Which one is different data mining and forensic analytics

Which One is DifferentData Mining and Forensic AnalyticsBill Douglas

Cost Advisors’ Background

Founded in 1999

Mission: Improve our client’s business and the lives of our employees

Focus on Accounting Investigation and Forensics

Logo symbolizes partnership with our clients

© 2008 Cost Advisors, Inc. All rights reserved.

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Bill Douglas’ BackgroundPresident at Cost Advisors, Inc.

33 years experience

Management positions in Accounting, Sales, Marketing

CFO, IPO, 'Big 4' public accounting, business processes, recovery auditing, internal controls, fraud, internal auditing, Sarbanes-Oxley (SOX)

Financial project management at both large and small public companies

Volunteer Washington County Sheriff’s Dept. – Fraud Team

Frequent speaker and writer about Internal Controls, Fraud


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Bill Douglas’ Background

Credentials and memberships:OR, CA, WA Certified Public Accountant (CPA)

Certified Internal Auditor (CIA)

Certified Fraud Examiner (CFE)

Certified in Financial Forensics (CFF)

Certified IT Professional (CITP)

OR Licensed Private Investigator (PI)


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Northwest Fraud Investigators Association

MULTNOMAH BAR

ASSOCIATION (Affiliate Member)

http://www.oali.org/index.php

Agenda

1. Data Mining Examples

2. Data mining you can do in Excel


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1. Data Mining for Fraud


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What is CAATs?

Example #1 Accounting Queries

Example #2 Scanning Bank Statements

Example #3 Benford’s Law

What is CAATs?

Computer Assisted Audit Tools (CAATs)

Examine 100% of transactions

Analysis available:Duplicates

Missing Records

Queries (meeting certain criteria)

Population summaries by field (pivot tables)

Population statistics


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Data Sources

Import data from many sourcesExcel

Acrobat (.pdf)

Text Files (.txt, .doc)

Print files (.prn)

Hardcopy scans


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.PRN File


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Disbursements(Checks)

Vendor Master List

Employee Master List

Accounting System

Data Mining Tool



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Vendor Master List


Example #1 Six Accounting Queries


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Vendors with same address as employeeVendors using SS# as EIN

Payee not on Vendor List Non-payroll, non-expense report, payments to employees

Duplicate Payments

Employees with no address


Vendor Master List


Example #2One Set of Books?


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Victim’sAccounting System = Victim’s

Bank Statement

Data Extraction - Review


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Vendor Master List


Accounting System

Disbursements in Excel


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Example #2- Scanning Bank Statements


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=Electronic Comparison

Victim’sBank Statement

Disbursements(per Accounting

System)

Missing

Example #3 -Benford’s Law

Frank Benford (1938), Simon Newcomb (1881)

Some leading digits occur more/less frequently in most data


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1 2 3 4 5 6 7 8 90.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Probability

Leading Digit

Example #3 -Benford’s Law

Compares expected amounts to actual amounts

There were 1,368 occurrences of amounts beginning with $250


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Summary of CAATs

Data from any source

Every transaction can be tested (no sampling)

Many tests possible. Comparison examples:Within accounting files

Accounting records to bank statements

Actual records to expected values (Benford)


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Agenda

1. Data Mining Examples

2. Data mining you can do in Excel


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Goals and Assumptions

Do basic investigation yourself

1 hour spent here will save dozens (hundreds?) of hours at work

Assumptions:

Data is in Excel 2007 or 2010

Basic knowledge of Excel (info for advanced Excel too)


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Data Mining in ExcelData Filters

Empty data fields

Conditional formattingDuplicates

Comparing two Excel filesPayee not on vendor list

Pivot TablesHigh-dollar vendors

Missing checks

PowerPivot

Reporting


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Data Filters - Setting


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Data Filters - Blanks


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Data Filters - Others


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Data Filters - Suggestions


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Blank invoice numbers

Employees or vendors with no address

Vendors using a social security instead of EIN

Odd characters at the end of the invoice number or check number (“.” “–” “a”)

Invoice numbers 100, 101, 1000 or 1001

Data Filters - Clearing


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Empty data fields




Missing checks

PowerPivot

Reporting


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Conditional Formatting -


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Conditional Formatting with Data Filter


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Conditional Format & Filter - Result


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Conditional Format - Suggestions


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Look for duplicates of:

Invoice date

Invoice number

Invoice amount

Vendor name


Empty data fields




Missing checks

PowerPivot

Reporting


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Comparing Excel Files – First Sheet


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Comparing Excel Files – Second Sheet


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Comparing Excel Files – Result


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These vendors are missing from the vendor master list


Empty data fields




Missing checks

PowerPivot

Reporting


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Pivot Table – Largest Vendors (step 1)


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Pivot Table – Largest Vendors - Suggestions


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Look for unusual vendor names and names of employees (‘cash’, ‘petty cash’, <blanks>, ‘bank’, ‘credit card’, etc.)

Discuss vendor disbursement levels with management

Pivot Tables – Missing Check #s


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Empty data fields




Missing checks

PowerPivot

Reporting


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What is PowerPivot

From Microsoft for Office (Excel) 2010

It’s Free

FeaturesTurns Excel into a relational database

Compresses data

Speeds recalculation

(DAX Reporting tool)


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How to Get PowerPivot

64 bit Excel vs. 32 bit Excel


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Menu


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Normal Tabs

PowerPivot Tabs

Menu


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Normal Tabs

PowerPivot Tabs

Pivot Fields from Multiple Tabs (Tables)


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PowerPivot Compression, SpeedAccess Excel (native) PowerPivot

Compression 327MB 82MB 12MB

Recalculation ~ 30min < 30 seconds

Worksheet size ~ 2GB 1,048,576 rows Millions of rows~2GB


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Empty data fields




Missing checks

PowerPivot

Reporting


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Reporting – Set Print Area


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Reporting – Setup (Header)


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Reporting – Setup (Footer)


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Reporting – Setup (Result)


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Reporting - Duplicating Tabs


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Reporting – Removing Meta Data


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Reporting – encrypting for sending


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Be sure to save the workbook with a new name - append

“(encrypted)” to the filename

For More Information

Cost Advisors, Inc.

503-704-3719

www.costadvisors.com

Download: ‘Embezzlement Response Guide’


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http://www.costadvisors.com/

Documents

Which one is different data mining and forensic analytics