Using Data Analytics to Detect Fraud · Using Data Analytics to Detect Fraud ... Fuzzy Logic Matching ... Application: Fuzzy Logic Excel ACL IDEA Normalize,

© 2018 Association of Certified Fraud Examiners, Inc.

Using Data Analytics to

Detect Fraud

Fundamental Data Analysis Techniques

© 2018 Association of Certified Fraud Examiners, Inc. 2 of 27

Introduction

▪ In determining types of tests to run, consider:

• The particular fraud risks that are present

• The data available to work with

• The type of predication that exists

▪ Often, techniques are most effective when

used in combination.


Aging

▪ Analyzing data

based on date

▪ Useful in

examining:

• Accounts

receivable

• Customer

payments

• Accounts payable

• Vendor payments


Application: Aging

Excel ACL IDEA

▪ Date-based

subtraction

▪ Function

• AGE()

▪ Command• AGE

▪ Functions

• @Age()

• @AgeDateTime()

• @AgeTime()

▪ Command

• Aging


Applying Filters

▪ Identifies only those

records meeting user-

defined criteria

▪ Used to extract

transactions outside of

expected norm

▪ Can further filter or

analyze results using

additional analysis

techniques


Application: Filters

Excel ACL IDEA

▪ Advanced filter

▪ Meta-tagging

▪ Filter bar

▪ IF statements

▪ Criteria


Benchmarking

▪ Comparing a

company’s processes

or performance metrics

to:

• Competitors

• Industry standards

• Historical data

• Budgeted data


Application: Benchmarking

Excel

▪ Conditional Formatting

▪ Charts

▪ PivotChart


Compliance Verification

▪ Determines whether

employee

transactions comply

with company policies

▪ Useful in identifying

whether a company

policy needs to be

either revised or

reinforced


Application: Compliance Verification

Excel ACL IDEA

▪ IF()

▪ IFError()

▪ Expression with

conditions

▪ @If()

▪ @CompIf()


Duplicate Testing

▪ Identifies transactions with duplicate values

in specified fields:

• Check numbers

• Invoice numbers

• Government identification numbers (e.g., Social

Security numbers)

• Employee or vendor addresses


Application: Duplicates

Excel ACL IDEA

▪ COUNTIF()

▪ COUNTIFS()

▪ DUPLICATES

command

▪ Duplicate Key

Detection

command

▪ Duplicate Key

Exclusion

command


Expressions and Equations

▪ Build expressions or equations based on

knowledge and expectations of what should

be in the data:

• Recomputing net payroll amounts based on gross

pay, taxes, and other deductions

• Recalculating amounts charged on invoices based

on unit price and quantity ordered


Frequently Used Values

▪ Identifying values

that occur with

unexpected

frequency

▪ Red flag of fictitious

transactions


Application: Frequently Used Values

Excel ACL IDEA

▪ COUNTIF()

▪ COUNTIFS()

▪ Benford’s Law

command

▪ Summarize

command

▪ Benford’s Law

command

▪ Summarization

command


Fuzzy Logic Matching

▪ Identifies records with similar or potentially

duplicate—though not identical—values:

• First Street, First St., 1st Street, 1st St.

▪ Helps detect fraud in “gray areas” by

reviewing various iterations of data

▪ Can produce an increased number of false

positives


Application: Fuzzy Logic

Excel ACL IDEA

▪ Normalize,

then compare

▪ Fuzzy Duplicates

command

▪ Normalize, then

compare

▪ Duplicate Key

Fuzzy command

▪ Normalize, then

compare


Gap Tests

▪ Search for missing items in a series or

sequence of consecutive numbers:

• Check numbers

• Invoice numbers

• Purchase order numbers

• Inventory tags

▪ Search for sequences where none are

expected:

• Social Security numbers


Application: Gaps

Excel ACL IDEA

▪ Sort, then value

comparison

using IF()

▪ GAPS command ▪ Gap Detection

command


Graphing

▪ Provides a visual

representation of the

data and can

highlight patterns or

anomalies that might

indicate areas for

further examination


Identifying Amounts Below a Threshold

▪ Search for patterns

of transactions that

fall just below

approval or review

thresholds.


Application: Thresholds

Excel ACL IDEA

▪ Value

comparison

using IF()

▪ BETWEEN()

function

▪ Value comparison

using <, >

▪ @Between()

function


using <, >


Identifying Unusual Dates and Times

▪ Identifies

transactions that

occur during non-

business hours or

employee

vacations


Application: Unusual Dates and Times

Excel ACL IDEA

▪ Value

comparison

using IF()

▪ NOT BETWEEN()

function


using <, >

▪ .NOT. @BetweenDate()

function

▪ .NOT. @BetweenTime()

function

▪ Value comparison using

<, >


Join/Relate

▪ Combines specified fields from two different

files into a single file using key fields

▪ Looks for matches or discrepancies between

the files


Application: Join/Relate

Excel ACL IDEA

▪ VLOOKUP()

▪ HLOOKUP()

▪ INDEX()

▪ JOIN command

▪ RELATE command

▪ Join command

▪ Visual Connector

command


Pivot Tables

▪ Interactive data summarization tool used to

sort, count, total, or give the average of

specified data in a spreadsheet

▪ Can perform the filter and sort functions

within the pivot table

▪ Helpful way to see the “big picture” of the

data


Application: Pivot Tables

Excel ACL IDEA

▪ PivotTable

▪ PowerPivot

▪ Cross-Tabulate

command

▪ Pivot Table

command


Round-Dollar Payments

▪ Most real-world cash

transactions do not

occur in simple round

numbers.

▪ Unusual amounts or

regular occurrences

of round-dollar

payments can be red

flags of fraud.


Application: Round-Dollar Payments

Excel ACL IDEA

▪ MOD() ▪ MOD() function

▪ FIND() function

▪ @IsInI function


Sort/Index

▪ Arranges the data in

ascending or

descending order

based on one or

more specified key

field(s)

• Alphabetically

• Numerically

• Chronologically


Stratification

Invoice amount Count Percent of total Total amount

Less than $1,000 87 10.5% $ 66,078.24

$1,001–$5,000 196 23.6% $ 782,089.00

$5,001–$10,000 359 43.2% $ 2,515,940.21

$10,001–$20,000 102 12.3% $ 1,427,527.74

$20,001–$50,000 68 8.2% $ 2,022,600.16

Over $50,000 19 2.3% $ 1,298,874.96

Total: 831 100% $ 8,113,110.31


Application: Stratification

Excel ACL IDEA

▪ SUMIFS() and

COUNTIFS()

▪ STRATIFY

command

▪ Stratification

command


Summarization

▪ Counting the number of records with

common values within a specified field

State Count

Texas 704

Florida 362

Georgia 12

New Hampshire 1

Virginia 7

Total: 1,086


Application: Summarization

Excel ACL IDEA

▪ SUMIFS() and

COUNTIFS()

▪ SUMMARIZE

command

▪ CLASSIFY

command

▪ Summarization

command

Documents

Using Data Analytics to Detect Fraud · Using Data Analytics to Detect Fraud ... Fuzzy Logic Matching ... Application: Fuzzy Logic Excel ACL IDEA Normalize,