Allegations – Do You Know the Facts?

Allegations – Do You Know the Facts?

In challenging economic times, organizations are at increased risk from internal fraudulent or illegal activities. Managing earnings, employee theft, accounting irregularities, bribery and corruption schemes to win overseas contracts are just some of the problems organizations may encounter. If not addressed responsibly, allegations of financial and ethical improprieties can further dissipate resources, detract from operational focus and impair reputation.


Commencing an internal investigation without addressing the inherent risks of such endeavors to the organization is extremely risky. Whether responding to whistleblower allegations, dealing with alleged accounting irregularities or addressing regulatory inquiries, response time is critical. Stakeholders want immediate answers and demand that responsible parties are held accountable. If an organization does not address improprieties quickly and objectively, it may be exposed to unnecessary third-party claims, further misdirection of assets, severe regulatory sanctions, and penalties and other threats to enterprise value. In such circumstances, organizations need an independent, multidisciplined team that can get to the facts discreetly, quickly and seamlessly so that these threats are managed effectively with minimal disruption to operations.

Challenges and Opportunities

Once an organization suspects or discovers fraud, timing is critical. It must address a number of key questions immediately, including but not limited to the following:

  • How should the records and data be secured and preserved?
  • Who needs to be notified – regulators, law enforcement, lenders, etc.?
  • Who is involved in the questioned activities?
  • How pervasive is the questioned behavior?
  • What is the financial and reporting impact?
  • Should outside legal counsel be engaged, and if so, who should retain them – the board of directors, audit committee, internal audit, management, etc.?
  • Should investigators and financial advisors be retained by outside counsel?
  • Will the organization be required to remediate the questioned behavior by enhancing existing internal controls over financial and operations processes?

Attempting to answer these and other questions with an internal team could increase the risk that the threats to the enterprise may not be addressed adequately. The results of in-house internal investigations may be challenged by third parties as not objective or complete. If this occurs, the delay in using an independent investigative team could result in other challenges. Critical information could be lost, the chain of custody of evidence could be compromised, and/or the organization may be required to incur additional costs to duplicate work already performed.

Our Point of View

Based on our experience and understanding of the inherent risks associated with performing fraud investigations, we believe that any allegations of wrongdoing should be taken seriously. Organizations should consult with in-house counsel and assess the need to retain independent counsel and financial advisors experienced in conducting fraud investigations to help determine the nature, extent and scope of the problem along with the related business risks.

How We Help Companies Succeed

Protiviti professionals know how to work effectively with counsel, regulators and law enforcement in high-profile and other sensitive matters. We customize each investigation to meet the objectives of the assignment and address the unique facts and circumstances of the situation. We are extremely sensitive to the risks inherent in these types of assignments and have extensive experience in helping companies effectively manage these risks.

Our Financial Investigations practice brings together to the client service team former law enforcement practitioners, experts in accounting and computer forensics, certified fraud examiners, and industry specialists. We have an international practice that allows us to deploy local professionals around the globe who are familiar with local language and customs and can be on the ground and responsive in short order. Protiviti has experience in conducting the following types of investigations:

  • Accounting irregularities/restatements
  • Special investigations for the board of directors or audit committee
  • Foreign Corrupt Practices Act violations
  • Financial restatements
  • Fidelity bond and D&O claims
  • Internal investigations
  • Securities violations
  • Money laundering
  • Regulatory investigations


  • Protiviti assisted counsel in the independent investigation of a major financial statement fraud that gave rise to billions of dollars of market capitalization loss and a billion-dollar financial restatement. Protiviti helped identify the schemes and worked closely with the SEC, DOJ and other third parties in a manner that allowed the company to continue to operate and remediate with its vendors and customers. As a result, billions of dollars of enterprise value were preserved.
  • A private company was in the process of filing an S-4 with the SEC when it discovered a significant inventory out-ofbalance situation. Protiviti helped assess the situation, identified the root causes, quantified the impact for each fiscal year-end, and assisted with reconstructing and restating financial statement accounts. Protiviti helped reconcile and restate the financial statements in conjunction with assisting in the execution of a financial investigation with outside counsel to determine who was responsible and when, why and how this error occurred. The misstatement eliminated nearly 50 percent of the company’s reported equity. As such, we also helped proactively address the challenges that surfaced with the company’s bank and bond group, outside auditors and shareholders as a result of this financial misstatement.
  • Protiviti assisted a multibillion-dollar public company with overseas operations in China in the investigation of allegations that senior executives and sales staff were making illegal payments to foreign government officials. Protiviti assisted outside counsel with an investigation on two continents to assess whether there were violations of the Foreign Corrupt Practices Act. This multinational effort was coordinated efficiently and managed by our professionals in the United States. We assembled a multidisciplinary and multinational team to secure and collect hard copy and electronically stored information in a manner that complied with applicable privacy laws and regulations. We analyzed this data and performed other investigation procedures, allowing counsel to obtain the facts necessary to provide the appropriate legal advice to the company to be compliant with its reporting obligations and minimize its business and financial risks.


Scott Moritz
Jim Gibson
Diane Walker

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