Professional Documents
Culture Documents
Proactive
Approaches to
Detecting Fraud
CHAPTER 6
Learning Objectives
1. Explain the importance of proactive
fraud detection.
Investigation
Preceded by Detection
Proving a Fraud
Answers the Questions: How? Who? Why?
What? Where? When a fraud took place?
Explain Data-Mining as a
Means of Detecting Fraud.
ACL- Audit Command Language
Looking for Anomalies in
Databases
Difficulty Because ACLs Are
Limited in What They Can Handle
The Result Is They May Identify
Thousands of Symptoms
Because of Their Limitations
Review How Benfords Law
Works.
Not Precise
Broad Identification of
Symptoms
Effects Investor
Source General or Creditor
Documents Ledger Decisions
Analysis Summar-
ized
What Effect Does the Size of
the Fraud Have on the F/S?
Small Large
frauds are frauds effect
unlikely to affect F/S, detected
F/S, usually during analysis of
detected when unexplained
examining source changes in
documents F/S
Explain How Revenue Affects
the Companys Accounts.
Accounts
Receivable
If Sales
Revenue
Increase Inventory
Cost of Then
Goods
Sold
How Can You Convert Balance
Sheets & Income Statements to
Change Statements?
Perform Perform
Horizontal Vertical
Analysis Analysis
Match Ratio to Name.
Current CA Inventory
Average A/R
Days in Accounts/Receivable
Inventory Total Assets
Match Ratio to Name.
Sales Sales
Return Ave. Property Plant
Percent & Equipment
Match Ratio to Name.
An Income Statement
A Balance Sheet
Describe How to Perform
Horizontal Analysis on:
An Income Statement
A Balance Sheet
What Questions Should Asked
When Using a Statement of
Cash Flows to Detect Fraud?
Are there any
unexpected
changes in cash?
Did A/R go up or
down? Why?
Why did inventory
go up or down?
Statement of Cash Flows
From
From Earnings From Borrowings
Investments and Stock Issuances
Cash Flows
Cash Balance
Cash Flows
Dividends
To Operations