Accountants Increasingly Use Data Analysis to Catch Fraud

When a team of forensic accountants began sifting through refunds issued by a national call center…

Georgia (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.

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http://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 more than 150 undergraduate, graduate and doctoral degrees to its approximately 41,000 students. With 11 colleges on two metro Atlanta campuses, Kennesaw State is a member of the University System of Georgia and the third-largest university in the state. The university’s vibrant campus culture, diverse population, strong global ties and entrepreneurial spirit draw students from throughout the region and from 92 countries across the globe. 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, and one of the 50 largest public institutions in the country. For more information, visit kennesaw.edu

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