NCJ Number
186552
Journal
White Paper Volume: 14 Issue: 6 Dated: November/December 2000 Pages: 26-48
Date Published
2000
Length
9 pages
Annotation
This article describes the Asset Method of net worth analysis to quantify illegal gains in the investigation of fraud.
Abstract
Regulatory authorities such as taxation agencies have used the Asset Method of net worth analysis for decades. When used in fraud investigations, the method is based on the assumption that fraud is committed to obtain financial advantage. The gain from the fraud will be used to either increase discretionary spending (i.e., enjoying life) or to acquire wealth (i.e., buy assets or retire debt). By analyzing the movement in these items, the quantity of fraudulent activity can be determined by comparing the required income to fund these activities with the income from legal sources. Analyzing the economic family unit can deliver valuable information, such as the target's true economic demands, which could be the pressure causing the fraud, compared with economic resources. The purpose of the Asset Method analysis is to show that the economic family unit of the perpetrator has lived beyond the means indicated by reported legitimate income. Comparing legitimate income with the sum of the expenditures and increase in net assets is the value of the fraud. This article provides detailed guidelines for conducting the asset method of analysis on an economic family unit, with attention to the limitations of the method.