Accountants Increasingly Use Data Analysis to Catch Fraud
When a team of forensic accountants began sifting through refunds issued by a national
(Dec 8, 2014) — When a team of forensic accountants began sifting through refunds issued by a national
call center, something didn’t add up: There were too many fours in the data. And it
was up to the accountants to figure out why.
Link To Articlehttp://www.wsj.com/articles/accountants-increasingly-use-data-analysis-to-catch-fraud-1417804886
Until recently, such a subtle anomaly might have slipped by unnoticed. But with employee
fraud costing the country an estimated $300 billion a year, forensic accountants are
increasingly wielding mathematical weapons to catch cheats.
“The future of forensic accounting lies in data analytics,” said Timothy Hedley, a fraud expert at KPMG, the firm that did the call-center audit.
In the curious case of the call centers, several hundred operators across the country
were authorized to issue refunds up to $50; anything larger required the permission
of a supervisor. Each operator had processed more than 10,000 refunds over several
years. With so much money going out the door, there was opportunity for theft, and
KPMG decided to check the validity of the payments with a test called Benford’s Law.
Getting the accounting profession to adopt Benford’s Law and similar tests has been
a slow process, but Mr. Nigrini has spent two decades inculcating Benford’s Lawin
the accounting and auditing community, promoting it through articles, books and lectures.
“It has the potential to add some big-time value,” said Kurt Schulzke, an accounting professor at Kennesaw State University in Georgia. “There has not been much innovation in the auditing profession in a long
time, partly because they have ignored mathematics.”
A leader in innovative teaching and learning, Kennesaw State University offers undergraduate, graduate and doctoral degrees to its nearly 43,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the country and the world. Kennesaw State is a Carnegie-designated doctoral research institution (R2), placing it among an elite group of only 6 percent of U.S. colleges and universities with an R1 or R2 status. For more information, visit kennesaw.edu.