FRAUD ANALYSIS AND DETECTION

BUSINESS FRAUD FACTS

What types of organizations are victimized by occupational fraud?

How long do different occupational fraud schemes last?

BUSINESS FRAUD FACTS

Data monitoring/analysis and surprise audits were
correlated with the largest reductions in fraud loss and duration

employee fraud data detection by audit straydot
fraud audit surprise audit facts straydot detection

Yet, only 37% of victim organizations implemented these controls

Small businesses lost almost
twice as much per scheme to fraud 

graph-4

85%

OF FRAUDSTERS
DISPLAYED AT LEAST
ONE BEHAVIORAL

RED FLAG OF FRAUD

FRAUD DETECTION SERVICE

Do you have an office manager that runs payroll without supervision?

Are you in control of the checks that are written?

Are all the pay functions done by one person in your office?

Do you open all the mail yourself?

All sound too familiar?

Have a certified public accountant use our fraud detection software

All we need:

  • Check runs, as many months as possible
  • Last detailed payroll run
  • Vendor list

OVERVIEW

Other services

  • Audit trail review of payroll activity
  • Credit card statement review
  • Annual employee survey regarding knowledge of fraud – 40% of fraud detected is from employee tips

WHAT WE NEED

For a certified public accountant to run
our fraud search engine we will need:

  • Check run data from the accounting system – the more months the better
  • Current vendor list with addresses
  • Current payroll data directly from payroll service

Other services:

  • Audit trail review of quickbooks – access to audit trail in quick books for a CPA to review
  • Audit trail review of payroll activity – access to service for a CPA to review
  • Credit card statement review – downloaded detail from Credit card company
  • Annual employee survey – list of all employee emails so we can send knowledge of fraud questions in the form of a survey

HOW WE DO IT

We run a series of automated tests that check for any evidence of common issues that appear when there is evidence of fraudulent activity

These tests out outlined in the
next few pages

  • Z-score
  • Benford’s law
  • Duplicate payments
  • Similar vendors
  • Fictitious vendors
  • Vendor/employee cross-check
  • Non-business day transactions
  • Under cut-off amounts
  • Quickbook audit trail review

Find out more at    STRAYDOT.COM

FRAUD ANALYSIS
AND DETECTION

Fraud analytics engine to aid in the detection of fraud

TEST: BENFORD’S LAW

Benford’s law
Percentage of time digits 1 through 99 are expected to occur in the first two positions in a genuine data set of numbers.

How to use it:

  • If an employee is committing fraud by producing fraudulent invoice, the amounts are not generated randomly, the employee has to create a fictitious amount. These amounts can become outliers in Benford’s Law. the tool generates a list of vendors that are outliers.
  • The application runs two separate test. Test one will produce the outliers of the first digits 1 through 10. We can also select the % difference from benford’s law (for small data sets). The second test produces the outliers for two digits, 10 through 99.

Average asset misappropriation in a healthcare small business costs $100,000.

the longer an employee has been with the company, the larger the amount.

Fraud examiners
(“ACFE”)

TEST: Z-SCORE

Z-score
Is a statistical measurement of a number in relationship to the mean of the group of numbers. It refers to points along the base of the standardized normal curve. The center point of the curve has a z-value of 0. Z-values to the right of 0 are positive and z-values to the left are negative values. The distance from the mean is measured by standard deviations.

How to use it:
The Z-score tool generates a report with a list of all vendors and highlights the outliers.

Asset misappropriation is the most common,

occurring in 89% of the cases.

Fraud examiners
(“ACFE”)

TEST: DUPLICATE PAYMENTS

Duplicate payments
Employees with control over accounts payable and the checks can submit an invoice for payment twice. They then alter the actual check to reflect a different payee. the system may show two checks went to Globex, but only one  really did. The other check was written for “cash” and cashed by the employee.

How to use it:
The application searches check registers for duplicate vendor names above a certain amount and payments for the same amount on the same day.

Data monitoring/analysis and surprise audits are correlated

with the largest reductions in fraud loss and duration.

Fraud examiners
(“ACFE”)

TEST: SIMILAR VENDORS

Similar vendors
Fictitious invoices from fictitious vendors will sometimes have similar names and address to actual or real vendors. Wayne enterprises may be a real vendor where Wayne Entertainment or Wain Enterprises may not be.

How to use it:
The application searches the vendor list data and identifies similar data points. The system allows you to adjust the similarity %. Once a list is generated the user can add vendors to a “Shortlist” to be added to the report generated by the application for further investigation.

70% of corruption cases are perpetrated by

employees in a position of authority.

Fraud examiners
(“ACFE”)

TEST: FICTITIOUS VENDORS

Fictitious vendors
Fictitious vendors will sometimes have PO box addresses or contain certain words like “consulting” or “marketing.” A fraudster may even use the same address for various fictitious vendors.

How to use it:
Using the vendor list the application searches for a defined  set of keywords. The user sets the words or addresses prior to running the query. Once the vendors are identified using the keyword list, they can be added to the report via the “Shortlist” function for further investigation.

An act of fraud involves not only the commission of the scheme itself, but
also efforts to conceal the misdeeds. understanding the methods fraudsters

use to cover their crimes can help detect the warning signs of fraud.

Fraud examiners
(“ACFE”)

TEST: VENDOR / EMPLOYEE
CROSS-CHECK

Vendor/employee cross-check
Employees that use fictitious invoices will sometimes use their own address. Employees may also alter a certain paycheck amount for only one pay period then return their paycheck amount back to normal amount.

How to use it:

  • The system searches both the vendor list and employee list at the same time to find similarities. The user of the application can set the similarity %, then create a shortlist for further investigation.
  • The second test compares the year to date amount paid to each employee to the annual salary amount (or estimated salary amount if hourly) to the actual amount paid to date. The application generates a report showing variances.

Payroll schemes last the longest, 30 months on average.

check and payment tampering last 24 months on average.

Fraud examiners
(“ACFE”)

TEST: NON-BUSINESS DAY

Non business day transaction
Employees with access to checks and can access the offices on days the business is closed may commit the fraud while they have an opportunity to be alone.

How to use it:
We load weekends and holidays into the application where we know the office was closed. The application compares check dates from the check register to those days.

The size of an organization’s staff can directly affect both the opportunity

for fraud and the ability to enact certain anti-fraud mechanisms.

Fraud examiners
(“ACFE”)

TEST: UNDER CUT-OFF

Under cut-Off
Some employees have check signing authority below a certain level. They may abuse this authority knowing those amounts are not monitored.

How to use it:
Application produces a list of checks under a predetermined amount for further investigation.

External fraud audit reviews reduce the total lose amounts by 50%.

Fraud examiners
(“ACFE”)

OTHER SERVICES

Quickbooks audit trail
Automatically reviews the audit trial generated by Quickbooks or other general legger software for invoice or check deletions, altering amounts on invoices or checks and other perimeters.

Credit card review

  • We will review credit card transactions for non-business like activity.
  • We will review audit trail in quickBooks. This process helps detect when an employee is manipulating or hiding activity.

HOW MUCH DOES IT COST

We have a wide range of ways to pay that are based on the size of the company of the company.

Find out more at   STRAYDOT.COM

PRICING

Analysis Revenue < 1 M Between 1M and 5M Revenue > 5 M
Benford's law
Duplicate vendors
Similar vendors
Fictitious vendors
Vendor/employee cross-check
Non-business day transactions
Under-cut off amounts
Relative size factor
Quickbooks audit trail
Cost $1,400 $2,200 $6,000

PRICING

Benford's law
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Duplicate vendors
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Similar vendors
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Fictitious vendors
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Vendor/employee cross-check
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Non-business day transactions
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Under-cut off amounts
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Relative size factor
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Quickbooks audit trail
Revenue < 1 M
Between 1M and 5M
Revenue > 5 M
Costs
Revenue < 1 M $1,400
Between 1M and 5M $2,200
Revenue > 5 M $6,000

ADDITIONAL SERVICES

Additional service Revenue < 1 M Between 1M and 5M Revenue > 5 M
Audit trail review of payroll service $400 $750 $1.200
Credit card statement review $500 $938 $1,500
Employee survey regarding knowledge of fraud $100 $100 $100

For more information and to find out
exactly how we can help you, visit
straydot.com

ADDITIONAL SERVICES

Audit trail review of payroll service
Revenue < 1 M $400
Between 1M and 5M $400
Revenue > 5 M $400
Credit card statement review
Revenue < 1 M $500
Between 1M and 5M $938
Revenue > 5 M $1,500
Employee survey regarding knowledge of fraud
Revenue < 1 M $100
Between 1M and 5M $100
Revenue > 5 M $100

For more information and to find out
exactly how we can help you, visit
straydot.com

Marietta Square, Marietta GA 30060
contact @straydot.com
404-662-3318
straydot.com