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1. Merging Forensics with Data Analytics
Monday, September 28, 2015
Time
Josh Shilts, CPA/CFF/CGMA, CFE

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3. MIS Training Institute Holdings, Inc. Slide 3
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 Big Data Phenomenon and its’ Effect on Organizations
& Audit Departments
 Data Analytic Program Landscape
 Forensics + Data Analytics = Mitigated Risk
 Continuous Auditing Evolution
 Data Analytics Future: Organization and Audit
Department Affects
Key Points

4. MIS Training Institute Holdings, Inc. Slide 4
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The BIG Data Phenomenon
“Information is the oil of the 21st century, and
analytics is the combustion engine.”
- Peter Sondergaard, Gartner Research

5. MIS Training Institute Holdings, Inc. Slide 5
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The BIG Data Phenomenon
“Ninety percent of the world’s data has been created
in the last two years… The ultimate question is really
what insight and value can we draw from that data.”
- George Lee, Chief Information Officer, Investment Banking
Division, Goldman Sachs, Sept. 2014

6. MIS Training Institute Holdings, Inc. Slide 6
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The BIG Data Phenomenon
“Big data is not about the data.”
- Gary King, Harvard University, making the point that while
data is plentiful and easy to collect, the real value is in the
analytics
“Hiding within those mounds of data is knowledge that
could change the life of a patient, or change the world.”
- Atul Butte, Stanford School of Medicine

7. MIS Training Institute Holdings, Inc. Slide 7
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The BIG Data Phenomenon
“Figures often beguile me, particularly when I have the arranging
of them myself…
…there are three kinds of lies: lies, damned lies, and statistics.”
- Mark Twain, 1906

8. MIS Training Institute Holdings, Inc. Slide 8
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 Employee & Customer Behavior
 Supply Chain Efficiency
 Faster Decision Making
 Push to understand Data Structure and Advanced
Analytical Tools
 Identify Data Analytics Talent
 Embedding Big Data
This creates a lot of unanswered questions…How is big
data going to improve our performance as a business?
What will the company focus on? etc…
Effect on Organizations

9. MIS Training Institute Holdings, Inc. Slide 9
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“Trickle Down” to Audit Departments
 Employee & Customer Behavior
 Supply Chain Efficiency
 Faster Decision Making
 Push to understand Data Structure
and Advanced Analytical Tools
 Identify Data Analytics Talent
 Embedding Big Data
This creates a lot of unanswered questions…How is big
data going to improve our performance or the audit plan?
What will the audit plan focus on? etc…

10. MIS Training Institute Holdings, Inc. Slide 10
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 Use of “Scripts” defined by software companies, large
internal audit consulting shops and well known
professional associations (i.e. IIA, ACFE)
 Excel, ACL and IDEA used to identify duplicates,
quantitative outliers (e.g. aberrations, deviations)
 No defined method for script implementation
 No use of existing resources
 Audit Management “forcing” use of analytics with no
other reason to do so than meet professional
association guidance
Current Data Analytic Landscapes

11. MIS Training Institute Holdings, Inc. Slide 11
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“If you want to give yourself a fair chance to
succeed, never expect too much too soon”
– Po Bronson
Data Analytic Program Landscape

12. MIS Training Institute Holdings, Inc. Slide 12
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- Don’t put the cart before the
horse…

13. MIS Training Institute Holdings, Inc. Slide 13
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To succeed you must utilize existing knowledge as well as
existing tools to build the “base” of your program…
Magnitude
Major >$50M 5
Substantial >$25M 4
Moderate >$ 10M 3
Minor >$1M 2
Insignificant <$1M 1
Define how Financial
Impact is measured (i.e.
Net Income, Revenues,
etc.)
1 2 3 4 5
Remote Unlikely Possible Likely
Almost
Certain
Likelihood
12
11
3
10
4
6
5
14
13
15
9
8
1
7

14. MIS Training Institute Holdings, Inc. Slide 14
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Before even the discussion of a analytic tool
consider using existing information…

15. MIS Training Institute Holdings, Inc. Slide 15
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Forensics + Data Analytics
Magnitude
Major >$50M 5
Substantial >$25M 4
Moderate >$ 10M 3
Minor >$1M 2
Insignificant <$1M 1
Define how
Financial Impact
is measured (i.e.
Net Income,
Revenues, etc.)
1 2 3 4 5
Remote Unlikely Possible Likely
Almost
Certain
Likelihood
9

16. MIS Training Institute Holdings, Inc. Slide 16
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Some forensic accountants specialize in forensic analytics
which is the procurement and analysis of electronic data
to reconstruct, detect, or otherwise support a claim of
financial fraud. The main steps in forensic analytics are (a)
data collection, (b) data preparation, (c) data analysis, and
(d) reporting. For example, forensic analytics may be used
to review an employee's purchasing card activity to
assess whether any of the purchases were diverted or
divertible for personal use.
Wikipedia
How Does Forensics Relate

17. MIS Training Institute Holdings, Inc. Slide 17
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Equals Mitigated Risk
Continuous audit, much like the disciplines currently employed within
forensic audit, focuses on the prevalence of a risk and/or the effectiveness
of a control…
…with automated, frequent analyses of data, you will be able to perform
control and risk assessments in real time or near real time. Thus, giving
you the ability to analyze key systems for anomalies at the transaction level.

18. MIS Training Institute Holdings, Inc. Slide 18
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Representative Examples
1. Invalid Tax ID – generate a report to identify all
expense payments sorted by Tax ID. Investigate
all payments wherein there is no Tax ID, Tax ID is
all 9s, or contains alpha characters.
2. Duplicate Payments – Captures payments either
same $ paid to the same payee and/or check #
3. PO Box Payments – Captures all payments
made on an insurance claims that included a PO
box as the address.
The majority of “canned” scripts focus on cash misuse and/or
larceny fraud schemes…

19. MIS Training Institute Holdings, Inc. Slide 19
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Representative Examples
However; focus should be on “real” fraud risks and not utilizing
resources to complete “common” tests…
Scenario Fraud Risk Potential Test
Company has a significant
# of employees who
travel.
Abuse of company credit
card.
Identify how many
charges per employee are
incurred in their
hometown.
Technology company
incurs high percentage of
employee turnover below
the manager level.
Inappropriate access with
non-existent employee
IDs
Run a report to compare
employee leaves vs.
change management
activity.
Insurance company who
prides itself on making
timely payments to
customers.
Payments are made
without appropriate
approvals or support.
Run a report to identify
claims made within 5 days
of endorsement to identify
if payment is made on an
excluded loss.

20. MIS Training Institute Holdings, Inc. Slide 20
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Forensics has long been a discipline that focuses on a specific
risk or situation and utilizes tools and knowledge to pinpoint its
cause…
My Point
…data analytics builds on the “Forensic Objective” by allowing
professionals to decipher mounds of data and information and
focus on more than just fraud within a set of data.

21. MIS Training Institute Holdings, Inc. Slide 21
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Continuous Audit Process
Implementation Graph
Continuous Audit
Process
Implementation
Steps
1
Establish
Priority
Areas
6
Report
Results
5
Manage
Results &
Follow Up
4
Configure
Parameters
& Execute
3
Determine
Process
Frequency
2
Identify Audit
Rules
7
Assess
Emerging
Risk & Add
to Register

22. MIS Training Institute Holdings, Inc. Slide 22
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Continuous Auditing Evolution

23. MIS Training Institute Holdings, Inc. Slide 23
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CONTINUOUS
AUDIT RISK/
CONTROL
ASSESSMENT
FACT FIND
DATA
ANALYTIC
INITIATION
CONTINUOUS
AUDIT
ACTIVITY PLAN
DATA
ANALYTIC
STORAGE
REPORTING
Qn REVIEW &
ASSESSMENT
Intake
Assess
Emerging
Plan
Changes
Resource
Allocation
Process &
System
Reviews
Other
Activity
Integration
1st
& 2nd
Lines
Monitoring
Ratios /
Trends
Script
Initiation
Evaluation
Periodic
Process
Mngt.
Tools
Quarterly
Annual
Continuous Audit
Process
Implementation
Steps
1
Establish
Priority
Areas
6
Report
Results
5
Manage
Results &
Follow Up
4
Configure
Parameters
& Execute
3
Determine
Process
Frequency
2
Identify Audit
Rules
7
Assess
Emerging
Risk & Add
to Register

24. MIS Training Institute Holdings, Inc. Slide 24
©
The Future
 Improve Existing Products and Services
 Improve Internal Processes
 Building New Products or Services
 Transforming Business Models
 The business of Forensics by
improving the determination of priorities
and picking the right angle to review.

25. MIS Training Institute Holdings, Inc. Slide 25
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 Big Data is in fact a phenomenon that has a lot of
theory behind it. Problem is most of it is theory…
 Some problems the theorists forgot to think about is:
 Data Integrity
 Core Value and Missions
 Continuous Control Monitoring is complex and requires
the appropriate number of resources and allocated
time.
 You need very creative individuals to implement.
The Realities

26. MIS Training Institute Holdings, Inc. Slide 26
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 Don’t let the Big Data phenomenon distract you
from your core values and mission
 Focus on “easy” wins by using ‘canned’ scripts
 Build slowly: know what works for you and don’t
get caught up in an “arms race”
 Audit the Data!!!
Summary

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