Knowledge

Document Requests for Fidelity / Crime Insurance Claims

Rehana MoosaBy Rehana Moosa

When reviewing or preparing a fidelity / crime insurance claim, the documents required to substantiate the amount of the loss will depend on many factors.  The nature of the scheme, methods used to conceal the misappropriation, and the extent of the fraud are some of the considerations that will impact the documents required.

 

However, in many cases, there is standard information, beyond the obvious accounting records, that should be requested or compiled.  The chart below lists the basic documents that should be reviewed, if you are reviewing a submitted claim, or prepared, if you are submitting a claim to your insurance company:

 

DOCUMENT

PURPOSE OF DOCUMENT

Documentation showing how the accounting records were altered to conceal the misappropriation

Understanding how the misappropriation was concealed can help detail how the scheme was carried out, and what records, if any, can be relied upon to quantify the loss.  The records can also assist in distinguishing between potentially fraudulent transactions and legitimate ones.  For example, the accounting records for a transaction that is known to be legitimate can be compared to those prepared for transactions that may be fraudulent.  Once the differences are identified, further suspect transactions can be compared to ensure they are categorized correctly.

List of internal controls that were in place during the misappropriation

It is important to understand which internal controls functioned as expected, and which were overridden or failed.  This can further assist in understanding how the misappropriation occurred, and areas of the business where internal controls need to be strengthened or improved.

Organizational chart

The organization chart can outline the employee’s role and responsibilities, which can identify areas of the business that the employee had authority over or access to.  The chart can also identify individuals who may have had approval authority over certain transactions generated by the employee (e.g. a manager with cheque signing authority or higher invoice approval limits).  The involvement of these individuals in approving or reviewing suspect transactions can be assessed in detail, to identify potential internal control improvements or changes.

Copy of the suspect employee’s personnel file

The personnel file may include a job description or employment agreement setting out the employee’s role and responsibilities (and therefore areas of the business they were able to access and may have been compromised in the misappropriation).  The file may also include performance reviews or details of any disciplinary action taken against the employee in the past.  This information can establish whether the organization had any knowledge of possible wrongdoing prior to the date of discovery.

Any written or recorded confessions obtained from the suspect employee

The confession may contain information about how the scheme was carried out, which can guide the investigation.  The suspect employee may also identify other employees who were involved in the misappropriation and should be included in the investigation.

Transcripts of interviews conducted with other individuals

Individuals such as customers, vendors, and other employees may have information about how the misappropriation was committed and other parties that should be interviewed.  They may also shed some light on any suspicious behaviour they have observed, such as a change in spending habits, circumventing internal controls, etc.

Documentation showing any amounts recovered from the suspect employee

Any amounts recovered from the suspect employee (or other sources) should be deducted from the claim.

 

Documentation to substantiate that the business’ losses occurred due to fraud and to quantify the losses should also be requested from the policy holder or provided to the insurance company.  However, a list of the documents required should be customized depending on the type of scheme and the way in which it was executed.

 

Contact us to learn more.   647-426-0146  |  rehana@rmforensics.ca

Communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. For permission to republish this content, please contact Rehana Moosa Forensic Accounting Professional Corporation.

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