Internal Corporate Fraud

In the previous two years, the Bank had gone through a series of transitions, culminating in a new Board of Directors and, because of new regulations in the financial industry, an independent Auditing Committee. The Auditing Committee charged certain officers of the Bank with engaging in suspect activities related to particular Bank expenses that were either hidden or “lost” from the purview of the normal Bank’s accounting practices. In order to stay compliant and to remedy what may have been “bad apples” in the organization, the Bank’s Auditing Committee required the Board to hire an independent accounting firm to review those issues and present a formal report to the Bank. The accounting firm knew that one of the best ways to get to the true facts at the root of those issues was by performing a thorough examination of the Bank’s digital assets.

Since the Bank had in place a host of disparate and complicated IT systems, and because of the immense time pressure to solve those issues before the Bank was to release its next mandatory financial statement, a concise but thorough plan for reviewing those digital assets was needed. Complicating matters further was the fact that certain systems run by the Bank’s IT department had been recently changed and many logs and historical records regarding pertinent information were non existent.

There was an enormous volume of paper documents that the accounting firm was reviewing and needed to validate and review those documents against information gleaned from the digital examination as well. Because of the Bank’s size and market capitalization, it did not allocate surplus funds for this type of situation and cost factors were in the forefront, but could not guide the investigation on any substantive level for fear of bias and a lack of diligence.

The accounting firm retained GDF to perform examinations of the Bank’s digital assets as necessary to uncover information that potentially would help the Bank make an ultimate decision regarding how it should proceed with the employees and Bank officers suspected in the wrongdoing.

GDF examined selected desktop and network systems and data supplied by the Bank's IT department. Examiners catalogued documents, fragments and Internet related activity relevant to the accounting team's questions. The collected records supported corroboration of aspects of the expense audit while missing logs limited the historical record.

The Bank's audit committee, counsel and accounting team were responsible for employment, settlement and filing decisions. The useful technical output was an organized record with the gaps identified.

This account describes expense records and gaps caused by system changes. See the related banking loan account for its loan approval focus.