Financial Investigation Sources of Information
by the Bureau of Alcohol, Tobacco, and Firearms, Audit Services
For more information on this document, please contact your local ATF
Banks and Lending Institutions
- State and Local Government/Court
- Bankruptcy Court
- Civil Court
- Workman's Compensation Board
- Accountant's/Bookkeeper's Records
- Suppliers of Goods & Services Records
- Sales Invoice
- Accounts Receivable
- Forms of Payment
- Correspondence File
- Financial Crimes Enforcement Network (FINCEN)
- Credit Bureaus
- Utility Records Billing Statements
Tax returns, both state and federal, provide substantial information.
Federal tax returns, filed with the Internal Revenue Service (IRS), can
only be obtained with a federal court order. When federal tax returns are
obtained from court order they may only be used in federal court. If a state
trial is anticipated, tax returns should be obtained from state tax authorities.
Tax returns filed with the IRS and state taxing authorities should be
compared to tax returns used to obtain loans. Often the banks have returns
that have been embellished. This may lead to bank fraud charges.
Form 1040 is a personal tax return. The form contains a Schedule
C. This schedule contains information about income and assets. Inventory
levels may be established from the return. The inventory amount on the return
will help substantiate the inventory on the insurance claim. Depreciable
assets are listed on the return as a deductible expense.
Corporate F1120 & F1120S and Partnership F1065--These
returns have balance sheets. The Balance Sheets will identify the purchase
price and book value of assets at the time of the fire. Balance Sheets can
be used to establish the gain from the fire. The owner's investment may
be established from these returns.
Payroll F941 & Unemployment F940 Returns will establish
Sales Tax--records will establish business trends.
Real Estate--taxes help put a fair market value on property. If
the property is over insured these bills will assist.
Banks and Lending Institutions
A. Bank Statements--Provide the forensic accountant with a monthly
summary of owners and/or businesses financial transactions (deposit and
expenditures). In addition to providing the name of the bank, the name of
the account, and the account number, bank statements also show check numbers,
date of checks, deposit amounts, check amounts, monthly balances, and possible
cash flow problems (Non Sufficient Funds checks, negative balances, etc.)
- Canceled checks- Provides the forensic accountant with the following:
the name of the bank, name on the account, the account number, payee name,
check approving authority, and the memo notation section.
- Deposit tickets- show type and amounts of deposits (checks or
- Deposit items- same as above
- Debit/Credit Memos- (loans, bank charges, return checks.)
- Cash Transaction Records (CTR)- deposits & withdrawals
- Wire Transfer Records- appear on bank statement
- Safe Deposit Log- shows number of trips to deposit box (date
- Certificate of Deposits (CD's)- conversion of cash into investment.
Shows obligations (details) of owner and/or business as well as potential
assets. In addition, loans include, as well as provide the forensic accountant
with the name of the lending institution, name of the borrower, date of
loan, monthly payments, interest rates, collateral, and terms of loan (length/period
A. Application- Primary source documents for the following: Name, address,
city/state, telephone number, social security number of the borrower; credit
references; amount needed or sought, employer's name; debts of the borrower;
and the annual income of the borrower.
*Documents that may accompany the application include:
B. Financial Statements
C. Tax returns
D. Loan officer notes
E. Payment history
F. Dun and Bradsheet, TRW (credit) reports
Credit Cards--Show mobility and/or location
of the individual(s) during time of purchase(s).
A. Application- may contain same information as loan application.
B. Monthly statement- show purchase history (dates, amount, items
C. Payment history- self-explanatory.
State and Local Government/Court records would include, but are
not limited to, such records as: deeds, that would reflect any liens on
the property, current and previous ownership history, purchase price, mortgage,
and the lender holding the mortgage.
Bankruptcy Court reflects the type of bankruptcy filing, whether
it's corporate or personal, restricting on out of business, schedule of
credits and debts.
Civil Court actions or suits of a business or personal nature
can be determined.
Workman's Compensation Board reflects claims against a business
or brought as the injured party and subsequent ruling. From a college(s)
or private school(s) the financial application/documents that include tax
returns, financial statement, payment plan, loans and aid. Corporate documents
at the Secretary of the State office indicate corporate officers, associated
corporations, if the corporation has filed with the Secretary of State for
the year, and stocks and shares distributed by the corporation. Additionally,
the local property tax collector reflects the amount of tax and if current.
The building department and accessions office maintains records of changes
to the property and possible violation. The Board of Health reflects violations
and inspection reports. The Department of Environmental Protection reflects
any inspection reports for hazardous waste and clean up issues.
A local licensing board maintains records of violations pertaining to
alcohol, food, and entertainment licenses. And the local police and fire
departments maintain a history of incidents relative to a property or business.
Accountant's/Bookkeeper's Records: Accountants/bookkeepers are
typically hired to maintain the company's books (journals and ledgers) and
to prepare financial statements that reflect its profitability, solving,
and cash flow. Other records that may be found at the office of the accountant/bookkeepers
include contract files, correspondence files, corporate minutes, tax returns,
cancelled checks, bank statements, invoices, and other source documents.
The partnership agreement or corporate charter would identify the owners
of the business. Depreciation schedules list the company's fixed assets,
and can be compared to assets claimed on the proof of loss statement. Perpetual
inventory reports and reports of physical inventory counts can be used to
plot sales trends, and can also indicate problems with inventory, such as
obsolescence or overstocking. These types of records can generate many useful
leads when analyzed by a forensic accountant.
Suppliers of Goods & Services Records: Suppliers provide multiple
sources of financial information for the investigative team. The following
pertinent areas provide specific sources for further analysis.
Sales Invoice: A document that provides details as to the sales
transactions between the parties. The invoice will show the amount of the
sale, items sold, terms of sale etc. These are excellent source documents
which provide the investigative teams with trend analysis.
Accounts Receivable: Details the supplier's financial records,
which indicate purchases, made from each supplier. The suppliers accounts
receivable depicts specific sales, payment history, and outstanding balances.
Cash-on-delivery (C.O.D.) sales would not be shown in the accounts receivable
ledger but may indicate financial difficulties.
Forms of Payment: depict the method of payments to suppliers in
the form of cash (possibly C.O.D.), check, certified check or credit card.
Correspondence File: contain letters, documents, TRW reports,
etc., between the parties. These files may provide documentation such as,
placing a customer on C.O.D. basis.
Financial Database Records
Financial Crimes Enforcement Network (FINCEN): provides multiple
source of data basis's from different credit bureaus for both businesses
and individuals. It will provide credit card companies and numbers along
with other pertinent financial data. You must contact your appointed State
representative in order to process your request. See EXHIBIT? For specifics.
Credit Bureaus: sources such as TRW etc., summarize financial
information for both businesses and individuals in a useful format for the
investigative team. These credit reports provide leads such as outstanding
mortgages, credit card information (type of card, account number, outstanding
balance and payment history), back account data, etc. In addition, any other
inquiries appear as "hits" on these reports and indicate other
sources of banks, etc. that are also inquiring into credit data.
Internet: This is another possible investigative tool that may
provide valuable information and data to the investigative team. The term
"searching the web" allows the team to research numerous web sites
for information that my impact the investigation. One pertinent web site
is FINCLEN at http://www.ustreas.gov/treasury/bureau/fincen.
Utility Records Billing Statements are monthly statements
which provide basic data as to quantitative usage and applicable dollar
value. Monthly usage aspects may be in the form of gas thermal units, kilowatt-hours
etc., that may be used for comparative purposes.
Reprinted with permission from the author.