which one is different data mining and forensic analytics
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Which One is DifferentData Mining and Forensic AnalyticsBill Douglas
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Cost Advisors’ Background
Founded in 1999
Mission: Improve our client’s business and the lives of our employees
Focus on Accounting Investigation and Forensics
Logo symbolizes partnership with our clients
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Bill Douglas’ BackgroundPresident at Cost Advisors, Inc.
33 years experience
Management positions in Accounting, Sales, Marketing
CFO, IPO, 'Big 4' public accounting, business processes, recovery auditing, internal controls, fraud, internal auditing, Sarbanes-Oxley (SOX)
Financial project management at both large and small public companies
Volunteer Washington County Sheriff’s Dept. – Fraud Team
Frequent speaker and writer about Internal Controls, Fraud
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Bill Douglas’ Background
Credentials and memberships:OR, CA, WA Certified Public Accountant (CPA)
Certified Internal Auditor (CIA)
Certified Fraud Examiner (CFE)
Certified in Financial Forensics (CFF)
Certified IT Professional (CITP)
OR Licensed Private Investigator (PI)
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Northwest Fraud Investigators Association
MULTNOMAH BAR
ASSOCIATION (Affiliate Member)
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Agenda
1. Data Mining Examples
2. Data mining you can do in Excel
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1. Data Mining for Fraud
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What is CAATs?
Example #1 Accounting Queries
Example #2 Scanning Bank Statements
Example #3 Benford’s Law
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What is CAATs?
Computer Assisted Audit Tools (CAATs)
Examine 100% of transactions
Analysis available:Duplicates
Missing Records
Queries (meeting certain criteria)
Population summaries by field (pivot tables)
Population statistics
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Data Sources
Import data from many sourcesExcel
Acrobat (.pdf)
Text Files (.txt, .doc)
Print files (.prn)
Hardcopy scans
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.PRN File
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Example #1 Accounting Queries
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Disbursements(Checks)
Vendor Master List
Employee Master List
Accounting System
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Data Mining Tool
Example #1 Accounting Queries
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Disbursements(Checks)
Vendor Master List
Employee Master List
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Example #1 Six Accounting Queries
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Vendors with same address as employeeVendors using SS# as EIN
Payee not on Vendor List Non-payroll, non-expense report, payments to employees
Duplicate Payments
Employees with no address
Disbursements(Checks)
Vendor Master List
Employee Master List
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Example #2One Set of Books?
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Victim’sAccounting System = Victim’s
Bank Statement
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Data Extraction - Review
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Disbursements(Checks)
Vendor Master List
Employee Master List
Accounting System
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Disbursements in Excel
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Disbursements(Checks)
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Example #2- Scanning Bank Statements
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=Electronic Comparison
Victim’sBank Statement
Disbursements(per Accounting
System)
Missing
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Example #3 -Benford’s Law
Frank Benford (1938), Simon Newcomb (1881)
Some leading digits occur more/less frequently in most data
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1 2 3 4 5 6 7 8 90.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Probability
Leading Digit
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Example #3 -Benford’s Law
Compares expected amounts to actual amounts
There were 1,368 occurrences of amounts beginning with $250
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Summary of CAATs
Data from any source
Every transaction can be tested (no sampling)
Many tests possible. Comparison examples:Within accounting files
Accounting records to bank statements
Actual records to expected values (Benford)
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Agenda
1. Data Mining Examples
2. Data mining you can do in Excel
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Goals and Assumptions
Do basic investigation yourself
1 hour spent here will save dozens (hundreds?) of hours at work
Assumptions:
Data is in Excel 2007 or 2010
Basic knowledge of Excel (info for advanced Excel too)
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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Data Filters - Setting
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Data Filters - Blanks
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Data Filters - Others
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Data Filters - Suggestions
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Blank invoice numbers
Employees or vendors with no address
Vendors using a social security instead of EIN
Odd characters at the end of the invoice number or check number (“.” “–” “a”)
Invoice numbers 100, 101, 1000 or 1001
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Data Filters - Clearing
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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Conditional Formatting -
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Conditional Formatting with Data Filter
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Conditional Format & Filter - Result
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Conditional Format - Suggestions
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Look for duplicates of:
Invoice date
Invoice number
Invoice amount
Vendor name
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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Comparing Excel Files – First Sheet
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Comparing Excel Files – Second Sheet
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Comparing Excel Files – Result
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These vendors are missing from the vendor master list
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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Pivot Table – Largest Vendors (step 1)
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Pivot Table – Largest Vendors (step 2)
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Pivot Table – Largest Vendors (step 3)
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Pivot Table – Largest Vendors - Suggestions
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Look for unusual vendor names and names of employees (‘cash’, ‘petty cash’, <blanks>, ‘bank’, ‘credit card’, etc.)
Discuss vendor disbursement levels with management
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Pivot Tables – Missing Check #s
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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What is PowerPivot
From Microsoft for Office (Excel) 2010
It’s Free
FeaturesTurns Excel into a relational database
Compresses data
Speeds recalculation
(DAX Reporting tool)
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How to Get PowerPivot
64 bit Excel vs. 32 bit Excel
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Menu
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Normal Tabs
PowerPivot Tabs
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Menu
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Normal Tabs
PowerPivot Tabs
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Pivot Fields from Multiple Tabs (Tables)
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PowerPivot Compression, SpeedAccess Excel (native) PowerPivot
Compression 327MB 82MB 12MB
Recalculation ~ 30min < 30 seconds
Worksheet size ~ 2GB 1,048,576 rows Millions of rows~2GB
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Data Mining in ExcelData Filters
Empty data fields
Conditional formattingDuplicates
Comparing two Excel filesPayee not on vendor list
Pivot TablesHigh-dollar vendors
Missing checks
PowerPivot
Reporting
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Reporting – Set Print Area
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Reporting – Setup (Header)
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Reporting – Setup (Footer)
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Reporting – Setup (Result)
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Reporting - Duplicating Tabs
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Reporting – Removing Meta Data
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Reporting – encrypting for sending
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Be sure to save the workbook with a new name - append
“(encrypted)” to the filename
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For More Information
Cost Advisors, Inc.
503-704-3719
www.costadvisors.com
Download: ‘Embezzlement Response Guide’
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