Forensic Frontlines: data analysis tips and techniques to uncover fraud red flags.

• Author: Lopez, Brian Y.
• Position: Uncoveringfraud

forensic accounting has changed dramatically with the emergence of new technologies. Our digital society is producing more data and information per second data one could possibly fathom a few years back. However, with this ever-increasing amount of information, fraud has become increasingly difficult to detect.

Enter forensic data analysis.

What is Forensic Data Analysis?

In short, forensic data analysis is the process of taking disparate types of data collected and accumulated in the normal course of business, and running queries and comparisons on that information to help uncover fraud indicators. The key word here is disparate.

Forensic data analysis compares and analyzes different or disparate types of information in ways that aren't performed normally. For example, a business will collect and maintain accounts payable and payment information, such as a check register or disbursements ledger. Additionally, this business may have a building access system that contains a log of when employees access building entry points. If we were to take these two disparate sets of data the disbursements ledger and the building access log and compare them against each other we would be performing forensic data analysis.

Planning

The first step in forensic data analysis is establishing an execution plan, which starts by discussing the capabilities of such analysis with the appropriate parties involved. Some of the key capabilities to talk about include being able to:

* Analyze virally all types of financial and non-financial data.

* Analyze 100 percent of information rather than sampling.

* Assess and identify transactions or records of higher risk.

* Uncover additional areas for testing that would have otherwise gone unnoticed.

Once the capabilities are understood and it's determined that a forensic data analysis would be beneficial, a detailed scope can be formed. As with all forensic accounting engagements, things can change quickly depending on what is discovered in die analyses. Therefore, it's important to address die potential for an expansion in scope depending on the initial findings.

Identifying Risk

The next step is to focus and customize the analyses by identifying potential risks. Brainstorm with the members of your team or the appropriate parties regarding the types of fraud schemes that have affected or are affecting the company or its related industry, or are being investigated by the SEC, FBI and Department of Justice.

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