Question

You are in your first month as an internal auditor in the corporate offices of Cover-Up Fraud-Mart, a large regional variety store chain based in Los Angeles. Your manager has just given you a general overview of the company’s problems with fraud. In fact, losses from fraud exceed losses from shoplifting by tenfold, and management wants your perspective on what it can do to proactively detect fraud. From your fraud auditing class, you know that the data-driven approach is one of the most effective detection methods.

Questions

1. Prepare a project plan for implementing the six-step data-driven approach. List the types of team members who should be involved in each step, how long each step will take, and cost estimates for each step.

2. What software package will you need to purchase to complete the process? Provide arguments for your decision.

3. What techniques should be run in steps 4 and 5?

Answer 1

1)

You based on their plan, but each plan should include the six steps to the data-driven approach. They should identify an investigative team that includes business experts, technology experts, auditors, fraud investigators, and any others that might be useful to performing the process.

2)

The chapter lists ACL, IDEA, Piccolo, and ActiveData. You may also decide that Excel or Access is good enough for the investigation.

Some students may like ACL or IDEA because they are standard and company-supported.

The companies offer training. Other students may like the open-source and free nature of Piccolo.

3)

The primary technique useful to this type of analysis is stratification and/or summarization. Stratifying purchases against inventory levels by employee will allow the investigator to see if product levels (having accounted for purchases during the time frame) are decreasing more during any specific employee's shift.