Fraud & Technology

     Fighting Fraud with Technology




The Weakest Link in Information Security


November 2007: Businesses spend a significant portion of their annual information technology budgets on high-tech computer security. But the firewalls, vaults, bunkers, locks and biometrics those dollars buy can be pierced by attackers targeting untrained, uninformed or unmonitored users. (Read more...)


Video Surveillance in the Fight Against Bank Fraud


SEPTEMBER 2007: Fraud and other illegal activities are cause for major concern at all banks, and Israel's Bank Hapoalim is no exception. Identity theft and on-premises holdups are some of the more prominent crimes that come to mind when we think about threats, but smaller petty crimes often are more common and can have a surprisingly significant impact not only on a bank's bottom line but on its reputation as well. (Read more...)

A Risk-Based Approach to Journal Entry Testing

JULY 2007: How software can help auditors detect fraud


An effective system of internal control will help prevent material misstatements, whether due to error or fraud, from occurring in a company’s financial statements. Much recent work has gone into ensuring that controls are in place, documented and tested to provide evidence that they are designed and operating effectively. However, all this work is for naught if employees are able to circumvent the control structure. A recent study by the Association of Certified Fraud Examiners (ACFE) documented the limitations of internal controls for fraud detection when it found that internal controls were not the first but the fourth most common way to detect fraud. (Read more...)

Flexing Your Super Financial Sleuth Power

JUNE 2007: Worldwide fraud is on the rise. The magnitude of the problem prompted the AICPA and the Association of Certified Fraud Examiners to create the Institute for Fraud Prevention. To assist in detecting fraud, auditors need to employ innovative techniques like Benford’s law, which predicts the frequency of digits 1 through 9 in the first four places of any number. (Read more...)


Technology's Role in Accounts Payable Fraud Prevention


June 2007: Without a doubt technology plays a huge role in preventing accounts payable fraud. Technology and automation take the slack out of manual processing, making it possible for an invoice to be processed in a fraction of the time. Not only does automation increase throughput, but it makes it more difficult for crooks, who rely on inefficient processes, to sneak fraudulent invoices through. (Read more...)


Continuous Fraud Monitoring: A Real-Time Solution to a Real Problem?


JUNE 2007: Imagine how valuable your advice would be if you could save clients the 5 percent of their annual revenue that is now leaking unseen out of their organization, reduce their Sarbanes-Oxley compliance costs and enhance the reliability of their financial reports. That’s the promise of the latest information technology-driven business process, Continuous Fraud Monitoring (CFM).


In this article, posted with permission from Consulting magazine, Tom Aleman and Samir Hans, a principal and senior manager, respectively, in the Analytic & Forensic Technology practice of Deloitte Financial Advisory Services LLP, discuss how organizations with high transaction volume may be able to use CFM to identify fraud proactively and slash the time between when fraud is committed and when it is detected, with a view to improving their accounting processes and enhancing the integrity of their financial reports. (Read more...)

Continuous fraud control

APRIL 2007: With five per cent of turnover being lost every year to fraud1, it is no surprise that today’s enterprises are particularly keen to implement both tighter strategies and new technologies that aim to reduce revenue leakage. But viewed in a wider organisational context, can fraud prevention be much more than simply curbing an unnecessary loss of funds?


The short answer, I believe, is ‘yes’. Reducing financial risk can have a very clear impact on corporate governance, and here’s my argument. (Read more...)


How retailers can get the most from forensic data analysis


JANUARY 2007: Properly designed and deployed, forensic data analysis is a powerful, practical tool to address fraud and misconduct in retail enterprises of all kinds and sizes. (Read more...)





Click...and the Database Loads Into Excel


SEPTEMBER 2006: If you’re like most CPAs, you’re more proficient with an Excel spreadsheet than a database. So when you’re faced with the challenge of analyzing database information, you probably reluctantly bite the bullet and go through the tortuous steps of converting and importing it into Excel. Say good-bye to all that. We’ll show you how to do the whole job with just a single mouse click. (Read more...)


Data Mining 101: Tools and Techniques


AUGUST 2006: Understanding the advantages of using different data mining tools and techniques — and knowing what data mining does — can help beginner auditors provide recommendations that improve business processes and discover fraud.


Most internal auditors, especially those working in customer-focused industries, are aware of data mining and what it can do for an organization — reduce the cost of acquiring new customers and improve the sales rate of new products and services. However, whether you are a beginner internal auditor or a seasoned veteran looking for a refresher, gaining a clear understanding of what data mining does and the different data mining tools and techniques available for use can improve audit activities and business operations across the board. (Read more...)




Fraud and artificial intelligence: new machine-learning technology may help businesses detect suspicious activity and mitigate the risk of fraudulent transactions


FEBRUARY 2005: COMPUTER AUDIT TOOLS HAVE been used for years to detect and investigate fraudulent behavior, but can technology enable auditors to stop fraud before it actually takes place? It might sound like science fiction, but a UK start-up company says its tools, based on artificial intelligence techniques, can do just that. (Read more...)


Digging for golden evidence


Data mining: a tool for all fraud examiners


Business or nonprofit databases can be minimal in size or grow to several terabytes. Any of these data sources may hold hidden yet vital information you may be seeking during a fraud examination. No matter your background you can become skilled at data mining. In fact, it''s no longer an optional skill set.

Data mining has also been called database reporting, data analysis, and other similar names but generally can be defined as "the automated extraction of hidden predictive information from databases." The tools discussed here will assist with automated extraction. (Read more...)



Setting a Process To Proactively Detect Fraud Using Technology


2005: Fraud is an elusive enemy in that it is a human nature issue. Therefore, as quickly we can build a person-trap to catch a particular fraudster, just as quickly will the person find a new means to extract funds from a company. While this may be a defeatist attitude, I consider it more of a realistic situation assessment. Also, by admitting that technology alone will not stop fraud, it begins us down the road to better detecting it at organizations. Technology needs to be paired with the human mind to make a new form, a bionic one, that stands the best chance to detecting fraud in organizations. (Read more...)




Data mining, "The DNA of a forensic accountant"


2004: Every organization employs a fraudster performing his devious deeds as you are reading this article. Even in those companies where the management believes their organization to be "99 and 44/100 % pure", just like the old Ivory Soap commercials, this still means that for an organization with 1,000 employees, there are at least five of them running around trying to wreck the company. Most would agree – that's five people too many. Fortunately, there is an efficient mechanism to both detect and deter fraud which is the subject of this article… Data Mining. (Read more...)


How to Use a New Computer Audit Fraud Prevention and Detection Tool

2004: While occupational fraud takes various forms, the result is always the same: the numbers generated by fraud cannot hold up to the unfailing logic of the accounting equation. If executives add false sales and accounts receivable to increase the organization's revenue, profits and cash will be out of kilter. The advancement of technology has allowed for this "accounting equation" to be systematized into computer logic and applied to company data.1 Results of this logic could take the form of a simple matching of the human resource file to the accounts payable vendor master file. On the other side of the coin, it could be an advanced neural network application focused on detecting money laundering schemes. (Read more...)





Back from the shred


NOVEMBER 2003: The term "shred of evidence" may soon take on a new meaning for forensic accountants. That's because Houston-based ChurchStreet Technology has developed a method of reconstructing shredded documents electronically, offering a speedier alternative to the laborious task of searching, matching and pasting strips manually. (Read more...)


Using Software to Sniff Out Fraud

SEPTEMBER 2003: In the 1920s, Frank Benford, a physicist at General Electric (GE), discovered an astonishing mathematical law: In just about any given set of numerical data, numbers occur as the first or second digit at a predictable rate. For example, "1" will appear as the first digit 31% of the time, but "9" will appear first only 5%. While that sounds unlikely, Benford tested lists of numbers from many different sources -- accounting ledgers, geographic data, even magazine articles -- and found that the same probability persisted.


Applied to accounting, Benford's Law makes for a great way to check to see if numbers are fabricated (since when liars make up figures, they usually don't follow the same statistical pattern Benford identified). The law is now enjoying booming popularity as the basis for a fairly easy, routine test that's used to uncover accounting fraud. Easy, that is, if you have a sophisticated software package and enough high-powered computers to crunch numbers from reams of documents. (Read more...)


Turn Excel Into a Financial Sleuth


AUGUST 2003: One of our small business clients—we’ll call him Bob—recently expanded his one-store, family-run retail operation into a four-store chain. As many small business owners have to do, Bob had to relinquish some hands-on control when his business grew. He had to hire new employees for each store, and he worried about the possibility of bookkeeping errors and, even worse, fraud.


We suggested running a digital-analysis process based on Benford’s Law, which can detect irregularities in large data sets. We told Bob he didn’t need to buy any special software to use the process, and that with a few modifications, Excel could do the job. (Read more...)


The brain gain


Advanced knowledge-based systems can be a valuable weapon in the fight against fraud


AUGUST 2003: Forensic accountants and auditors no longer have to rely solely on their own experience to detect fraud or internal control weaknesses. Huge strides have been made over the past decade in advanced knowledge-based systems (KBS), which use data mining to unearth patterns and trends that might otherwise escape detection. In that way, they can contribute to an organization's overall risk management strategy. (Read more...)


Incident response and fraud investigation – the role of the information technology auditor


MAY 2003: Information systems can both facilitate and detect fraud. The increasing accessibility of information systems to employees, business partners and customers, from both inside and outside the organization, heightens the vulnerability of the systems to attack and the potential for theft or misuse of confidential data.


All IT-related frauds start as an IT incident, which is an IT event that disrupts the day-to-day IT processing. Incident response is the first step: determine what happened, decide what to do about it and determine whether the incident is fraud related. If so, the next step involves computer forensics: the means by which an incident investigator retrieves and assembles evidence about a computer crime. This article discusses incident response issues and then provides detailed guidance on the role of information technology in fraud response, investigation, analysis, and prevention. (Read more...)

MARCH 2003: There are several software programs that can help you provide the added assurance demanded by officers and directors


The Sarbanes-Oxley Act, which is mirrored in Canada with the CICA's proposed new independence rules, has changed the way we practise.


"To protect investors by improving the accuracy and reliability of corporate disclosures"

The Sarbanes-Oxley Act of 2002


Top executive responsibility has been increased. The audit committee and board of directors are demanding more assurance from the internal auditor, external auditor and accounting department.


Moreover, new restrictions have been placed on external auditors of publicly listed companies, which leave the internal auditors and accountants to fend for themselves. How do you respond?


Fortunately, there are several easy-to-use software programs that can greatly assist in providing the added assurance demanded by officers and directors, not to mention shareholders. (Read more...)