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The decision to conduct an internal investigation is frequently driven by an unexpected event that imposes risk to a company. A shareholder composes a demand letter alleging breaches of fiduciary duty by the board of directors. A whistleblower claims that senior management is overriding internal controls to prevent the disclosure of related-party transactions. An outside auditor uncovers a persistent pattern of prematurely recorded revenues seemingly designed to inflate earnings. A rogue employee engages in misconduct under the pretense of corporate authority. The government contacts the company with precisely crafted requests for information—or, the FBI shows up with a search warrant. Once confronted with these types of unwelcome events, companies need to promptly consider the credibility of the underlying accusations and prudently determine whether an internal investigation is warranted.

 

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