- 1. 6/18/2014 1 CopyrightFraudResourceNet LLC
QuickResponseFraudDetectionusingDataAnalytics:
HittingtheGroundRunningusingTechnologyina SuspectedFraudCase June
18, 2014 Special Guest Presenter: Rich Lanza
CopyrightFraudResourceNet LLC President and Founder of White Collar
Crime 101 Publisher of White-Collar Crime Fighter Developer of
FraudAware Anti-Fraud Training Monthly Columnist, The Fraud
Examiner, ACFE Newsletter Member of Editorial Advisory Board, ACFE
Author of Fraud in the Markets Explains how fraud fueled the
financial crisis. About Peter Goldmann, MSc., CFE
2. 6/18/2014 2 CopyrightFraudResourceNet LLC
AboutJimKaplan,MSc,CIA,CFE President and Founder of AuditNet, the
global resource for auditors (now available on Apple and Android
devices) Auditor, Web Site Guru, Internet for Auditors Pioneer
Recipient of the IIAs 2007 Bradford Cadmus Memorial Award. Author
of The Auditors Guide to Internet Resources 2nd Edition
CopyrightFraudResourceNet LLC Richard B. Lanza, CPA, CFE, CGMA Over
two decades of ACL and Excel software usage Wrote the first
practical ACL publication on how to use the product in 101 ways
(101 ACL Applications) Has written and spoken on the use of audit
data analytics for over 15 years. Received the Outstanding
Achievement in Business Award by the Association of Certified Fraud
Examiners for developing the publication Proactively Detecting
Fraud Using Computer Audit Reports as a research project for the
IIA Recently was a contributing author of: Global Technology Audit
Guide (GTAG #13) Fraud in an Automated World - IIA Data Analytics A
Practical Approach - research whitepaper for the Information System
Accountability Control Association. Cost Recovery Turning Your
Accounts Payable Department into a Profit Center Wiley & Sons.
Please see full bio at www.richlanza.com 3. 6/18/2014 3
CopyrightFraudResourceNet LLC The CPE certificates and link to the
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CopyrightFraudResourceNet LLC
Theviewsexpressedbythepresentersdonotnecessarilyrepresenttheviews,
positions,oropinionsofFraudResourceNetLLC(FRN)orthepresenters
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Anymentionofcommercialproductsisforinformationonly;itdoesnotimply
recommendationorendorsementbyFraudResourceNetLLC 6 Disclaimers 4.
6/18/2014 4 CopyrightFraudResourceNet LLC Todays Agenda Which data
files should be requested in the area of concern or what should the
data request look like when there is no specific area of concern.
Using a fast-track process to validating data and understanding
statistical norms for benchmarking purposes. Statistical techniques
to be utilized include: standard deviation, a unique method of
combining Benfords Law and other digital analysis techniques,
time/size stratifications, and value/volume difference
scattergraphs. How the general ledger can provide a digital road
map for analytics for fraud (and errors) within the organization.
How to quickly gather report ideas and techniques for analysis, as
well as, obtain a list of some of the top fraud tests by process
area. (continued) CopyrightFraudResourceNet LLC Todays Agenda
(continued) How to combine your reports for maximum impact and
understanding this concept within a specific review of accounts
payable. Additional report techniques that can be applied to
expected data files include user transaction analysis, data file
change reviews, and external data mapping. Understand a provided
Excel macro tool (free as part of the course) that will quickly map
an entire hard drive in minutes. Various applications of this tool
will be presented. Your Questions Conclusion 5. 6/18/2014 5
CopyrightFraudResourceNet LLC MostPopularProducts MicrosoftExcel
ActiveDataforExcel TopCaats MicrosoftAccess ACL IDEA
WizRule,WizWhy,&WizSame (WizSoftproducts)
CopyrightFraudResourceNet LLC ToolSelection Considerations
Coreprocessingfeatures Advancedfeatures Advanceddataimport
Scripting Easeofuse Training/CustomerSupport/UserGroups
Yearsinbusiness/Companysustainability Workpapersystemintegration 6.
6/18/2014 6 CopyrightFraudResourceNet LLC ProposalDecisionAnalysis
Page11 http://www.caseware.com/products/idea#_research_reports
CopyrightFraudResourceNet LLC DetectionMethods ByCompanySize 7.
6/18/2014 7 CopyrightFraudResourceNet LLC AssetMisappropriation
TopsTheCharts CopyrightFraudResourceNet LLC
VendorBillingFraud/Corruption Is#1or#2NoMatterWhereYouGo 8.
6/18/2014 8 CopyrightFraudResourceNet LLC FraudIsItReallyHard
ToFind AskaCPAfirmtoFINDFRAUDATYOUR COMPANY
AFraudAudittoFindthe6%of RevenuesLosttoFraud Willthatbecheapor
REALLY expensive? Howmanypeoplefindorresearchacommitted
fraudprovidedtoyoudaily,weekly,monthly, quarterly,annually?
Whatiftechnologycouldfinditforyouquarterly
andweorsomeoneelsecouldtellyouexactlyhow
tofindit?.butitsthere(onaverage)at companies..
Ifthisweretrue,whyarewenotallrunningbackto ourdesksnow!? Caveat
Probablywilltakeafewhundredhoursat
minimumtoresearchthedataandpresentfindings unlesstheyarerightontop
CopyrightFraudResourceNet LLC HavetoStartSomewhere ReportMapping 9.
6/18/2014 9 CopyrightFraudResourceNet LLC MappingDatatoScripts
MapYourReportstoYour DataNeeds CopyrightFraudResourceNet LLC Clear
Data Request AccountsPayableDataRequest.doc 10. 6/18/2014 10
CopyrightFraudResourceNet LLC Sample Data Validation Accounts
Payable Other Questions CopyrightFraudResourceNet LLC Polling
Question 1 What comes first in the analytic process? A. Getdata B.
Runreports C. Identifyreportstorun D. Deliverreportstoclient 11.
6/18/2014 11 CopyrightFraudResourceNet LLC The Overall Fraud
Analytic Process Get the Most Useful Data for Analysis General
Ledger / Accounts Payable Other? / Use external data sources
Develop Fraud Query Viewpoints The 5 Dimensions Brainstorm report
ideas Analytically Trend Benfords Law Statistical averages and
simple trending by day, month, day of week Post dated changes
Transactional Score Based On the Above CopyrightFraudResourceNet
LLC IsYourOrganizationWorking WithBannedCompanies? EPLS is the
excluded party list service of the U.S. Government as maintained by
the GSA WWW.SAM.GOV 12. 6/18/2014 12 CopyrightFraudResourceNet LLC
IsYourOrganization WorkingWithTerrorists? CopyrightFraudResourceNet
LLC AreYourVendorsReal? IRSTINMatchingProgram ValidatesU.S.Tax
IdentificationNumbers Cansubmitupto100,000 TINsubmissionsatatime
Makesureallpunctuationis removed See http://www.irs.gov/taxpro s/
andenterTINmatching programinthesearchbox 13. 6/18/2014 13
CopyrightFraudResourceNet LLC SSN DeathFile
CopyrightFraudResourceNet LLC The Overall Fraud Analytic Process
Get the Most Useful Data for Analysis General Ledger / Accounts
Payable Other? / Use external data sources Develop Fraud Query
Viewpoints The 5 Dimensions Brainstorm report ideas Analytically
Trend Benfords Law Statistical averages and simple trending by day,
month, day of week Post dated changes Transactional Score Based On
the Above 14. 6/18/2014 14 CopyrightFraudResourceNet LLC
QueryViewpoints CopyrightFraudResourceNet LLC SpecificTestsBased
onthe5WsWho
Summarizejournalentriesbythepersonsenteringtodetermineiftheyre
authorized. What
Summarizejournalentriesbyaccountandrepetitiveextracts(morethan50
instances)anduniqueaccountsequencesusedinthejournalentry(basedon
thefirstfivedebitandcreditpostings).
Extractnonstandardormanualjournalentries(versusacreatedsystemsuchas
anaccountspayableledgerposting)forfurtheranalysis.
Stratifysizeofjournalentriesbasedonamount(usingthedebitsideofthe
transaction).
Summarizegeneralledgeractivityontheamountfield(absolutevalueofdebit
orcredit)toidentifythetopoccurringamounts.Thensummarizeactivityby
accountandtheamountidentifiedforthetop25appearingamounts.
Scattergraphgeneralledgeraccount(debitandcreditamountsseparately)
andnumbersoftransactions. 15. 6/18/2014 15
CopyrightFraudResourceNet LLC When
Extractjournalentriespostedonweekendsandholidays.
Extractjournalentriesrelatingtotheprioryearthatweremadejust
immediatelyfollowingafiscalyearend.
Summarizejournalentrycreditsanddebitsprocessingbyday,month,and
year. Where
Extractjournalentriesmadetosuspenseaccountsandsummarizebythe
personenteringandcorrespondingaccountnumbers.
Extractjournalentriestogeneralledgeraccountsknowntobeproblemsor
complexbasedonpastissues(errorsofaccountinginjournalsubsequently
correctedbyaccountingstafforauditors)atthecompanyortheindustryin
general. Extractdebitsinrevenueandsummarizebygeneralledgeraccount.
Summarizejournalentriesbythepersonsenteringtodetermineiftheyreauthorized.
SpecificTestsBased onthe5Ws(Continued) CopyrightFraudResourceNet
LLC Why Extractgeneralledgertransactionamounts(debitorcredit)that
exceedtheaverageamountsforthatgeneralledgeraccountbya
specifiedpercentage.(Fivetimestheaverageisthedefault.)
Extractjournalentriesthatequatetoroundmultiplesof10,000,
100,000,and1,000,000.
Extractjournalentrieswithkeytextssuchasplugandnettozero
anywhereintherecord.
Extractjournalentriesthataremadebelowsetaccounting
departmentapprovallimitsespeciallymultipleentriesofamounts
belowsuchlimits.
Extractjournalentriesthatdontnettozero(debitslesscredits).
SpecificTestsBased onthe5Ws (Continued) 16. 6/18/2014 16
CopyrightFraudResourceNet LLC ReportBrainstormTool
CopyrightFraudResourceNet LLC ProactivelyDetectingFraud
UsingComputerAuditReports IIAResearchPaper/CPECourse See the IIAs
website at www.theiia.org The purpose of this document is to assist
auditors, fraud examiners, and management in implementing data
analysis routines for improved fraud prevention and detection. A
comprehensive checklist of data analysis reports that are
associated with each occupational fraud category per the
Association of Certified Fraud Examiners classification system. 17.
6/18/2014 17 CopyrightFraudResourceNet LLC PayrollFraudReportIdeas
CopyrightFraudResourceNet LLC TopReportsinPayroll
Duplicateemployeepayments Paymentstothesamebankaccount
andadifferentemployeenumber Overtimetrendingbydepartmentand
person(%ofovertimetogrosspay, averageovertimebydepartment)
Matchemployeedatafromthehuman resourcetothepayrollsystem
Lookforinaccurateorincomplete employeedata 18. 6/18/2014 18
CopyrightFraudResourceNet LLC OtherT&EReports
Unmatchedqueryofcardholderstoanactiveemployee masterfile
Cardsusedinmultiplestates(morethan2)inthesameday
Cardsprocessinginmultiplecurrencies(morethan2)inthe sameday
Identifycardsthathavenothadactivityinthelastsixmonths
Cardholdersthathavemorethanonecard
Extractanycashbackcreditsprocessedthroughthecard
Extractdeclinedcardtransactionsanddetermineiftheyare
frequentforcertaincards
Summaryofcardusagebymerchanttofindnewlyadded merchantsandmostactive
CopyrightFraudResourceNet LLC T&E ItsTheTrendsRight?
Trendcategories(meals,hotel, airfare,other) Trendbypersonandtitle
Trenddepartments Trendvendors Trendinthetypeofreceipts
Trendunderlimits(companypolicy) 36 19. 6/18/2014 19
CopyrightFraudResourceNet LLC OtherDataMiningIdeas
PersonnelAnalysis Adjustmentsbyemployee Processingbyemployee
ContextualSummarizations Transactiontypes TimeTrending
Month,week,andday/Alsobydepartment Lastmonthtofirst11months
Transactionsattheendofandstartofafiscalyear
CopyrightFraudResourceNet LLC Polling Question 2 Whatisnot
oneofthequeryviewpoints? A. Who B. What C. How D. When 20.
6/18/2014 20 CopyrightFraudResourceNet LLC AddingtheAnalysis
Toolpak AddIn CopyrightFraudResourceNet LLC AboveAverage/Standard
Deviation 21. 6/18/2014 21 CopyrightFraudResourceNet LLC
StratifyDatainExcelorwith ActiveDataforExcelTM UseExcelVlookup=TRUE
UseActiveDataforExcelTM CopyrightFraudResourceNet LLC
HowFraudGrowsOverTime 42 22. 6/18/2014 22 CopyrightFraudResourceNet
LLC ScatterGraph CopyrightFraudResourceNet LLC
ScatterGraphExplanation 1 highdollarchangeandlowcount(outliers) 2
chargesthatmakesense 3 changesthatdontmakesense 4
inefficiencythatisdeveloping 23. 6/18/2014 23
CopyrightFraudResourceNet LLC Polling Question 3
WheredoyoufindtheDescriptiveStatisticsin Excel? A. ExcelOption B.
DataMenu C. ExcelAddIns D. InsertMenu CopyrightFraudResourceNet LLC
UniqueJournalEntryTest AccountSequencing TheSampsonIndex 24.
6/18/2014 24 CopyrightFraudResourceNet LLC
Normalizeandtestgeneralledgerdataconsistentlyonalllocations
Mostinternalauditshopsobtaingeneralledgerdataquarterlyfortheirexternal
auditorsanyway noexcuse G/Ldataisthelifebloodoftheorganization
Itisthefirstdatasetwithenoughdetailtoeffectivelycombthrough
Planningwillimproveasfocuscanbeplacedonkeyaccounts,entries,timeframes,
enterers,etc.andwillguidefuturedataextracts
Mostsystemspostindetail(evendowntoinventorymovements)whichcanallow
detailedreviewofsubledgers.usingG/Ldata
Identifysavings,betterideas,andfraud
Fraudhasbeenthefocusandweshouldstilltestforit
Savingsincostrecoveriescannowbecomemoreofafocus
Betterideasleveragedthroughtechnology
Efficiency(tohelpafasterclose) Revenueandbusinessenhancement
KeyMantrasofG/L AnalyticAuditing CopyrightFraudResourceNet LLC
Polling Question 4 What ActiveData for Excel function allows for
the development of the account sequence: A.Summarize B.Stratify
C.Merge D.Top / Bottom Items 25. 6/18/2014 25
CopyrightFraudResourceNet LLC SimpleFraudVendorScoringAnalysis
HowItStarted Vendorsonreport1vs.report2ofduplicatepayments.
Duplicatetransactionspaidondifferentchecks.
Duplicatetransactionswithdebitamountsinthevendor account.
Vendorswithahighproportionofrounddollarpayments.
Invoicesthatareexactly10x,100xor1000xlargerthan anotherinvoice.
Paymentstoanyvendorthatexceedthetwelvemonth
averagepaymentstothatvendorbyaspecifiedpercentage
(i.e.,200%)or3xthestandarddeviationforthatvendor.
Vendorspaidwithahighproportionofmanualchecks. 49
CopyrightFraudResourceNet LLC TheSamplingProblem BottomLineNumbers
Moderntests(roundnumbers,duplicates,missingfields)
identifythousandsofsuspicioustransactions,usuallyabout1in
5ofalltransactionsgetaredflag Historicallyatleast0.02
0.03%ofalltransactionshavereal
problems,suchasarecoverableoverpayment
Soroughly0.00025/0.2=0.00125or1in800redflagsleadtoa realproblem.
Imaginethrowingarandomdartat800balloonshopingtohit therightone!!!
26. 6/18/2014 26 CopyrightFraudResourceNet LLC TransactionalScore
Benefits Thebestsampleitems(tomeetyourattributes)are
selectedbasedontheseveritygiventoeachattribute.
Inotherwords,errors,asyoudefinethem,canbe mathematicallycalculated.
Insteadofselectingsamplesfromreports,transactions
thatmeetmultiplereportattributesareselected(kill
morebirdswithonestone).Thereforea50unitsample canefficientlyaudit:
38duplicatepayments 22roundinvoices 18insequenceinvoices
.andtheyarethebestgiventheyare mathematicallythemostsevere. 51
CopyrightFraudResourceNet LLC PickItemsRarein SeveralWays
DontchoosejustANYweekendinvoice ChooseanUNUSUALweekendinvoice
Largeweekendinvoicesaretherarestkind(i.e.,
only2percentoflargeinvoices) Theoddsoffindingarecoverableerrorgoup
ANDsincetheinvoiceislarge,thevalue recoveredgoesuptoo! 27.
6/18/2014 27 CopyrightFraudResourceNet LLC Summarieson
VariousPerspectives 53 Summarizeby dimensions(andsub
dimension)topinpoint withinthecubethe crossoverbetweenthetop
scoredlocation,time,and placeoffraudbasedon thecombinedjudgmental
andstatisticalscore ALLTIESBACKTOTHE ORIGINALANALYTIC APPROACH
CopyrightFraudResourceNet LLC KeyControlReports &Scoring 28.
6/18/2014 28 CopyrightFraudResourceNet LLC CombiningtheScores
ACLCode CopyrightFraudResourceNet LLC UsingVlookupto CombineScores
Createarecordnumber RelatesheetsbasedonVLookup 29. 6/18/2014 29
CopyrightFraudResourceNet LLC ChartingtheScore
CopyrightFraudResourceNet LLC TransactionalScore
BenefitPatternsExample 58 30. 6/18/2014 30
CopyrightFraudResourceNet LLC GeoMapping MapPoint
CopyrightFraudResourceNet LLC Polling Question 5
Whatgraphisusedtomapvaluetoscoreforeasier selectionsofdatasubsets?
A. Pie B. Line C. Bar D. Scatter 31. 6/18/2014 31
CopyrightFraudResourceNet LLC FreeExcelDirectoryTool
Collectsallfileinformationbyfolder
Providesadditionalinformationonthe files Becareful
Cantake30minutestorun anentireharddrive
Usefultoidentifyfilesaccessedrecently
GreatforbackupsandcleanupsofHDs CopyrightFraudResourceNet LLC
Questions? Any Questions? Dont be Shy! 32. 6/18/2014 32
CopyrightFraudResourceNet LLC ComingUpNextMonth 1.
ThinkLikeaFraudstertoCatcha FraudsterJuly9,2014,1:00PM
2.SecretsofFindingFraudulent Documentation,July16,11:00AM
3.HowtoBuildFraudFocusedData AnalyticsIntoYourAudit&Risk
Assessment,July23,11:00AM CopyrightFraudResourceNet LLC
Thebestinformationnewsletter onfraudandwhitecollarcrimeis
nowavailableforfree! SignUpNow Pleasesharewithyournetwork!
WCCFighterNews Free 33. 6/18/2014 33 CopyrightFraudResourceNet LLC
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>>Professionallyproducedvideosby instructorswithover20years
experienceinACL,Excel,and more CopyrightFraudResourceNet LLC Thank
You! Website:http://www.fraudresourcenet.com JimKaplan
FraudResourceNet 8003851625 [email protected]
PeterGoldmann FraudResourceNet 8004402261
[email protected] RichLanza CashRecoveryPartners,LLC
Phone: 9737293944 [email protected]