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Fighting Fraud with Data Mining Techniques
Audimation Services, Inc.Carolyn J. Newman, CPA, CISA
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
v.v.
Data Mining Defined
Data mining is the analysis of data with the intent to discover gems of hidden information in the vast quantity of data that has been captured in the normal course of running the business.
Most commonly used:
Customer Relationship ManagementFraud Detection and Prevention
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Three Key Terms
Discover
Extract
Gems
Evidence
Relationships
Patterns
Customer Relationship Management
Fraud Detection and Prevention
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Important GAO Report
Discover
Extract
Hidden
Hiding
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Searchingfor Text
in MultipleFields
and Files
Testing for Completeness –
Gaps & Duplicates
Cross Matching Data
BetweenFiles/Systems
Main Areas for IDEA Use in Data Mining to Detect Fraud
IdentifyingExceptional
Items
Checking Calculations
Analytical Review
IDEA ®
Data Analysis Software
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Potential IDEA Use in anAP Fraud Examination
Test 1 Test 2 Test 3 Test 4
Match payments against authorized suppliers list
Match vendor bank account numbers to employee bank account numbers
Match suppliers against employee surnames
Match delivery addresses to employee addresses
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Test 5 Test 6 Test 7 Test 8
Identify large variances from prior years
Potential IDEA Use in anAP Fraud Examination
Test for duplicate invoices
Test for duplicate payments
Identify gaps in check sequences
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Test 9 Test 10 Test 11 Test 12
Examine amounts at or just below break points
Potential IDEA Use in anAP Fraud Examination
Identify split invoices
Test for large discounts
Stratify payments and examine all large amounts
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Test 13 Test 14
Analyze days to pay and identify suppliers with wide variance from average
Potential IDEA Use in anAP Fraud Examination
Identify exceptional transactions–Extract certain payees–Extract all round $1000 payments–Extract payments authorized by a certain
individual–Extract all payments on a Sunday–Extract all payments prior to invoice date
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
IDEA’s New Smart Analyzers
Smart Analyzer Complete includes tests for General Ledger, Accounts Receivable and Accounts Payable
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Report Mining - a Low-cost and High-impact Alternative
USERS OF INFORMATION
OPERATIONAL DATA
Report Mining Tools (IDEA)
Report Generators
HardcopyReports
Data Mining Tools
Data Warehouse
Data Mining Tools
Report Generators
ReportFiles
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Report Mining - Characteristics
Your Text hereYour Text here
Existing reports already contain meta data, data and business rules (and extract parameters)
Existing reports already contain meta data, data and business rules (and extract parameters)
Your Text hereYour Text here
Instead of mining data in the database, mining data contained in electronic copies of existing reports
Instead of mining data in the database, mining data contained in electronic copies of existing reports
TitleTitleReport Mining No restructuring is necessary
No restructuring is necessary
Compatibility across computing environments
Compatibility across computing environments
No access to data necessary (or implied)
No access to data necessary (or implied)
No impact on production environment
No impact on production environment
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Auditor’s Challenge
Maximize Productivity
Enhance Image of Auditing
Add Client Value
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Become “Value Added”
Provide clients with better business advice
Provide additional services to new or existing customers
Reduce the client burden from auditors using technical resources to access data and generate desired reports
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
Enhance Your Image
Perform analysis on data from remote locations, without travel, and possibly prior to any on-site work – reduce time in the field
Focus on areas where the greatest risks are noted
Generate more specific questions and become a creative problem solver
Backup findings will be backed up with detail
IS - Prepare reports in a very short period of time and provide innovative solutions to better serve end users
Enhance your reputation and differentiate yourself from the competition
© Audimation Services, Inc.
“The experts in IDEA Data Analysis Software”
For more information about IDEA Data Analysis Software
visit us on the web atwww.audimation.com
Presenter:Carolyn J. Newman, CPA, CISA
