Social networks like Facebook and MySpace are being used to conduct investigations to uncover fraud and identity theft, but they could also lead to those same problems.

At a New York State Society of CPAs conference last week, fraud investigator Cynthia Hetherington, founder of the Hetherington Group, talked about how social media can lend themselves to searches that can find information about employees who have misrepresented themselves to their employers. Sites like Facebook and LinkedIn often yield eye-opening information on employees, including their friends and social connections, and provide personal details that many people would prefer their supervisors and HR department not to know.

Hetherington’s talk pointed out the dangers of overuse of social media sites and the loss of privacy they can entail. She likened them, and the compulsion to update the information on them, to an addiction. Beware of information you put on the Web, because like the Wayback Machine, it can easily uncover information that you might hope would be long forgotten.

Search engines like Google, ZabaSearch,, and YoName can yield information about people on the Web, including the employees at your firm and your clients’ employees. To safeguard one’s identity, it’s a good idea to give out as little information as possible in your profile and social network updates, and be sparing in the number of people you invite to be your “friend” on the network. Use services like Anonymizer if you want to cloak your own activities and searches on the Net. However, it's still a good idea to open up your own account on the popular social networks so no-one else claims your identity for you, puts false and damaging information on your alleged profile, and tries to coerce your friends and colleagues into thinking it's you. 

Accounting firms are not far behind in taking advantage of social networking services, and are increasingly developing forensic capabilities. The AICPA is pushing its recently introduced Certified in Financial Forensics credential, while the Association of Certified Fraud Examiners is seeing its credential attracting new interest among people who want to be the next Harry Markopolos, the CFE who tried to blow the whistle on Bernie Madoff to the SEC long before the Ponzi scheme unraveled.

Longtime investigation agencies like Kroll are forming alliances with accountants in an effort to root out fraud and identity theft. Alan Brill, senior managing director of technology services at Kroll Ontrack, regaled the NYSSCPA audience with anecdotes about his exploits in dealing with malware, viruses, misplaced laptops, and stolen and hacked data. His fraud investigations included one that uncovered a dead judge who kept adjudicating parking and traffic tickets for years after his decease. Despite his physical condition, he was the most productive administrative law judge in his jurisdiction.

Fraud can turn up in all sorts of places, and one area that’s ripe for abuse is travel and entertainment expense reports. Ari Schonbrun, director of administration and expense management at Cantor Fitzgerald’s Debt Capital Markets Group, pointed out a variety of schemes, ranging from common varieties such as personal expenses mischaracterized as business expenses, to fictitious receipts and outright collusion between managers and employees.

Among the scams are various airline schemes, such as when an employee books an expensive refundable ticket along with a cheaper ticket. The employee uses the cheaper ticket for the actual flight, but cancels the refundable ticket. Then he or she submits the more expensive ticket for reimbursement.

Hotel scams are popular too. Some employees will scan in a hotel invoice and then change the amounts on the bill before submitting it for reimbursement. Another scheme involves getting some extra letterhead paper from the hotel and typing up a phony bill on it. Yet another scam is to change the amounts on e-mailed confirmations from companies like Expedia and Priceline.

Accountants have to be good at spotting fraud not only on receipts, but on signed checks as well. Handwriting expert Ruth Brayer, a principal at Brayer Handwriting International, showed various ways to detect forgery in fraud investigations. She pointed out how some forgers use primitive techniques such as tracing to reproduce signatures. Brayer warned the CPAs in attendance to watch out for red flags such as documents that lack dates. She noted that no two signatures by the same individual are ever identical.

The accounting profession in some ways is evolving into more of a supersleuth kind of job, especially as financial crimes take on more visibility during the recession and shady operators grow increasingly desperate for ways to keep making money. It’s the accountant’s job to keep a watchful eye and magnifying glass on the financial activities their firm or department is tracking and auditing. Quick, Watson, the game’s afoot.

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