An accounting investigation is unusual because the clock is not set by the company — it is set by the audit and reporting calendar. Once auditors are aware of a potential irregularity, the sequence of investigation, remediation and disclosure has to work against deadlines the board does not control. That is why scope and staffing decisions are made in the first days, not after a preliminary look.
Waxman Litigation conducts and advises on investigations for companies and their boards. Seth B. Waxman spent 13 years as an Assistant United States Attorney in the District of Columbia, roughly eight of them on fraud and public corruption.
The sequence problem
Three processes run at once and each constrains the others: the investigation establishing what happened; the audit, which cannot conclude while a material question is open; and disclosure, which turns on what is known and when. Getting the order wrong is the usual source of difficulty — not the underlying accounting.
Preservation, immediately
Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both. (Added Pub. L. 107–204, title VIII, § 802(a) , July 30, 2002 , 116 Stat. 800 .) U.S. Code Toolbox Law about… Articles from Wex Table of Popular Names Parallel Table of Authorities How current is this? Accessibility About LII Contact us Advertise here Help Terms of use Privacy
18 U.S.C. § 1519
Financial systems and email are the record here. Automated deletion continuing after a concern is raised is exposure under § 1519, which reaches conduct in contemplation of a federal matter.
What tends to follow
Accounting matters at public companies attract SEC attention, and the criminal analogue is securities fraud under 18 U.S.C. § 1348. Where federal program funds or government contracts are involved, False Claims Act exposure may run alongside. Managing them together is the subject of parallel proceedings.
Which provisions are in play in an accounting or financial fraud investigation?
Accounting fraud matters usually run on two tracks at once — a securities-fraud theory and a records theory — and the records theory carries the longer term. Section 1519 reaches the handling of documents during the investigation, separately from the underlying conduct.
| Provision | Official heading | Maximum term |
|---|---|---|
| 18 U.S.C. § 1348 | Securities and commodities fraud | 25 years |
| 18 U.S.C. § 1519 | Destruction, alteration, or falsification of records in Federal investigations | 20 years |
| 18 U.S.C. § 1001 | Statements or entries generally | 5 years (8 if terrorism-related) |
| 31 U.S.C. § 3729 | False claims (civil) | Treble damages plus a per-claim civil penalty, as adjusted for inflation |
Frequently asked questions
Who should commission the investigation?
Where management may be implicated, the audit committee or the board — otherwise independence is the first thing challenged.
Can we wait for the audit to finish?
Usually not. The audit generally cannot conclude while a material question is open, which is what creates the pressure.
Does finding a problem mean we must restate?
That is an accounting and disclosure judgment informed by the investigation, not decided by it.
Will regulators find out?
Possibly through several routes. What matters is that decisions about disclosure and self-reporting are taken deliberately once facts are established.
Sources and legal authorities
General information, not legal advice. Scope, conduct and privilege decisions turn on the specific facts and should be taken with counsel before the first interview.
Related: Internal Investigations · Securities Fraud · Parallel Criminal & Civil Proceedings · False Claims Act Defense. Call (301) 901-3109 or use the contact page.