Corporations often find themselves in a position where conducting an audit is in their best interests. Whether the goal of the audit is to improve the company’s business practices and bolster its bottom line or to test its compliance mechanisms in order to protect it from legal liability, one of the most important decisions that stakeholders will have to make about the audit is whether to handle it internally or to get external help.

The internal audit consultants at Corporate Investigation Consulting have guided numerous companies through this difficult decision. With their experienced help and insight, companies, executives, and stakeholders have been able to make an informed decision about how to proceed with their auditing endeavor.

The Difference Between Internal and External Audits

As their names imply, the core difference between an internal and an external audit is who is conducting it: Internal audits are handled by people within the corporation, while external audits are handled by professionals or contractors who are not employed by the corporation. In many cases, internal audits are conducted by employees in a particular department within the company, like the:

• Corporate Compliance Office,
• Human Resources Department, or
• Office of Legal Affairs.

The precise wording of these departments will vary by corporation, though the general responsibilities will be largely the same.

External audits, on the other hand, are performed by professionals who are independent of the company. These auditors are generally employed by auditing companies, themselves.

The Pros and Cons of External and Internal Audits

This singular difference between internal and external auditors spills out into numerous drawbacks and benefits for each type. Some of these results can, and often should, change whether it is an internal or an external audit that is in the company’s best interests.

Here are six pros and cons that distinguish internal from external audits.

1. Familiarity with the Company and Its Culture

Internal auditors are going to bring with them a relatively intimate knowledge and understanding of the company and its culture. External auditors will not have that.

Depending on the goals of the audit, that insider knowledge can be either a perk or a drawback. Generally speaking, though, it is a drawback.

Internal auditors are going to have a good understanding of the company politics that are always at play, regardless of whether the company is a small one or a multinational corporation. This understanding can help them see hidden influences in the results of their audit and can alert them to potential problems that might arise during the process.

External auditors, on the other hand, are going to come to the audit process with clear eyes. While this means they will not be steeped in the company’s culture and might not see what is really going on behind the scenes, it also means that they will bring a fresh perspective to their inspection.

Depending on the type of audit you want to perform, that outsider’s view of the company can be a significant bonus.

2. Independence of the Auditor

Internal auditors are not going to be as independent as external auditors. Even when internally conducted audits claim to be independent and unbiased, the reality is that internal auditors depend on their employer for their livelihood. If the audit uncovers damning information that could subject the company to liability or negative publicity, internal auditors are likely to take steps to mitigate the damage or potentially even sweep the information under the proverbial rug.

The focus and the goal of the audit should dictate how much independence is a good thing. Many audits want to obtain objective, actionable information about the company, its risks, and its business practices. Occasionally, though, audits are conducted to control the perception of events, instead.

Generally, if the goal of the audit is to be unbiased, going outside the organization and hiring external auditors is the best way to proceed. This can eliminate the possibility that internal auditors will avoid uncomfortable facts and focus on details that paint themselves in a good light.

3. Cost

Internal audits cost very little money to perform because the company conducting the audit is already paying the people who will be running it. External audits will cost more because the auditors are not already on the company’s payroll.

4. Time

While they cost relatively little in the way of money, internal audits cost the firm far more in the time that will be spent on the audit. The company’s own employees will be spending time inspecting the company’s practices, taking their productivity away from other job duties that could be enhancing the firm’s bottom line.

Hiring an external auditor will not divert company resources away from pressing business needs. Additionally, externally-conducted audits tend to resolve more quickly than internal ones because external auditors are professional auditors – they likely have a far more refined and streamlined system for conducting audits than internal personnel who only perform audits on occasion.

5. Legal Privileges

One of the most important aspects of compliance audits – those that review the company’s protocols that are designed to keep the firm on the right side of the law or to perform any affirmative legal obligations that it might have – is to keep the results of the audit privileged from disclosure in a subsequent legal action. If you audit a compliance mechanism, find that it is inadequate and that legal violations have already happened, and then get sued or face a law enforcement action, that audit can get used against you if it is not privileged from disclosure.

Conducting an internal audit with the wrong personnel can leave the results open to disclosure, putting the company at extreme risk of liability. External audits that are done by experienced auditing professionals are done with this risk in mind. Ensuring that the audit is privileged from later disclosure is one of the basic services that external auditors frequently offer.

6. Expertise

An internal audit will generally be done by company staff members who do not conduct audits for a living. External audits are done by individuals and companies that do nothing but audit other companies.

This is perhaps the biggest reason to strongly consider hiring outside help to conduct a corporate audit.

Even if your team of auditors has some experience conducting an audit, there are several different types of auditing procedures. For example, two of the most common types of audits are those that test compliance mechanisms and those that focus on streamlining business practices. If a company’s internal auditing team has done one type but is now faced with the other, their experience is an illusion.

Additionally, the experience that external auditors have obtained from auditing other firms can provide extremely valuable insight into your own company’s compliance or business practices. External, professional auditors have seen it all. They may have seen problems similar to your own and have solutions that you might never have thought of.

Frequently Asked Questions About Corporate Investigation Consulting and Auditing

Auditing Consultants at Corporate Investigation Consulting

The auditing consultants at Corporate Investigation Consulting have helped numerous corporate clients perform effective and thorough audits that fit the company’s needs and goals. Contact them online or call them at (866) 352-9324 to tap into their extensive experience and talents.

Remain Compliant with Assistance from Former FBI and OIG Agents

Unfortunately, there are several ways that your practice could get into trouble with federal regulations. Incorrect coding and billing are at the top of the list. Your facility’s inadequate billing and coding practices could put you at risk for federal audits, criminal investigations, fines, and other penalties.

While some facilities may think their medical coding and billing procedures comply with all laws and regulations, there is a chance that rules have changed, leaving your facility with non-compliant protocols. Remaining compliant is an ever-evolving process. You must ensure all laws and regulations are followed.

What separates successful healthcare facilities and practices from unsuccessful ones is how they stay organized. Thriving organizations understand that processes and protocols must promote accountability. All staff members play a role in helping your facility remain compliant with billing and coding procedures.

Whether you want to establish a new program or implement a few changes, trust the team at Corporate Investigation Consulting to help with these tasks.

We Can Improve Your Compliance and Boost Revenue

Without a compliant billing and coding program, your facility could face significant problems, such as:

Lack of Organization

With so many rules, regulations, and laws, it is vital to remain organized. Some of the most prosperous practices have streamlined the internal process to ensure all aspects of the facility are organized and compliant. Staying organized can be easier said than done. You need a trusted team to help your facility find the ideal solution to keep it organized.

At Corporate Investigation Consulting, we will help you find the best practices to implement in your facilities. With that, you will not have to worry about opening your facility up to potential liabilities or losing revenue because of inefficient organization.

Additionally, we focus on other aspects of your practice. Our team will enhance the patient experience for everyone. With accurate billings, streamlined medical care, and proper codings, we can help your practice deliver a first-class experience to your patients. If you are ready to find a better way to organize your practice and deliver those exceptional results to clients, contact our Corporate Investigation Consulting team.

Accusations of Fraudulent Claims

Any fraudulent claims will have a negative impact on your practice or facility. When you work with an experienced team to assist with medical billing and coding, you will not have to worry about these fraudulent claims. With our medical coding auditing services, we can detect any fraudulent activities before they can become a problem for you. In most cases, you can resolve the issue before attracting the attention of federal auditors or investigators. Some of the most common fraudulent claims include:

Billing for Non-Covered Services

Not all services are covered by an insurance company. In those instances, the patient may be ineligible for the service. If the facility bills for the treatment, it could be deemed a non-covered service, leading to an accusation of fraudulent billing.

Billing for Unnecessary Services

When team members sign off on the billings, they ensure the services are medically necessary, accurate, and complete. While the requirement will vary depending on the insurer, you must ensure that your billing protocols adhere to ethical billing practices established under state and federal regulations.

Billing for Services Not Provided

While this issue is uncommon, it is the basis for a claim of billing or insurance fraud. Unfortunately, some practices and practitioners could bill for services not provided to the patient. When that happens, it can lead to serious legal liabilities. By establishing a strict and efficient accounting system, you can document which services were provided to the patient to ensure proper billing.

Unbundling

Some providers and facilities may want to bill in a way that allows them to recover more money from an insurance company. Unbundling is one type of practice. With that, the services are billed individually to receive more from the insurance company. When the services are bundled, it will reduce the amount of reimbursement to the provider or facility.

Upcoding

When a facility or provider bills for more services than provided, that is known as upcoding. Once again, these practices can lead to an investigation of insurance fraud. Upcoding can include billing for brand-name medication when a generic was used or rounding up the provider’s time to half-hour increments.

Improperly Trained Staff

Unfortunately, your protocols and practices are only as good as your staff training. You can send them to seminars, classes, and training sessions, but it is all for nothing if they need help understanding how to implement the best billing practices. Today’s regulations and rules are constantly evolving, and your team needs to understand these changes to risk the chances of being non-compliant.

When you work with us, we will help you understand the business aspect of billing and coding. Once you know the importance of these practices, you can efficiently train your staff on these measures. Our skilled medical coding audit team has experience with preventing medical fraud. With our assistance, we will help you find and implement the best practices in your billing and coding department to avoid any legal liabilities.

Lost Opportunities To Increase Revenue

All practices and providers want to boost their revenue. In many cases, the answer is in plain sight. Often, practices may forget to resubmit denied claims, underbill for services and supplies, or miscode claims. All those issues can lead to lost revenue for your practice. With a medical billing audit, our team will help to uncover those discrepancies, which can lead to adding a boost to your bottom line.

Billing Policies Do Not Align With Current Regulations and Laws

Insurance companies and government programs regularly change their regulations and laws. Also, billing codes can face frequent changes. If you want to remain compliant with these regulations, you must have the right billing policies to follow these changes. When you work with us, we will provide you with a professional medical billing audit that can determine where you need to focus your efforts. We understand that full compliance can lead to higher revenue for your facility or practice.

Many practices continue to use outdated protocols and processes that can lead to legal liabilities. You never want to continue with “business as usual” and wait for a federal audit. Taking a proactive approach can pinpoint any weak points in your compliance programs. With that, you will be able to address those issues before they become a problem for your practice. We can conduct an audit at any level, helping you manage your organization’s specific needs.

Choose Corporate Investigation Consulting for Your Audits

Whether you have a small practice or a large facility, we will provide you with high-quality medical coding and billing audits for your healthcare organization. We do not offer a “one-size-fits-all” approach. Instead, we will focus on giving you a custom-tailored solution that will address any concerns and needs in your practice. Some areas where we can help include:

• Auditing Medicare patient charts
• Discovering reasons for billing denials
• Finding weak billing practices
• Locating missed charges
• Determining any areas of potential liabilities

If you are currently facing a federal audit or want to avoid one, Corporate Investigation Consulting is ready to help. We will provide you with the most efficient and comprehensive medical coding and billing audits in the industry. There is no second guessing with our services. We will pinpoint any problem area and find solutions to resolve them.

Our team wants you to understand every aspect of the practice, including those vital business procedures. Billing and coding in the healthcare industry are very complex. Without the proper understanding, your practice could be non-compliant with federal regulations.

At Corporate Investigation Consulting, we will provide you with the highest level of service. We were founded by a federal attorney who has extensive experience in the medical billing compliance field. Additionally, our team is composed of former federal investigators, skilled lawyers, and experienced billing auditors who understand the intricacies of healthcare compliance. With that, our team will ensure that your practice or facility remains compliant as you gain a competitive edge over other practices in your area.

We Are Passionate, Dedicated, and Committed To Our Clients

With our services, we want our clients to avoid any issues with federal regulations and audits. However, problems can arise, requiring you to seek out the assistance of a professional team. When you need to respond to government audits or charges, we will defend you every step of the way.

We distinguish ourselves in numerous ways. We want your practice to succeed. Whether you need to fight federal accusations or wish to have a thorough audit, the team at Corporate Investigation Consulting is ready to provide our assistance to you.

Minimize Your Potential Liabilities With Our Medical Billing and Coding Audits

If you want a comprehensive audit conducted on your medical practice, there is only one company to contact: Corporate Investigation Consulting. We will ensure all your needs are met with our thorough billing and coding audits. We can help you understand the business side of your practice.

Determining your weakness and straightening your practice can lead to more revenue for your facility or practice. If you want to take your medical practice to the next level of success, reach out to Corporate Investigation Consulting. You can contact us online or call us at (866) 808-4160.

There are numerous benefits to conducting an internal audit. However, they can depend on the nature of the internal audit and the type of company that runs it. Generally, though, the benefits of an internal audit are:

• Increased efficiency
• Decreased risk exposure, generally from discovering flaws or shortcomings in compliance mechanisms or information technology cybersecurity
• Discovering internal misconduct
• Verifying financial statements and other important information for legally-required disclosure

Together, these benefits can streamline a business’ practices, improve its bottom line, shield it from threats, and increase its future prospects. Many businesses that run an internal audit come to see the process as an investment in the company – one that pays substantial dividends in the long run.

The internal auditing professionals at Corporate Investigation Consulting help company executives and stakeholders conduct effective internal audits that produce these benefits.

1. Internal Audits Find Inefficiencies and Propose Solutions

Internal audits often focus on reviewing the company’s business practices, policies, and internal controls. By reexamining them and monitoring how they function, auditors are often able to find inefficiencies and other weaknesses in the system. These can take a huge number of forms, from problems like:

• Nearly identical job functions being performed by multiple people
• A needlessly excessive physical distance that has to be traveled by employees from one work station to another
• Confusing workplace hierarchies
• Unnecessary levels of oversight or sign-off requirements by supervisors

On a day-to-day basis, these issues and others like them may be little more than an inconvenience for workers. In some cases, they are barely noticeable. Over time, though, they can amount to a significant amount of time and money lost to the inefficiency.

Internal audits look for workplace problems like these and then propose solutions that, if implemented, would eliminate or at least alleviate the inefficiency. In some cases, the payoff for the change would make itself financially worthwhile in only a few months.

In many instances, the findings by an internal auditor come as a surprise to company executives. Their familiarity with their own company often keeps them from noticing how things can change. The fresh perspective that auditors bring to the table – as well as experience with other, similar companies – help them see issues that may have been overlooked and then propose original solutions that solve them.

2. Identify Compliance Shortcomings and Reduce Risk Exposure

Many internal audits focus on a company’s compliance mechanisms, especially in the fields of healthcare and securities trading where the legal obligations imposed by federal and state statutes and regulations are intimidating and onerous. Rather than looking to improve the company’s performance, the purpose of these internal audits is to make sure that the business is complying with the law and is not exposed to the legal liability that can come with noncompliance.

Internal audits like these typically target specific aspects of the company’s compliance obligations, like:

• Billing practices of hospitals and pharmacies
• Contract compliance for law firms
• Foreign Corrupt Practices Act (FCPA) compliance of international corporations

These are all entities that have numerous laws that they need to abide by. Many of those laws impose active requirements that the company has to affirmatively take in order to stay on the right side of the law. Failing to take those steps can expose the company to intrusive investigations, embarrassing allegations, and legal liability in the form of administrative sanctions, civil fines, and potentially even criminal penalties. The steps that have to be taken to avoid these penalties, though, are often vague.

A good internal audit can review the steps that the company has deemed necessary to satisfy their legal obligations and see if they are as effective as they were supposed to be.

3. Detect Internal Misconduct

Another important benefit to running an internal audit is that it can uncover signs of employee misconduct that would have continued to go unnoticed without the inspection. In most cases, that misconduct is merely negligent, like when a worker is failing to uphold their role in the company’s compliance protocols and putting the business at risk of liability. Occasionally, though, that misconduct is deliberate, fraudulent, and potentially even criminal.

These issues can be spotted in audits that focus on compliance mechanisms as well as those that pinpoint the business’ routine practices and policies. The most common first sign of trouble is simply money going missing at a particular point in the process. Generally, the problem is confined to a worker having an opportunity to divert the company’s funds into his or her own pocket and then making the most of it. In some rare circumstances, though, the problem is more widespread, with multiple or numerous employees having a hand in the conspiracy.

Resolving these problems can be tricky, but they can also answer some pressing questions that company executives may have had simmering for a while.

4. Verify Information and Accuracy of Disclosures

Internal audits also help companies by verifying internal information that the company has about its business practices and finances – a benefit that is especially important for companies that are about to issue critical disclosures about how the company is faring.

This aspect of an internal audit into the company’s finances can be an important one to consider when deciding when to start the auditing process. In many cases, the information to be disclosed would have had to be verified, anyway. By making it a part of the internal audit, the company can streamline the ordeal by avoiding a duplicative verification process.

Internal Auditing Professionals at Corporate Investigation Consulting

These are just some of the most important benefits that come with an effective internal audit of your company. Others include the peace of mind that comes with knowing that your company’s compliance protocols have been tested and strengthened, the input that a professional auditing consultant can provide to your company, and the deterrent effect that the audit can have on employee negligence or those who have been eyeing company property for their own taking.

The auditing consultants and experts at Corporate Investigation Consulting can help your company conduct an internal audit that provides all of these benefits. Contact us online or call us at (866) 352-9324.

Corporations that conduct an internal investigation to determine their risks or potential liabilities after an allegation of misconduct or news of a violation have surfaced need to make broad use of the attorney-client privilege. Only by doing so can they shield the results of that investigation from the eye of the public, from law enforcement, and from potential plaintiffs.

The costs of failing to keep these investigations privileged is extreme. If legal action is taken against the corporation, the investigation will likely be divulged during the discovery process. This can provide law enforcement or civil claimants with all of the information that they need to build their own case against the company.

The corporate investigators at Corporate Investigation Consulting have conducted numerous internal audits and investigations for companies large and small across the United States. With their help, corporations have gotten to the bottom of serious allegations and pressing questions that carried the risk of significant legal liabilities, giving company executives and decision makers the information they need to make crucial judgments about the future of the company.

What is the Attorney-Client Privilege?

The attorney-client privilege is a great example of a legal concept that is very fundamentally simple, but that gets very complicated as soon as it gets delved into.

The simple part is that the attorney-client privilege protects confidential communications between an attorney and his or her client that were made in the provision of legal advice or assistance.

Nearly every word in that definition, though, can be pulled apart to expose nuance and extremely important details.

It is also important to remember that the burden of proving that the privilege applies lies with the party invoking it.

The Privilege Protects Against Subsequent Disclosure

The legal protection afforded by the attorney-client privilege is its most important aspect: The privileged information is protected from attempts to obtain it during the discovery phase of a subsequent criminal or civil case.

The importance of this is difficult to overstate.

It means that the contents of the internal investigation are immune from the usual evidence-gathering procedures that serve as the preamble to a court case. This forces the other side – whether it is a law enforcement agency or a private plaintiff – to find the information that the investigation uncovered on their own.

This protection applies to the client. For internal investigations, this is generally the corporation conducting it, usually in the form of its Board of Directors, not the individual people at the company, like its stakeholders or executives.

Communications Must Be Confidential

The attorney-client privilege, however, only covers communications that were confidential. This means that they were between the attorney, the client, and no one else. That confidentiality is broken if a third party is privy to the communication when it was made, or if the communication is later divulged to someone outside of the legal representation.

Communications Must Be Related to Legal Advice

Perhaps the most important aspect of the attorney-client privilege when it comes to internal corporate investigations is that communications are only privileged if they are made for the purpose of providing or obtaining legal advice.

This is legal advice, not business advice.

This trips up many corporations that are not careful with how they conduct the investigation. The scope and stated purpose of the internal investigation has to be to provide the company legal advice on how to proceed – not to ascertain the best business decision. That stated purpose needs to fall in line with its actual, primary purpose or else the judge ruling on the case may deem it unprivileged material.

Furthermore, it is not enough to trigger the privilege when one party is a lawyer and the other party is the lawyer’s client. Lawyers can still provide business or other non-legal advice. Courts look past the titles of the people involved to see whether the communications themselves should be privileged from discovery.

This also means that internal investigations that are required by state or federal regulations, like a workplace safety investigation after an on-site accident, or those that are conducted in the corporation’s regular course of business, are generally not done for the purpose of providing legal advice. They often cannot benefit from the attorney-client privilege.

What is the Purpose of the Privilege?

The attorney-client privilege is one of the oldest legal privileges used to protect information and potential evidence from being disclosed during a court case. All such privileges are grounded in policy concerns that are serious enough to warrant the insulation of what is often case-making or case-breaking information.

When it comes to the attorney-client privilege, that policy concern is as fundamental as ensuring that clients can communicate with their lawyer without worrying that what they say could be used against them later on. Because this candor is fundamental to the functioning of the justice system, those communications cannot be used to incriminate the person who makes them.

Are There Any Exceptions to the Attorney-Client Privilege?

The attorney-client privilege has some exceptions. When it comes to internal investigations, the two most important are:

1. The fiduciary duty of the company to its shareholders, and
2. The ongoing crime or fraud exception.

The first of these exceptions allows the corporation’s shareholders to pierce the privilege and access information that the privilege would have protected by invoking the company’s fiduciary duty to them, as its owners.

The second exception is for communications that either enable or assist the client’s ongoing crimes or that actively attempt to conceal those that have already been committed.

What Happens When It Does Not Apply to the Internal Investigation?

The value of ensuring that the internal investigation is privileged becomes apparent when the costs of it being left exposed to discovery is realized. Plaintiffs and law enforcement agencies that file lawsuits or criminal charges against your corporation have the burden of proving the allegations they are making. This can be a very difficult thing to do, as much of the information that they need to prove their case is held within the company. They can only pry it out with discovery requests, interrogatories, and depositions.

But if there is an internal investigation into the very allegations that are being made, and the results of that investigation is left unprivileged, it can be disclosable and will quickly become the very core of the case against the company. The internal investigation that you will have conducted in order to reduce the risks will then be used against the corporation, itself.

Some Frequently Asked Questions About the Attorney-Client Privilege and Corporate Investigation Consulting

Effective Internal Investigations by Corporate Investigation Consulting

Maintaining the attorney-client privilege is one of the most important aspects of conducting an internal investigation. It ensures that the sensitive information that it finds are kept within the corporation and out of the hands that would use it to damage the company.

The professional corporate investigators at Corporate Investigation Consulting are adept at conducting these investigations in ways that are securely within the boundaries of the attorney-client privilege. Contact us online or call our office at (866) 352-9324 to get started on an effective, thorough, and privileged corporate investigation at your company.

Regulated securities professionals and the brokerage houses that they work for have to conduct regular internal audits to ensure that they are complying with the many laws that apply to their industry. Failing to conduct these audits can leave the company exposed to significant legal liability or can keep the firm from operating as efficiently as it could.

The internal auditing consultants at Corporate Investigation Consulting have extensive experience handling the compliance requirements for securities professionals and brokerages. With our auditors’ help, guidance, and expert services, numerous regulated securities professionals have ensured that all of their SEC compliance needs have been met.

The Many Compliance Requirements Created by U.S. Securities Law

United States securities law is as complex, diverse, and nuanced as the assets that make up the industry. Securities professionals have to keep track of numerous federal statutes. Given recent developments in the securities field, particularly with regard to cryptocurrency, those statutes are being amended, revised, and reconsidered on a near constant basis. Just a few of the most important federal securities laws include the:

• Securities Act of 1933
• Securities Exchange Act of 1934
• Trust Indenture Act of 1939
• Investment Company Act of 1940
• Investment Advisers Act of 1940
• Sarbanes-Oxley Act of 2002
• Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
• Jumpstart Our Business Startups Act of 2012

Furthermore, some of the chief securities statutes, namely the Securities Act of 1933 (15 U.S.C. § 77a et seq.) and the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.), delegate lots of responsibility to the United States Securities and Exchange Commission (SEC) to define and enforce the law. This gives the SEC wide latitude to promulgate regulations that further the purposes of those extremely broad laws, imposing further obligations on covered securities professionals and their brokerage firms. These regulations get altered even more frequently than the statutes that underpin them because the SEC does need an act of Congress to amend its regulations.

Together, these laws and regulations create a network of complicated compliance obligations that all broker-dealers need to keep in mind. Breaking any of them or not upholding your legal obligations can lead to invasive scrutiny from the SEC and administrative, civil, or potentially even criminal penalties from the agency. Additionally, brokerage firms can face whistleblower claims that carry huge financial penalties, including treble damages in some cases.

Internal SEC Audits Need to be Efficient and Thorough

Internal SEC audits are a core component of all SEC compliance measures. Those compliance measures are long and arduous processes that take several steps before internal auditing can be done, including:

• Conducting a gap analysis to determine what business practices must be improved to meet legal requirements and obligations
• Planning compliance mechanisms that meet legal expectations without being unduly onerous to the firm
• Executing those plans in ways that ensure they are as easy to maintain as possible
• Continuing to maintain the implemented compliance measures, often by providing ongoing training to relevant personnel

Only after all of these steps have been taken can the brokerage firm begin conducting internal audits. These audits are meant to ensure that the compliance protocols that were adopted are, in fact, working the way they are supposed to work.

Every internal audit is unique and different, even SEC compliance audits. Audits that examine whether a firm is satisfying its recordkeeping requirements will be very different than those that inspect the firm’s supervisory practices under SEC Rule 3110. The materials that need to be examined and the people that need to be interviewed for each type of audit are completely different, and the goals of the audit are very distinct.

The Potential Legal Threats That Unaudited Firms Can Face

Many broker-dealers and brokerage firm managers drag their feet when it comes to compliance. They frequently wonder why they should take the time and invest the money and other resources into creating or bolstering compliance mechanisms when nothing has happened so far. If it is not broken, they often ask, why fix it?

The answer is frequently that you cannot know that it is not broken until it is too late.

Most brokerage firms that do not take their compliance protocols seriously only discover how inadequate they are when they learn that the SEC has initiated an enforcement action. When this happens, it is too late to avoid the situation where the agency has obtained damning evidence of a civil violation or potentially even a criminal case of securities fraud.

By then, the penalties of noncompliance will have become very real and very pressing.

The precise repercussions will depend on the specific nature of the noncompliance and the securities law or regulation that it allegedly violated. For example, all of the following issues of noncompliance can carry their own unique set of fines, prison time, professional consequences, and other sanctions:

• Antitrust violations
• Securities fraud
• Market manipulation
• Violations of an SEC Rule, such as Rule 10b—5
• Violations of a FINRA Rule
• Insider trading
• Violations of legal obligations under federal anti-money laundering statutes

Regardless of the specific offense being pressed, the future of the brokerage firm is at risk.

Three Frequently Asked Questions About SEC Compliance, Internal Audits, and Corporate Investigation Consulting’s Services

SEC Compliance Auditors at Corporate Investigation Consulting

Avoiding these repercussions is essential. A robust compliance mechanism is the best way to do it. When securities firms take their compliance obligations seriously, create thorough and strict compliance protocols for the organization, and internally audit them regularly to ensure that they are working properly, they can drastically reduce the odds that the SEC accuses the firm of wrongdoing. This does not just avoid the repercussions of a conviction or a judgment against the company. It also avoids the expense and stress of defending against a civil or criminal securities case, as well as the bad reputation that comes with the mere allegation of wrongdoing.

The SEC compliance auditors at Corporate Investigation Consulting have extensive experience guiding stakeholders and decision makers in securities firms across the country through the SEC compliance and internal auditing procedures. Contact them online or call their offices at (866) 352-9324 to get started on an internal audit of your firm’s SEC compliance system.

All companies, both domestic and foreign, need to take steps to stay in compliance with the Foreign Corrupt Practices Act, or FCPA. This wide-reaching federal law forbids companies from using bribes with foreign officials in order to obtain or retain business. The concept of “foreign official,” however, is extremely broad and includes people who may not outwardly appear to be a part of a foreign government. This makes compliance difficult for companies that are not exceptionally vigilant.

The internal auditors at Corporate Investigation Consulting provide FCPA compliance services, including FCPA audits. These are an essential component of the compliance mechanisms that are often necessary for keeping companies out of the crosshairs of the federal law enforcement agencies that conduct FCPA investigations.

The Wide Reach of the Foreign Corrupt Practices Act

The FCPA (15 U.S.C. § 78dd-1 et seq.) is a fairly straightforward federal law that has some extremely broad consequences that are often underappreciated. Companies that do not understand how far it reaches can find themselves accused of violating it. These allegations carry substantial penalties.

Companies violate the FCPA if they bribe “foreign officials.” This sounds like it would only apply to high-level dignitaries and politicians of other countries. To the surprise of many, though, there is no requirement that the official be of rank. They just have to be an agent or employee of a foreign government. This includes the obvious, such as:

• Foreign presidents or prime ministers
• Members of a royal family
• Foreign politicians and candidates for office

However, it also applies to people far lower down on the chain of command, like:

• Employees at foreign public or state-owned companies
• Healthcare professionals in countries that have universal, state-operated healthcare systems
• Administrators or faculty members at state-run schools or universities
• Government advisors

Worse, the FCPA forbids the corrupt payment of something of value to these foreign officials, even if they are hidden from the company’s view. It is illegal to directly offer these officials something of value for a business opportunity. It is also illegal to offer the bribe to an intermediary, if you know or should have known that the bribe would then be forwarded on to the official.

The Steep Penalties of Violating the FCPA

Corruptly providing a payment to a foreign official can lead to an investigation by the U.S. Securities and Exchange Commission (SEC) or the Department of Justice (DOJ). This can escalate into either a criminal or a civil charge, and both financial penalties and prison time for the individuals involved in the transaction.

Just the allegation of a violation of the FCPA is a serious event. An accusation that a corporation has bribed someone in order to corruptly procure business overseas is certain to generate bad press and tarnish the company’s brand. This alone can lead to millions of dollars in lost revenue that often comes downstream of a battered reputation.

However, a conviction for each FCPA violation by an individual person carries up to 5 years in jail, $10,000 in civil penalties, and $100,000 in criminal fines. For corporate entities, the criminal fines can increase to two million dollars for each violation, though prison time is obviously off the table given the corporate defendant. The SEC can increase these financial penalties to match the financial gain from the corrupt payments.

Worse, the SEC and DOJ have stepped up their enforcement efforts and gone to great lengths to enhance the punishments they impose against violators. In one recent settlement agreement involving a company whose subsidiary was accused of repeatedly bribing officials in Peru, the SEC imposed a $10 million fine in large part because the company never audited its FCPA controls.

An Overview of FCPA Compliance

Given the steep repercussions of violating the FCPA, complying with the law is critical. This involves:

• Establishing internal policies that forbid corrupt practices with foreign officials
• Implementing employee training on those policies
• Creating internal controls to prevent employees from offering illicit bribes and to detect them if and when they are made
• Incentivizing the internal disclosure of suspected FCPA violations
• Ensuring that all of the necessary paperwork and records are being kept that would reveal a potential violation
• Reviewing those records to ensure that there are no signs of an FCPA violation
• Testing the internal controls to see if they are actually performing the way they should

These last two aspects of FCPA compliance are the focus of internal FCPA auditing.

The Role of Internal Auditing in FCPA Compliance

Out of all of the corporate compliance obligations that companies have, FCPA compliance probably needs ongoing review and auditing the most. This is because the FCPA deals with international trade, which is affected by global politics and regional upheaval. The parties involved in a foreign transaction can change, foreign officials can enter or leave the venture, or business partners can become intermediaries for hidden officials and their agendas. All of these potentials for change can alter what was once a legitimate and legal foreign transaction into one that violates the FCPA, and all without the corporation knowing about it.

As a result, FCPA audits are a big part of the compliance scheme. These audits generally progress through the following steps:

1. Determining the scope of the audit
2. Reviewing the applicable and appropriate compliance protocols
3. Selecting the audit team
4. Identifying all of the relevant sources of information covered by the audit
5. Implementing document preservation rules to ensure nothing gets lost or destroyed
6. Conducting interviews and reviewing documentary information
7. Following up on potential FCPA violations
8. Taking corrective action on transactions that violate the FCPA
9. Preserving a record of the audit

Each one of these steps is sensitive and has to be performed carefully and thoroughly to be effective.

Some Frequently Asked Questions (FAQs) About the FCPA, Internal FCPA Audits, and Corporate Investigation Consulting

FCPA Auditors at Corporate Investigation Consulting

Conducting an effective FCPA internal audit is absolutely critical, given the increased attention that the DOJ and the SEC have been putting on enforcement actions and the excessive fines that they have been imposing. Additionally, given the recent global turmoil and the armed conflict that it has created, there is no better time for reviewing your company’s foreign business ventures to ensure that they still comply with the terms of the FCPA.

The internal auditing professionals at Corporate Investigation Consulting have helped numerous international corporations review their internal controls for compliance with the FCPA. With our expert guidance and experienced advice and auditing techniques, these companies have taken the steps necessary to continue to insulate themselves from allegations of wrongdoing under the FCPA.

Call us at (866) 352-9324 or contact us online to join their ranks.

Conducting an internal investigation for a corporation is a complex and intensively detailed task. Investigators must go into the process with a sound and thorough plan of attack, complete with foreseeable contingencies covered, in order to be adequately prepared for the ordeal.

While every corporate investigation is different, it can still be useful to have a generalized checklist on hand to make sure that all of the pertinent aspects of the inspection are going to be covered.

In over 100 collective years of conducting effective internal and external investigations, the auditing professionals at Corporate Investigation Consulting have found that, generally speaking, most internal investigations must check off at least the following eight elements:

1. Take any necessary action to prevent the conduct at issue from continuing unabated during the investigation
2. Determine the ultimate goal of the investigation
3. Make sure that the investigators conducting the investigation do not have a conflict of interest
4. Parse out what information is necessary to achieve the investigation’s goal
5. Figure out who has that information
6. Decide how best to get access to it in a reliable and credible way
7. Prevent the disclosure of information found by the investigation
8. Ensure attorney-client privilege applies to the investigation and to its findings

Professional corporate investigators will also know what other aspects must be covered in your particular scenario, as well.

1. Take Temporary Remedial Actions to Stop the Alleged Misconduct

Depending on the circumstances that drove the company to initiate the investigation, temporary remedial or corrective action may be warranted before the internal investigation even gets off the ground. For example, if the goal of the investigation is to determine whether an allegation of workplace harassment is true or not, it may be wise to put the alleged harasser on temporary leave. This not only prevents the alleged conduct from continuing; it also protects the corporation from damaging allegations that it was notified of the misconduct but did nothing.

Importantly, though, the corrective action should not be punitive in nature and should not be irreversible. At this point, before the investigation has even started, it is impossible to tell whether the allegations are true or not.

2. Set the Goal of the Investigation

Internal corporate investigations strive to answer a question. Is a particular supervisor discriminating against certain workers? Are the correct billing codes being used on claims for reimbursement from healthcare insurers? Are employees fulfilling their compliance obligations and keeping the company from violating a federal law?

If the question is unclear, the answer that the investigation uncovers may be vague, as well, or potentially even irrelevant and useless. Setting the goal of the investigation and making sure that it is as concrete as possible is essential.

3. Ensure that the Investigators Do Not Have a Conflict of Interest

If the people conducting the corporate investigation have a stake or an interest in how the inspection turns out, then the findings will be tainted and it will have almost been better to not conduct the audit at all. It is often not even enough to pick an investigator from the company’s HR department or a branch that is distantly removed from the people and issues being audited, as that person would still have an interest in the success of the company. If they find extremely damaging information, they may try to downplay how bad it is in an attempt to save their job at your corporation.

This is why many corporations hire outside consultants when they need to learn about what really happened within the company’s walls.

4. Figure Out What Information is Needed to Meet the Investigation’s Goal

Once the goal of the investigation is clear, you need to determine what information you are going to need in order to answer the call of the question that it asks. This demands much more than just details concerning the alleged conduct at issue: Investigators should determine exactly what evidence is necessary to prove or disprove the allegations being made or the corporation’s concerns.

5. Determine Who Has That Information

Once it is clear what information is the target of the investigation, auditors then need to isolate the person or the people who have access to that information. In many cases, this is the person who is making the allegations that triggered the investigation.

Just because they have access to the information or have first-hand knowledge of it, though, does not mean that they should be the exclusive target of the investigation, especially if they are the ones who are claiming corporate misconduct. Their credibility must be sounded and the full context of the information still needs to be brought out to light.

6. Decide How to Best Obtain the Information

Most of the time there will be multiple ways to get the information that will answer the question that has been posed. In these cases, investigators should generally pursue the avenue that will gather the evidence in as unbiased a form as possible – preferably in contemporaneous writings made by unbiased personnel.

However, the credibility of the information is only one factor. While it is the strongest factor, there are times where the difficulties of getting the information from that source will be significant, and the measures taken to get them extremely intrusive. For example, if a group of job applicants are claiming that a hiring manager demanded sexual favors in exchange for a job offer, information taken from the hiring manager’s personal phone will probably be extremely valuable. However, getting it would be a serious invasion of privacy and a denial of access, while itself a piece of evidence, would be a big obstacle to surmount.

7. Keep the Investigation from Getting Disclosed

When corporations conduct internal investigations, they generally want to get ahead of potential liabilities by discovering what happened before anyone else can. If news of the investigation gets leaked, that goal can get drastically undermined.

Investigators can help keep the investigation under wraps by requiring parties involved in the investigation to sign nondisclosure agreements, or NDAs, that forbid them from talking about the audit to anyone outside the organization, including the media. While the damage that comes when a single person violates their NDA is usually far more than what can be recovered from them under the terms of the agreement, the deterrent effect of an enforceable NDA is generally enough to insulate the company from reputational harm.

8. Make Sure the Attorney-Client Privilege Applies to the Investigation

Particularly when the internal investigation was conducted because of the threat of a criminal charge or a civil lawsuit, it is crucially important to get the attorney-client privilege to cover the entirety of the process. If the investigation and its results are not privileged, then a subsequent criminal case or civil claim can uncover it during discovery. This can hand law enforcement or the claimant their entire case on a silver platter, essentially doing their job for them.

Some Frequently Asked Questions About Corporate Internal Investigations and Corporate Investigation Consulting

Contact the Professional Corporate Investigators at Corporate Investigation Consulting

The corporate investigators at Corporate Investigation Consulting have conducted countless internal audits and investigations for companies across the United States. Call them at (866) 352-9324 or contact them online to get their team started on your case.

Internal investigations are an essential, and sometimes legally required, step for corporations to take in some circumstances. The exact process for conducting an internal investigation will depend on several factors, such as what event has triggered the need for the investigation and the type of information that needs to be found. However, most internal investigations flow through these seven general stages:

1. Take temporary precautions to prevent further violations
2. Choose an investigator that meets your needs
3. Plan the investigation
4. Execute the investigation by gathering information and conducting interviews
5. Make a formal recommendation to relevant corporate stakeholders and other parties
6. Close the investigation
7. Draft a written investigation summary

The professionals at Corporate Investigation Consulting have guided numerous companies through this process in the past, helping them adopt the best practices for their particular corporate investigation.

1. Take Temporary Corrective Action

The first step in many internal investigations – particularly those that are triggered by allegations of misconduct in the workplace or corporate wrongdoing – is to take temporary corrective action. This step is essential for ensuring that the conduct at issue stops and does not get worse. It can also insulate the corporation from claims of negligence for allowing the misconduct to continue even after it was brought to the company’s attention.

Importantly, though, the corrective action cannot be seen as punitive in any way. When the allegations are just that – mere allegations – and there is not much support for them yet, then it would be unfair to punish those accused of wrongdoing.

Stopping the behavior without punishing it is a fine line to walk. Some examples of appropriate corrective actions are:

• Paid administrative leave for a worker accused of workplace harassment
• Transferring a worker who claims to be in a hostile working environment or giving them paid time off
• Shifting job responsibilities out of the hands of someone who is being accused of abusing their role or committing fraud

Unfortunately, corrective actions like these are frequently criticized by both the accusers and the parties being accused and those who support them. The accusers often claim that nothing is being done, demanding that their word be accepted as the truth with no need for questioning it. The accused often argue that they are being set up or retaliated against for something else that they did, or may even claim that the allegations are themselves discriminatory.

2. Choose the Right Investigator

After taking an appropriate and immediate corrective action, the next step is to find the right internal investigator for your needs. At the very least, internal investigators should have the following traits and qualities:

• They cannot have a stake or an interest in the outcome
• They must be unbiased
• They need to have a strong attention to detail, as the evidence-gathering phase of an internal investigation has to be meticulous
• They need strong interpersonal skills, particularly if the investigation is going to involve interviewing lots of people or if the allegation is sensitive in nature
• They should have prior experience as an investigator, as this will help them determine issues of credibility and give them the tools they need to see when someone is not being truthful

This is often why corporations hire outside consultants to conduct internal investigations. Conducting audits and investigations is a profession. The people in that profession have built up a skillset that is unlike any other. Additionally, investigators who are not a part of the corporation are far more likely to approach the project at arm’s length and without a conflict of interest that could skew the results.

3. Plan the Internal Investigation

All good internal investigations have an extensive planning stage. This is when investigators:

• Determine the goal of the investigation
• Isolate the information that they need to find in order to attain that goal
• Figure out where they are going to find that information
• Create a list of people to interview and documents to obtain
• Determine how they are going to obtain and retain that information
• Craft a list of interview questions to ask
• Decide how to conduct the interviews in the way that is most likely to bring out the information sought after by the investigation

Especially when the internal investigation is being conducted by experienced professionals, the planning stage is thorough, detailed, and has contingency plans for foreseeable obstacles and surprises. Additionally, the sequence of the interviews and the questions asked during them will be designed to draw out as much information as possible.

4. Gather Information

Once the plan is set, the next step is to put it into motion.

This is where professional, but inexperienced investigators often have the most trouble. Even the best laid plans face unforeseen difficulties once they are implemented. Investigators who have not conducted numerous internal audits and inspections before can become frazzled. Experienced investigators, on the other hand, are better able to see the problems before they occur and plan for them. They can also come up with creative ways to handle issues that they did not see coming so they stay on schedule and keep the investigation running smoothly.

5. Make a Formal Recommendation

Based on the information that has been gathered, the next step in the internal investigation is for the investigator to make a formal recommendation. This is the most important, and often the most difficult, part of the process. In many cases, information that has been gathered in interviews contradicts evidence that has been provided in other interviews or in documentary evidence. A key part of being a good investigator is being able to tell who is lying and who is telling the truth.

Lots of internal investigations do not conclusively determine what happened, or fail to authoritatively answer the question that triggered the inspection. Good internal investigators who recognize, in spite of all of their efforts, that there is still some uncertainty as to what happened will acknowledge that fact when informing stakeholders or corporate decision makers.

6. Close the Investigation

After making the formal recommendation, the internal investigation can be closed. This means notifying the relevant parties of the outcome of the investigation and implementing any corrective actions that the corporation has decided to take. It also often means informing all parties involved in the investigation, including people who were interviewed, that they have to keep the process and its outcome confidential.

In many cases, particularly when the investigation concerned an allegation of workplace discrimination or harassment and the outcome of the investigation found no wrongdoing, the closing stage can be extremely sensitive. The complainant needs to be assured that their claim was heard and fully investigated, but that it had nevertheless been found to be unsupported by the facts. This can be very tricky to do in a way that does not expose the company to legal liability or reputational harm.

7. Write the Investigation Summary

Finally, the outcome of the investigation needs to be memorialized in writing. This summary needs to be thorough, but also clear and concise. It should include:

• A description of the allegations or event that triggered the investigation
• The parties involved and a list of people who were interviewed
• The important factual findings, often with a timeline of the events that took place
• A statement as to whether someone’s credibility was in doubt, and why
• Whether there were any factual circumstances that were still in question after the investigation
• The final recommendation offered by the investigators
• What corrective actions were taken by the corporation

Frequently Asked Questions About Corporate Investigation Consulting and Internal Investigations

The Internal Investigation Team at Corporate Investigation Consulting

Our team at Corporate Investigation Consulting is composed of former federal agents and investigators from a wide variety of powerful agencies, including the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS). With 100 years of combined experience between our investigators, we can help you conduct an internal investigation into your company in a way that brings the truth to light so your corporation can take the appropriate action.

Contact us online or call us at (866) 352-9324 to get started.