[Fraud Risk Management] A report by a fraud examiner is privileged from disclosure by anyone other than the client.

The statement is false because privilege is not an automatic or inherent attribute of a fraud examiner's report. For a report to be considered privileged, specific legal conditions must be met. Primarily, the report may be protected by the attorney-client privilege if the fraud examiner was retained by legal counsel (either in-house or external) to assist the attorney in providing legal advice to the client. In this capacity, the fraud examiner acts as an agent of the attorney. If the fraud examiner is hired directly by management for business purposes (e.g., to determine the extent of a loss or to improve internal controls), the report is generally considered a business record and is not privileged, making it discoverable during legal proceedings. A separate, more limited protection, the work-product doctrine, may apply if the report was prepared specifically in anticipation of litigation, but this is also not an absolute privilege.

The statement "True" is incorrect because it makes a blanket assertion that a fraud examiner's report is always privileged. This oversimplifies a complex legal issue. The existence of privilege is entirely conditional upon the structure of the engagement and the purpose for which the report was created, with the involvement of legal counsel being the most critical factor for establishing attorney-client privilege.

1. Association of Certified Fraud Examiners (ACFE). (2023). Fraud Examiners Manual

International Edition.

Section 4.801

"Privilege": This section explicitly states

"For a fraud examiner’s work to be protected by the attorney-client privilege

the fraud examiner should be retained by counsel." It distinguishes this from situations where the examiner is hired directly by the company

in which case the communications are generally not privileged. It further clarifies the nature of the attorney work-product doctrine as a separate

qualified privilege for materials prepared in anticipation of litigation.

2. Kranacher

M. J.

& Riley

R. (2019). Forensic Accounting and Fraud Examination. John Wiley & Sons.

Chapter 16

"Rules of Evidence and Expert Testimony": This chapter discusses the legal framework surrounding evidence in fraud cases. It explains that communications with a forensic accountant are not privileged unless the accountant is working as a consultant for an attorney under the Kovel rule (United States v. Kovel

296 F.2d 918 (2d Cir. 1961)). The Kovel doctrine extends the attorney-client privilege to third-party experts whose role is to help the attorney understand complex issues to provide effective legal counsel.

3. Wells

J. T. (2011). The Fraud Examiner's Responsibility to Uncover and Report Illegal Acts. Journal of Forensic & Investigative Accounting

3(2)

121-130.

This article discusses the professional responsibilities of fraud examiners

including the legal context of their work. It implicitly supports the principle that the confidentiality and privilege of a fraud examiner's findings are dictated by the legal framework of the engagement

particularly whether it is structured under the guidance of legal counsel to protect potential evidence and communications from discovery. The report itself is not inherently privileged.