigation or forensic accounting

engagement or process is based on data

and understanding what that data tells us,

then I think it can be applied as part
of audit or compliance or investigation.

I mean,

you say data and we're in
a highly digitized era,

what is the role of that data and
technology within forensic accounting

engagement, especially like you said,

it's grown in kinds of it's
grown the capacity and the

capabilities of forensic
accounting globally.

Yeah.

So from a forensic accounting or fraud
specifically fraud investigation - well I

guess both - standpoint,

I use the word data because that's
the simplest thing to kind of

address, but really it
boils down to the primary,

just the best evidence. So there's
two different kinds of data.

And I actually talk about this in my book.

So there's two different kinds of data.

There's qualitative data and there's
quantitative data in forensic accounting

and fraud investigations.

So our quantitative data
is typically looking at,

and I have kind of two
categories for this as well.

We have our most reliable evidence
that would be when we're talking

about, I'm always trying to
find some sort of missing money.

So I need to identify how did
the subject increase their

purchasing power. So a
journal entry doesn't tell me,

how did this person steal money? A

journal entry doesn't tell
me how much money was stolen,

because that's not necessarily reflective
of the cash leaving the bank account

or overpayment of payroll,
or even theft of inventory,

a journal entry or accounting records
that provides me with the context that

gives me the story, but that doesn't
necessarily quantify the loss.

A loss is actually quantified by,

and these are so simple
because so to call it data,

I think makes it sound a
little scarier than it is.

It's really just looking at bank
statements, credit card statements,

or payroll reports for most
companies. In larger companies,

it could look a little different because
there are more internal controls.

And so we can rely more on the
company's accounting information,

but most companies don't have the

internal control setup to
make their records reliable.

So we just go to the source themselves,
bank statements, credit card statements,

payroll reports,

everything else is used contextually
that's part of our quantitative data.

Our qualitative data also helps
build that story and the most common,

or I think the thing that's most expected
in our field is trying to find any

sort of emails or notes or files.

I will tell you that in the majority
of the cases that I've worked and I've

worked close to 200 cases in
my career emails, you know,

people will say there has to be a
spreadsheet somewhere emails or something

where they confess to doing
this or text messages. I wish.

That's not really the case in my

sample of cases that I've
worked in my life. That is not,

that is not proven true. But
when I'm talking about data,

I'm really talking about bank statements,

credit card statements,
and payroll reports.

And I mean, how can, because
obviously data is so full of insights.

How can that be used proactively
to kind of inform you know,

future kind of preventative measures. So,

and then how can finance and accounting
professionals actually harness the power

of that data to kind of prevent fraud
within companies and use that, you know,

that data, as we said to inform.

Yeah. So on a kind of broader,

bigger picture, when I'm
talking about fraud prevention,

I like to talk about fraud
prevention from the perspective of,

I need to understand how does money come
into my organization and how does money

leave my organization
then within both of those

categories,

I then start looking at who handles actual

cash or assets that could be stolen.

So we're just gonna focus on cash
for the purpose of this example.

So I need to look at

what types of payments does my
company or organization actually

receive. And that could be cash, check,

credit card, wire, ACH, whatever,
but I need to identify all of those.

Then I need to identify who are all the
people that touch it when it comes in,

who reconciles it. And then I need to
look at if someone was to steal money,

as it's coming into the organization,
where would they do this?

And then I need to identify if
they were to do these things,

then what data do I have at
my disposal that would tell

me that this is happening. So,

and then I do the same thing, looking at
how the money leaves the organization,

what are all the different things that
we pay? How do we pay those things?

Check, credit card, ACH, wire. I mean,
it's the same thing. How do I do that?

And identify who touches that?

Who actually initiates it,
sends it. I mean, you know,

things that probably a lot of finance
and accounting professionals are used to,

but then ask ourselves in relation to who

authorizes it and all of that,

and I'm not looking at it from
an internal control standpoint,

trying to evaluate controls.

I'm trying to evaluate the
opportunity at each of these types of

payments. So then if I've
identified, these are the people,

and then these are the opportunities
they would have to steal.

Then I go a step further and say,

so what data do I have available
that if I looked at this data,

it would tell me that money was missing.

And a really simple
example of this is if I am

looking at payroll and I
go through all those steps,

we just talked about for
payroll. And at the end,

I've identified that someone
could be overpaying themselves,

like maybe they're inflating
their hours or something,

or maybe they're paying themselves
salary greater than what was agreed upon.

Then the data at the end is as
simple as how much did they get paid?

So I would need a payroll report. I
would need maybe several payroll reports,

and then I would need an
employment agreement or
contract or whatever it is that

would tell me how much this
individual's being paid.

And in working through this process,

if money is missing those two things,
aren't going to match up, you know,

if somebody's stealing money,
but what this process does.

And I realize it's pretty detailed,
the larger the organization is,

but by doing this, it identifies
where do I have gaps in data?

Do I even have employment
agreements for everyone?

If someone suspected someone
was stealing out of payroll,

do I have enough
documentation to even see,

to even answer that question?

And that's what we've actually found
with large and small organizations alike,

but it's more surprising
in large organizations when
we go in to work a fraud

investigation and we
start saying, okay, well,

in order to address all of
these concerns that you have,

we're going to need access to
this, this, and this. Well,

when they take that
list back to their team,

we will find out from them later, oh,

we actually don't have reports
that will tell us this information.

And so from a preventative standpoint,

if you know that you have
these data gaps, then,

and you might think I'm a
pessimist by my next statement,

but it's just the nature of my work,

but I don't think that we can
prevent a hundred percent of fraud,

especially occupational fraud. I think
the goal is to detect it quickly.

So because the longer a scheme goes
on the greater the loss and absolutely

potentially more damaging
to an organization.

So if we can identify
those data gaps and we're

using that data on an ongoing basis to
say, okay, it's payroll, what we expect,

or, you know, expenditures is what we
expect is inventory what we expect.

Then as we do, if we run into issues,

at least we know that we have this
data we can use to quantify any

losses, or if there's
discrepancies kind of find out,

is it an error or is someone actually
stealing money and start making that

determination. But if the data isn't
being collected or the data isn't

readily accessible, because sometimes
it's just a conversation with IT.

Sometimes it's, oh yeah,
we should have audit logs.

That's something that our
accounting software does,

but nobody's ever turned them on.

And so that will even be in large
organizations and even small

organizations.

So identifying that on the
front end will always set

up any type of investigation
into any type of discrepancy and,

you know, set up that
investigation to win.

Brilliant. I mean I,

I definitely wanna know more and I think
one of the dives I'm going to do is

into your book, Data Sleuth. I mean, if
you can tell us more about your book,

which talks about using
data in forensic accounting,

engagements and fraud investigations.

Yeah. So I had the opportunity,

so I started this practice. My practice,

it'll be 12 years in November,

and I started as a sole proprietor. I
just was gonna work a few little cases.

I was tired of public accounting.

And then I ended up
getting really busy really

quickly. And that was
something I didn't plan.

And so several years into my business,

I was kind of facing either burnout or
I had to figure out how to scale what I

was doing so that we, so that
I could help more people.

And you know,

trying to give a team information

that I had gathered from years
of experience was just very,

very complicated and for lots of
reasons. And I talk about it in the book.

And so several years ago,

I thought I have to create
a process that I can trust.

I can trust the process
and my team can learn

along the way,

but at least the process will help make
things reliable and will help me as

the future testifying expert
be able to depend on their

work. And as I started creating
this process, and then, you know,

we were able to work more
cases more efficiently.

We were able to use data so that
we were using best evidence and

really just solving problems for clients.

And then I started networking with
other professionals like myself,

and realized, oh, there's
actually a need to,

to understand and an interest, you know,

like this whole area of forensic
accounting just sounds interesting.

So there's this whole interest
in forensic accounting.

So if I can present and
share with everyone,

what I have learned over my career about
following a process, that makes sense,

that's scalable, that
you can work with a team.

Then I think this would be really helpful.

And so I had the opportunity to
work with Wiley publishers last year

to write this book, Data Sleuth, and
it's based on our data sleuth process.

And so in the book,

I share a lot of case stories cause I've
worked close to 200 cases in my career.

So I share a lot of case stories
and then talk about our data

sleuth approach and framework
to how we tackle cases,

how we prepare planning, you know,

because there's not some guideline
out there like an audit might have

for these are the things that you test,

we're really driven by the concerns and
the problems that the client is facing.

And while walking a fine line
that we can't just be a hired gun

and give them information
that would help them win.

We have to be able to tell them, I mean,

it's an investigation and we're a
third party and we have a code of

ethics. And so we're going to tell them,

this is what actually happened
and then work, you know,

be able to address those concerns
that they have while telling them what

happened and helping them
solve their problem that way.

And so I talk about the process.
I provide the case examples.

I provide a couple case studies
at the back and there's also

we created a website.

That's referenced in the book where
you can actually download like our case

planning templates and what I was
talking about earlier about the fraud

prevention approach
from money in money out,

we have a template for that process.

And so I mean,

obviously I'm biased because I
spent time writing it last year,

but I think it's a really helpful book.
And the whole time I was writing it,

I thought, you know, what do I wish?

What was I looking for
when I started on my own?

What was I looking for to,

to learn from other professionals and to
hopefully share what I've learned over

my career.

That's amazing.

And we'll definitely post a link
to your book and where people can

get it online and great
work. I mean, I'm really,

this is very interesting and thank you
so much for sharing so much insight about

this. And I think there's
much more to learn. So yes,

I will be reading your book very soon.

Oh, well, thank you.

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