Excel vs Fraud

1. Excel Vs Fraud – An Analysis
CA Saran Kumar U
saran@sbsandco.com
+91 9640208282
Date: 22.03.2016
by
ICAI Hyderabad

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 Talk on Facebook, Whatsapp, Candy Crush
 MS Excel and Fraud – An introduction
 Simple but Serious
 Don’t believe what you see – a Case Study
 Data  Summary  Pattern
 Benford’s Law
 Q & A
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Let’s talk fun

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Excel and Fraud - Introduction

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Excel and Fraud - Introduction
“Fraud is deliberate deception to secure unfair or unlawful gain”
Fraudster Fraud Detector
Excel can be used to manipulate the
numbers
Excel techniques can be used to detect the manipulated
numbers
Excel can be used to transform the Data into structured tables
Excel can be used to create Summaries from structured tables
Excel can be used as one of the medium to apply the
techniques like Benford’s Law etc

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Simple but Serious
SUM Case Study
Merged Cells Case Study
Sumif Case Study
Import of Data Case Study
(Refer the Excel files)

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Import
Format
Analyze
Interpret
Data  Summary  Pattern
 Understanding the raw data source
 Understanding the raw data format
 Importing to MS Excel (either Fixed Width or Delimited)
 Clean up activity
 Deletion of unnecessary rows and columns
 Clearing the unnecessary content
 Presenting in a proper tabular format with suitable
headings
 Analysing the data by using subtotal, sort, filter and
pivot table features
 Interpretation of clues taken out from the data

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Data Analysis Features
 Consolidation
 Pivot Tables

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Important Functions
 Sumif(s)
 If
 Vlookup
 Reverse Vlookup

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 Benford’s Law is also called the “First-Digit Law”
 Benford’s Law predicts the occurrence of digits in large sets of data
 Simply put, this law maintains that we can expect some digits to occur
more often than others
 For example, the numeral 1 should occur as the first digit in any multiple-
digit number about 30.1% of the time, while the numeral 9 should occur
as the first digit only 4.6% of the time
Benford’s Law

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Occurrence of ‘x’ as first digit = Log10(1/x+1)
Occurrence of 1 = Log10(1/1+1) = 30.10%
Occurrence of 2 = Log10(1/2+1) = 17.61%
Occurrence of 3 = Log10(1/3+1) = 12.49%
Occurrence of 4 = Log10(1/4+1) = 9.69%
Occurrence of 5 = Log10(1/5+1) = 7.92%
Occurrence of 6 = Log10(1/6+1) = 6.69%
Occurrence of 7 = Log10(1/7+1) = 5.80%
Occurrence of 8 = Log10(1/8+1) = 5.12%
Occurrence of 9 = Log10(1/9+1) = 4.58%
Benford’s Law Occurance

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 When someone creates false transactions or commits a data-entry error,
the resulting numbers often deviate from the law’s expectations
 This is true when someone creates random numbers or intentionally
keeps certain transactions below required authorization levels
Benford’s Law Vs Red Flag

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 The numbers in the data set should describe the same object
 There should be no built-in maximum or minimum to the numbers
 The numbers should not be assigned
 Example: Invoice Numbers, Bank Account Numbers, Telephone Number etc
 Does not apply to uniform distribution
Benford’s Law Conditions

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http://www.nseindia.com/products/content/all_daily_reports.htm
Practical Case Studies

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Why these numbers in this particular order???
Think Box
8 5 4 9 1 7 6 3 2 0
Eight Five Four Nine One Seven Six Three Two Zero

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CA Saran Kumar U
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PH: +91 9640208282
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