1. CHAPTER 8: INVESTIGATING
CONCEALMENT
David Shen Chen/1209471
1

2. Presentation Outline
2
Introduction of concealment investigation
Documentary evidence
Apply audit procedure to a case
Hard-to-get documentary evidence
Document expert
Conclusion

3. Concealment Investigation
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How to get
evidence？

4. Concealment Investigation
4

5. Documentary Evidence
5

6. Documentary Evidence
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What do we need to
Know about documentary
Evidence?

7. Documentary Evidence
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 Marking the Evidence

8. Documentary Evidence
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 Chain of Custody

9. Documentary Evidence
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 Coordination of Evidence
- Software: Xanalys Link Explorer, Analyst's
Notebook
 Original Documents VS Photocopies
- Always apply original document in priority

10. How to obtain Evidence
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 Data-driven approach (Chapter 6)
 Audit approach:
 Tests of mechanical accuracy (recalculations)
 Analytical procedure (tests of reasonableness)
 Documentation
 External Confirmations
 Observation
 Inspection
 Inquiries

11. The Case
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 The Fraud Restaurant (This story is purely
fictional. Any resemblance to actual individuals
or events are coincidental)

12. The Case
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13. The Case
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 What will IRD do after receive this fraud
report?
A: Ignore it
B: Call the restaurant owner (Inquiry)
C: General Analysis of company’s tax report
(Analytical tests)
D: Call the whistleblower (Inquiry)

14. The Case
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 Analytical Procedure
Gross profit margin
 Similar restaurant 60%
The fraud restaurant 40%

15. The Case
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 Direct (Specific Item) Method
- Make confirmation of tax report
- Understatement of income
- Overstatement of expenses
- Fraudulent claims for credits or exemptions

16. The Case
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 Inspection
Why there are large
amount purchase of
stock on lobster, but
no lobster dish on
the menu?

17. The Case
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 Sampling & Observation

18. The Case
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What is the appropriate sampling method for
IRD to estimate one month sales?
A: Estimate sales at Friday night, then times 30.
B: Estimate sales from Monday to Sunday, then
times 4.
C: Estimate sales for every single day within one
month.

19. The Case
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 Indirect Method
- Gather original evidence to support allegation.
- Whether the net worth, expenditures, bank
deposits and cash are logical based on reported
income.

20. The Case
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 Physical examination

21. The Case
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Do you think the IRD investigator have right to
do like this without notice?
A: Yes B: No

22. The Case
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 Enquiry

23. The Case
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Does the restaurant owner have the right to
refuse answer these questions?
A: Yes B: No

24. How to obtain Evidence
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 Audit approach:
 Tests of mechanical accuracy (recalculations)
 Analytical procedure (tests of reasonableness)
 Documentation
 External Confirmations
 Observation
 Inspection
 Inquiries

25. Hard-to-Get Documentary
Evidence25
 Web-based e-mail accounts
 Private bank record
 Tax returns
 Broker age records
 Subpoena
 Search Warrant
 Voluntary Consent

26. Document expert
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 What they do
- Test original signature
- Test original document

27. Document expert
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 Organizations of document experts
- Questioned Document Section under FBI
- American Board of Forensic Document
Examiners, Inc. (ABFDE)
- Independent Forensic
Practitioners Institute Inc.
(IFPI)

28. Conclusion
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 Get the document evidence
 Test the document evidence
 Keep the document