Accountants Have New Tools to Ferret out Fraud

Deleting computer files may seem like the equivalent of shredding documents, but there’s a difference: These shreds can be pieced back together.

And accounting firms have found a lucrative new market doing just that.

Like a vase that shatters when dropped, information deleted from computer hard drives isn’t really gone. It’s simply fragmented, said Jim Snyder, national director of BKD LLP’s Forensics and Dispute Consulting division.

When pieced together, the fragments may tell a story about possible misconduct in the workplace, whether it’s deleting vital documents or surfing inappropriate Web sites.

The tool that BKD uses to resurrect data that seems to be gone is DataProbe, but there are other computer applications that allow clients to look at a computer’s hard drive and see what is “not only there now and easy to find but what’s someone attempted to delete,” Snyder said.

Deleted files, Internet sites and e-mails can be recovered by computer forensic detectives to prove improper activity. Snyder said DataProbe also is often used, at a rate of $200 an hour, to determine whether employees have destroyed or duplicated proprietary information before leaving a workplace.

Electronic recovery is becoming more reliable and valuable in litigation cases, Snyder said. Lawyers involved in litigation battles have found programs of this sort helpful in recovering the “electronic fingerprints” of a document, he said.

An e-mail sent, like a word spoken, can’t be recalled. But companies can be armed with the knowledge that certain information has been leaked, allowing them to better deal with any possible fall-out.

Companies also are beginning to use similar technology in preventing “debacles,” Snyder said. Often companies have no set policies regarding the transmission of electronic data such as e-mail. The business environment allows companies to send out impromptu e-mails, which are then duplicated and passed on. Such an action, often in the heat of the moment, can have serious repercussions for an employee or a company.

Employees may transmit proprietary information, then delete the e-mail message, expecting all proof to be destroyed. With programs like DataProbe, the message can be resurrected and the employee possibly punished, Snyder said.

DataProbe also is said to be a good tool for catching mistakes that auditors may have missed.

“Sometimes [overlooking information is] easier than you would think … And you have to count at least on [the business’] internal audit committees and their board of directors to provide you with information as they know it, and if they’re going to lie to you, there’s not going to be any auditor who’s going to catch everything,” said Linda Steinkraus, manager of tax and accounting at Schwartz and Associates CPAs in Little Rock.