Fraud Detection and Prevention Techniques Using Excel

"Fraud Detection and
Prevention Techniques
Using Excel"
May 8, 2013
Special Guest Panelist:
Charlie Walker

Reinvent Data Limited

Copyright © 2013 FraudResourceNet LLC

About Peter Goldmann, MSc., CFE
 President and Founder of White

Collar Crime 101
 Publisher of White-Collar Crime Fighter
 Developer of FraudAware® anti-fraud

training courses
 Monthly columnist, The Fraud
Examiner, ACFE Newsletter

 Member of Editorial Advisory

Board, ACFE
 Author of Fraud in the Markets,
published by Wiley; available at
Amazon.com)


About Jim Kaplan, CIA, CFE
 President and Founder
of AuditNet®, the global
resource for auditors
 Auditor, Author, Web
Site Guru, Internet for
Auditors Pioneer
 Recipient of the IIA’s
2007 Bradford Cadmus
Memorial Award.


Charlie Walker

 Managing Director at

 Chartered Accountant and

Excel expert
 Creator of TopCAATs, an

Excel based CAATs package
 Author of “The Ultimate

Guide to Auditing with Excel”


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5

Today’s Agenda






Introduction
Fraud Statistics
Auditor’s Role in Fraud Detection
Principles of Data Analytics
Why Excel
Getting Started (including 30 tests to try
out)
 Going Forward
 Questions & Answers

Fraud: The Big Picture
According to major accounting firms, professional fraud examiners
and law enforcement:

 Fraud costs the world $3.5 TRILLION per year. (5%) (ACFE)
 Business losses due to fraud increased 20% in last 12 months, from
$1.4 million to $1.7 million per billion dollars of sales. (Kroll 2010/2011
Global Fraud Report)
 75% of the companies surveyed experienced at least one incident of
fraud in the last 12 months (KPMG)
 Average cost for each incident of fraud is $160K (ACFE)
 Skimming is 4th most common internal fraud; $60K per incident
 Larceny is 5th most common internal fraud; $100K per incident
 Approximately 60% of corporate fraud committed by insiders (PwC)

The Auditor’s Role

IPPF Standard 1210.A3
 Internal auditors must have
sufficient knowledge of…available
technology based audit techniques
to perform their assigned work


IIA Guidance – GTAG 13
Internal auditors require appropriate
skills and should use available
technological tools to help them
maintain a successful fraud
management program that covers
prevention, detection, and
investigation. As such, all audit
professionals — not just IT audit
specialists — are expected to be
increasingly proficient in areas such as
data analysis and the use of
technology to help them meet the
demands of the job.


Professional Guidance


Principles of Data Analytics to
Detect Fraud
 Using set rules to identify transactions of
higher risk
 Every company is different, has a different
environment, different systems, different
risks, etc.
 Need to use judgment to select testing
 Need to use judgment to evaluate results
 Just because a transaction matches a red
flag doesn’t mean fraud is present
 Using data analytics does not guarantee
finding fraud or finding all fraud!

Why Excel
 You’ve already got it
installed
 You’re already using it on a
daily basis
 It’s easy to get started with
the basics
 There’s a huge amount you
can do as your skills develop
 Skills learned here can be
carried forward

Polling Question 1


Limitations of Excel





Requires manual formula entry
Often many steps involved
Restricted file sizes
Not really designed for this type of work


Key Excel Features

 AutoFilters
 Pivot Tables
 IF Formulas
 VLookUp


Getting Started
 Start with the easy stuff – no
point trying to run before you
can walk!
 Have a well thought out plan
 Invest time in getting the right
data in the right format
 Remember to save regularly
 Just do it – what’s the worst
that can happen?


Polling Question 2


The Data Analytics Cycle

Plan your
testing

Request
Data

Review

Continual
Learning
Evaluate
and Follow
up

Obtain and
Clean Data

Carry out
testing


Getting the data

 Speak to IT departments not just process
owners
 Flat files (e.g. “.csv”) are best
 Be specific– the more information you can
provide the better


Accounts Payable Testing











Duplicate Vendors
Vendor – Employee Relationships
Split transactions
Transactions posted on unusual days/dates/times
Invoice date before purchase order date
Rounded transactions
Potential Related Parties
Reversing changes to standing data
Benford’s Testing
Summarize transactions by user

Polling Question 3


PCards and TCards











Transactions at foreign merchants
Split transactions
Purchases on weekends/holidays
Multiple cards per cardholder
Inappropriate vendor transactions
Top Cost Centers/Card Holders
Monthly limit exceeded
Duplicate Claims
Transactions just below authorization limits
Round Amounts


Payroll Testing

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
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
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

Duplicate or “ghost” employees
Duplicate payments
Excessive payments
Employees paid after termination
Unauthorized overtime
Leave never taken
Non Consecutive leave
Only person working overtime
Still in work not claiming overtime
Cancelled and re-issued checks


Polling Question 4


Going Forward







Build up a regular “Test set”
Don’t be afraid to experiment
Share ideas
Internally – resource library, regular meetings
Externally – forums, webinars, LinkedIn
Upgrade from Excel to dedicated CAATs
software – many of your skills will be
transferable


TopCAATs
 Suite of over 130 tools for Auditors and
Accountants
 Runs completely within Excel
 Mixture of data analytics and Excel productivity
tools
 Allows wider variety of work/testing and greatly
improves efficiency


Polling Question 5


10 Excel Resources for Auditors
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Auditing with Excel book – www.auditingwithexcel.com/auditnet
Evaluating CAATs report – www.topcaats.com/auditnet
TopCAATs – www.topcaats.com
ActiveData for Excel http://www.mrexcel.com/auditors.shtml
Using Excel as an Audit Software available eBook from AuditNet
Using Excel to Detect Fraud (e-book).
Excel for Auditors by Bill Jelen
Fraud Detection with ActiveData For Excel
Using Excel to Ferret Out Fraud
Find Financial Fraud Using Benford’s Law


Questions?
 Any Questions?
Don’t be Shy!


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2013 Fraud Detection Techniques Using Technology
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Coming Soon…

 “Fraudulent Documentation:
Fraudsters’ Secret Weapon ... How
to Disarm Them”, May 29
“An Expert’s Advice on Establishing
an Organization Wide Fraud Policy”,
June 5


Thank You!
Website: http://www.fraudresourcenet.com
Jim Kaplan
FraudResourceNet™
800-385-1625
jkaplan@fraudresourcenet.com
Peter Goldmann
FraudResourceNet™
800-440-2261
pgoldmann@fraudresourcenet.com
Charlie Walker, ACA
www.reinventdata.com
Charlie.walker@reinventdata.com

Fraud Detection and Prevention Techniques Using Excel

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