Forensic focus on COVID-19

Deloitte’s Forensic series around COVID-19 discusses business impacts and steps you can proactively take to help respond to and recover from the outbreak and mitigate potential fraud and financial crime risks. Join us as week by week we bring you our latest insights around COVID-19 considerations.

See all of our past insights here and be sure to subscribe for all the latest Forensic updates.

Financial statement fraud

The financial impact of COVID-19 will likely put pressure on corporations’ financial results and present potential challenges for individual employees. This pressure may increase the temptation for individuals to engage in improper acts in order to address their immediate financial needs or resort to financial statement manipulation to meet stakeholder expectations.

For some, as these financial pressures mount, the line separating acceptable from unacceptable behavior can become blurred. At the same time, controls such as segregation of duties may be weakened due to work force displacement or distraction. Organizations need to be sensitive to the pressures that could result in financial statement manipulations at the corporate or operating subsidiary level. Further, management should recognize that the environment created by adverse events such as COVID-19 could lead to increased fraud by employees (e.g., asset misappropriation or bonus maximization schemes).

This article discusses risks organizations should consider related to financial statement fraud.

Financial statement fraud

Conducting investigations remotely during times of uncertainty

Companies are facing significant operational, financial, and strategic challenges as a result of the coronavirus (COVID-19) breakout. Lower revenues will likely
result in budget modifications, with funding allocated to those parts of the
business deemed critical to meet current and near-term operations.

 Among the issues companies will need to address is how to handle internal investigations. While some categories of investigations can clearly be delayed, others will require more immediate attention because they concern allegations of significant financial impropriety (e.g., large frauds), implicate the integrity of key officers or management, or are the subject of regulatory or law enforcement actions. 

This piece discusses conducting effective remote investigations during times of uncertainty.

Conducting investigations remotely during times of uncertainty

Insider trading risk

Recent accusations of “stock dumping” raise questions about whether those made privy to nonpublic material information during times of crisis have placed their personal financial interests ahead of those of the investing public or their companies, potentially violating insider trading laws. 

This perspective discusses insider trading in the wake of the pandemic and key considerations for boards and audit committees.

Insider trading risk

Contract review and evaluation

The coronavirus pandemic has disrupted business transactions and relationships in virtually all industries and across most geographies. The specific obligations related to those transactions and relationships are typically detailed in contracts with customers, suppliers, service providers, lessors and lessees, supply chain and sales channel partners, creditors, borrowers, and other parties.

This installment highlights considerations arising around clauses in contracts and the associated risks on both the buy side and sell side, and suggests ways to identify those risks.

Contract review and evaluation

Unlocking the power of data

What is it about an economic crisis that causes organizations to become more vulnerable to fraud? Factors such as financial pressure to meet earnings expectations, employees who feel the need to protect the company or themselves, and gaps in controls resulting from decisions the business has been forced to make many contribute to increased fraud risk.

Not only is there a potential for a significant uptick in the volume of fraud, but organizations will likely now be forced to investigate these frauds in a new paradigm where shelter in place or stay at home orders have been issued across the world. The traditional ways of investigating that have effectively been relied upon do not exist, or are severely restricted, as a result of the current environment. Instead, virtual methods of interviewing witnesses, reviewing documents, and obtaining access to and analyzing data will need to be used.

This piece will discuss the opportunity for fraud investigators to redefine how they conduct investigations becoming more tech-enabled and relying heavier on the insights data and analytics can provide.

Unlocking the power of data

Personal protective equipment supplier vetting during the pandemic

As the spread of COVID-19 has accelerated across the US, health care providers, governmental entities, and essential businesses have been working to secure scant supplies of personal protective equipment (PPE) for workers and caregivers. As a result, purchasing agents may face pressure to eschew traditional means of vetting suppliers and potentially expose themselves to doing business with fraudulent or inexperienced suppliers.

Conducting accelerated supplier vetting, even at a high-level, can help provide purchasing agents with answers to pertinent questions about their potential business partners, thereby helping to inform their decision-making process.

The latest installment of Forensic Focus on COVID-19 discusses how to balance urgency and risk.

Personal protective equipment supplier vetting during the pandemic

Antitrust risks and considerations

COVID-19 is causing unprecedented disruptions to businesses and supply chains. The growing crisis has increased the global demand for products compelling many businesses and competitors to temporarily combine required operations to facilitate production and distribution of COVID-19-related products and services.

The latest installment of Forensic Focus on COVID-19 discusses cooperation, collaboration, and information sharing during the crisis.

Antitrust risks and considerations

Valuing business insurance claims

To address the financial impact of COVID-19, organizations are taking initial steps to recover losses, including standing up loss accounting centers; implementing tools to aggregate, analyze, and monitor losses; and developing relief recovery strategies. At this point, those pursuing or expecting insurance reimbursements and other potential sources of funding, such as the Coronavirus Aid, Relief and Economic Security (CARES) Act or government agency programs, should be preparing well-supported loss assessments as well as claims and relief recovery substantiation.

This article discusses valuing business insurance claims.

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Valuing business insurance claims

Opportunities to enhance compliance programs while working remotely and with reduced budgets

Companies continue to face significant financial, operational, and strategic challenges as a result of the novel coronavirus (COVID-19) pandemic, and such challenges are likely to persist at least for the near term.

Compliance teams in particular face specific challenges on each of these fronts. From a financial perspective, many companies will be tightening their belts, reducing compliance budgets, re-allocating resources to meet current and near-term needs, and otherwise weathering the slowdown. From an operational standpoint, compliance reviews and assessments will largely have to be performed remotely, with international travel, site visits, live interviews, gathering hard copy documents, and other typical steps on hold. And, in terms of strategic challenges, companies may be hesitant to introduce overall structural changes to the compliance framework during this period of great uncertainty, where other dramatic changes may be more mission critical.

Nevertheless, even working from home and with significantly reduced budgets, there are still meaningful opportunities to assess and improve corporate compliance programs. The latest installment of Forensic Focus on COVID-19 discusses COVID-19 business impacts and steps you can proactively take to help respond to and recover from the outbreak and mitigate potential fraud and financial crime risks.

Five insights on COVID-19 and product counterfeiting

The COVID-19 pandemic has shined a light on a problem already spiraling out of control: product counterfeiting and pirated goods. With counterfeit goods representing more than three percent of world trade, virtually no sector is immune to counterfeiters taking advantage of challenged supply chains.

The next article in our series <looks at how corporations at risk can smartly invest in protecting their brand and customer safety and demonstrate to management that their efforts are not just worth the investment but in fact, adding to and improving the company’s bottom line.

Related insight on Pandemic Preparedness: Preparing people and organizations­

The escalating COVID-19 pandemic has led businesses to consider their own preparedness measures to help ensure organizations are proactive and prepared, while remaining pragmatic, as the situation continues to quickly evolve. Download to read further.

Practical advice for pandemic preparedness


Intelligent Contract Lifecycle Management can help organizations better manage COVID-19 disruptions

Have a topic you would like us to address? Email us at US National Deloitte Forensic usnationaldeloitteforensic@deloitte.com

Contact us

Don Fancher
Global leader, Forensic

Deloitte Financial Advisory Services LLP
+1 404 220 1204

Ed Rial

Deloitte Financial Advisory Services LLP
+1 212 436 5809

Chris May
Principal, Discovery

Deloitte Transactions and Business Analytics LLP
+1 512 498 7408

Gregory Swinehart

Deloitte Financial Advisory Services LLP
+1 212 436 2089

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