Norwegian Approach to Private Internal Investigations: An Empirical Study of Mandates for Fraud Examiners

• DOI: 10.1177/1057567717739337
• Published date: 01 March 2019
• Date: 01 March 2019
• Author: Petter Gottschalk
• Subject Matter: Articles

Article

Norwegian Approach to Private

Internal Investigations:

An Empirical Study of Mandates

for Fraud Examiners

Petter Gottschalk

1

Abstract

This article applies principal–agent relationship theory through an empirical study of private

investigators’ mandates for fraud examiners in Norway. The business of private internal investiga-

tions by external fraud examiners has grown remarkably in the recent decades. Law firms and

auditing firms are hired by private and public organizations to reconstruct the past when there is

suspicion of misconduct and potential financial crime. Most reports of investigation are kept secret

to the public and often also to the police, even when there is evidence of financial crime by white-

collar criminals. For this study, we were able to identify and retrieve a total of 49 investigation

reports in Norway for the 10-year period from 2006 to 2016. Reports are studied in terms of

mandates defining the motive, purpose, scope, tasks, and goals. We find that mandates are deficient,

thereby opening up for opportunistic behavior by both parties in the principal–agent relationship.

Keywords

agency theory, fraud examination, internal investigations, conflicting preferences, mandate

Private internal investigations in terms of fraud examinations occur when there is suspicion of

misconduct and financial crime (Brooks & Button, 2011; Button, Frimpong, Smith, & Johnston,

2007a; Gill & Hart, 1997; Gottschalk, 2016). Financia l crime specialists, forensic accountants,

bankruptcy lawyers, and other experts are hired as fraud examiners to reconstruct the past. Fraud

examiners are engaged by their clients to find out what happened or did not happen, how it happened

or did not happen, who did what to make it happen or not happen, and why it happened or not

happened (Button, Johnston, Frimpong, & Smith, 2007b; Button & Gee, 2013; Machen & Richards,

2004; Schneider, 2006; Wells, 2003, 2007; Williams, 2005, 2014). Examples of investigations

include Valukas’s (2010) and Valukas’s (2014) studies at Lehmann Brothers and General Motors,

respectively.

1

BI Norwegian Business School, Nydalsveien, Oslo, Norway

Corresponding Author:

Petter Gottschalk, BI Norwegian Business School, Nydalsveien 37, 0484 Oslo, Norway.

Email: petter.gottschalk@bi.no

International CriminalJustice Review

2019, Vol. 29(1) 48-58

ª2017 Georgia State University

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DOI: 10.1177/1057567717739337

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