Fighting Fraud
with Data Mining
Techniques




                   Audimation Services, Inc.
                   Carolyn J. ...
Data Mining Defined

                               v.    Data mining is the analysis of
                                 ...
Three Key Terms

                              Customer Relationship Management


                                  Discov...
Important GAO Report



                               Discover              Hidden
                               Extract...
Main Areas for IDEA Use in
                              Data Mining to Detect Fraud

                                    ...
Potential IDEA Use in an
                              AP Fraud Examination


                                Test 1      ...
Potential IDEA Use in an
                              AP Fraud Examination


                                Test 5      ...
Potential IDEA Use in an
                              AP Fraud Examination


                                Test 9      ...
Potential IDEA Use in an
                              AP Fraud Examination


                               Test 13      ...
IDEA’s New Smart Analyzers




© Audimation Services, Inc.           Smart Analyzer Complete includes tests for
  “The exp...
Report Mining - a Low-cost
                              and High-impact Alternative

                                    ...
Report Mining - Characteristics
                              Instead of mining data in the
                              ...
Auditor’s Challenge
                                         Add Client Value




                                        ...
Become “Value Added”



                               Provide    Provide      Reduce the
                                ...
Enhance Your Image
                               Perform analysis on data from remote locations, without travel,
        ...
For more information about
                              IDEA Data Analysis Software
                                  vis...
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  1. 1. Fighting Fraud with Data Mining Techniques Audimation Services, Inc. Carolyn J. Newman, CPA, CISA
  2. 2. Data Mining Defined v. Data mining is the analysis of data with the intent to discover gems of hidden information in the vast quantity of data that has been captured in the normal course of running the business. Most commonly used: © Audimation Services, Inc. Customer Relationship Management “The experts in IDEA Data Analysis Software” Fraud Detection and Prevention
  3. 3. Three Key Terms Customer Relationship Management Discover Gems Relationships Extract Evidence Patterns Fraud Detection and Prevention © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  4. 4. Important GAO Report Discover Hidden Extract Hiding © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  5. 5. Main Areas for IDEA Use in Data Mining to Detect Fraud Identifying Checking Exceptional Calculations Items IDEA® Searching Analytical for Text Data Analysis Review in Multiple Software Fields and Files Cross Testing for Matching Data Completeness – Between Gaps & Files/Systems Duplicates © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  6. 6. Potential IDEA Use in an AP Fraud Examination Test 1 Test 2 Test 3 Test 4 Match Match Match Match payments vendor bank suppliers delivery against account against addresses authorized numbers to employee to employee suppliers surnames employee bank list account addresses © Audimation Services, Inc. numbers “The experts in IDEA Data Analysis Software”
  7. 7. Potential IDEA Use in an AP Fraud Examination Test 5 Test 6 Test 7 Test 8 Identify Test for Test for Identify large duplicate duplicate gaps in variances invoices payments check from prior sequences years © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  8. 8. Potential IDEA Use in an AP Fraud Examination Test 9 Test 10 Test 11 Test 12 Examine Identify Test for Stratify amounts split large payments at or just invoices discounts and below examine break all large points amounts © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  9. 9. Potential IDEA Use in an AP Fraud Examination Test 13 Test 14 Analyze Identify exceptional transactions days to pay – Extract certain payees and identify – Extract all round $1000 payments suppliers – Extract payments authorized by a certain with wide individual variance – Extract all payments on a Sunday from – Extract all payments prior to invoice date © Audimation Services, Inc. average “The experts in IDEA Data Analysis Software”
  10. 10. IDEA’s New Smart Analyzers © Audimation Services, Inc. Smart Analyzer Complete includes tests for “The experts in IDEA Data Analysis Software” General Ledger, Accounts Receivable and Accounts Payable
  11. 11. Report Mining - a Low-cost and High-impact Alternative USERS OF INFORMATION Report Mining Data Mining Data Mining Hardcopy Tools (IDEA) Tools Tools Reports Report Files Data Report Warehouse Generators Report Generators © Audimation Services, Inc. “The experts in IDEA Data Analysis Software” OPERATIONAL DATA
  12. 12. Report Mining - Characteristics Instead of mining data in the database, mining data contained in electronic Existing reports already copies Your Text here of existing reports contain meta data, data and business rules (and extract parameters) No impact on production No restructuring is environment Title Report Mining necessary Compatibility across No access to data computing environments necessary (or implied) Your Text here © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  13. 13. Auditor’s Challenge Add Client Value Enhance Maximize Image of Productivity Auditing © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  14. 14. Become “Value Added” Provide Provide Reduce the client burden clients additional from auditors with services using technical better to new or resources to access data business existing and generate advice customers desired reports © Audimation Services, Inc. “The experts in IDEA Data Analysis Software”
  15. 15. Enhance Your Image Perform analysis on data from remote locations, without travel, and possibly prior to any on-site work – reduce time in the field Focus on areas where the greatest risks are noted Generate more specific questions and become a creative problem solver Backup findings will be backed up with detail IS - Prepare reports in a very short period of time and provide innovative solutions to better serve end users © Audimation Services, Inc. “The experts in IDEA Enhance your reputation and differentiate yourself Data Analysis Software” from the competition
  16. 16. For more information about IDEA Data Analysis Software visit us on the web at www.audimation.com Presenter: © Audimation Services, Inc. Carolyn J. Newman, CPA, CISA “The experts in IDEA Data Analysis Software” carolynn@audimation.com
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