=largest divided by second largest small set of high-risk transactions relative size is an...

CHAPTER 11

=Largest divided by second largest

Small set of high-risk transactions

Relative Size is an error-detecting test

Access or Excel

Prepared by:Mark J. Nigrini

Copyright © 2012 by Mark J. Nigrini. All rights reserved.

INTRODUCTION

Company wired $600,000 to a charity

Usual amount was $3,000 The wire was 200x larger than

normal RSF takes largest divided by 2nd

largest Identifies the abnormally high

amounts Small sample of high-risk

transactions

RSF FORMULA

EXAMPLE RESULT

FINDINGS

Decimal point error, $320000 > $3200.00

High risk when subset has many records

Errors in perpetual inventory records Insurance claims approved by

adjusters Health care payments to providers Beverage sales by an airline Sales prices of a sportswear

manufacturer

LOGIC UNDERLYING THE TEST

ACCESS STEP 3

ACCESS STEP 4

ACCESS STEP 7

ACCESS STEP 10

ACCESS RESULTS

ACCESS DRILL DOWN

RSF: EXCEL

RSF: EXCEL

RSF: EXCEL

EXCEL RESULTS

RSF SUMMARY

Test aimed at detecting errors and fraud Tests gives a small set of high-risk

transactions Formula: Largest ÷ second largest Based on company wiring $600,000 to a

charity This is a reasonableness test Finds the decimal point error Useful for audits of health care claims Somewhat complex Access or Excel routines