The internal audit department conducted an audit of accounts payable data over several months to identify potential duplicate payments, unusual supplier activity, unusual payment activity, and potential ghost suppliers. As part of the audit, Benford's Law was used to analyze the data, along with other tests like identifying debit balances, historic invoices, potential duplicate payments based on supplier number, invoice number, invoice date, and invoice amount, duplicate bank accounts, and ghost suppliers by matching supplier and employee address, postcode, and bank details. The results of applying Benford's Law to the extracted accounts payable data were presented in table and graphical formats for easier interpretation as part of the audit.

1. Internal Audit Department
Benfords Law
Practical Example – Accounts
Payable

2. 2
Introduction
The objective of the review was to undertake an independent systematic assessment of
the accounts payable data.
The audit scope focused on reviewing several months worth of accounts payable data in
orderto:
• identify potential duplicate payments
• highlight unusual supplieractivity
• highlight unusual payment activity
• identify potential ghost suppliers

3. 3
The Caveat
Whilst Benfords Law is a very useful tool the results have to be interpreted alongside the
conclusions of a whole suite of tests.
As part of the APaudit IDEA was used to performthe following tests:
Identification of:
- debit balances
- historic invoices
Query run to establish invoices which were debit balances to ensure
appropriately classed as a credit note.
Query run to establish extent of old invoices.
Potential Duplicate Payments Several queries run to identify potential duplicate payments:
Duplicate
Query
Supplier No Invoice No Invoice
Date
Invoice
Amount
1 Match Match Match Match
2 Match Match Match
3 Match Match Match
4 Match Match Match
5 Match Match Match

4. 4
The Caveat cont ….
Duplicate Bank Account
Search
Query run to identify where different suppliers have the same bank
details.
Ghost Suppliers Search Matching performed between Supplier Database and Employee
database to establish whether there were any links between :
● address
● postcode
● bank details
Date Analysis Identification of transactions posted at weekends.
Benfords Law Analysis Query run to identify any potential anomalies in the data for further
investigation

5. 5
Benford’s Law – IDEA Steps
1. Obtain data file which includes all the details of paid invoices within the defined time
period
2. In this case had to remove negative amount (using the Extraction query) which had
been classed as credit notes
3. Summarized the data by SupplierNo and Invoice No (as each invoice numberwas
repeated foreach line itemon that invoice)
4. Chose Benford’s Law fromthe Analysis menu
5. Result is given in a table format which you can then convert into a graphical format
foreasierinterpretation.

6. 6
Benford’s Law – The Results

7. 6
Benford’s Law – The Results