Detecting Fraud with Analytics: Rounded Numbers

CaseWareAnalytics, Auditing, Cloud Computing, Fraud

Rounded number checks when auditing

Author: Andreas Ong, Technical Manager: Cloud & Data Analytics, CaseWare Australia & New Zealand

Mark J Nigrini, Ph.D. wrote a very good article published in the Journal of Accountancy and titled “Round Numbers: A fingerprint of fraud”. It is about how auditors can benefit from understanding when the overuse of certain numerals might be a red flag for malfeasance.

When someone wants to commit fraudulent activities, they will need to fabricate some numbers in the accounting system and research tells us that generally, these fraudulent numbers are rounded numbers.

An auditor could run “round number data analytics testing”:

  • During the audit planning phase to assess the risk of material misstatements
  • During the audit (to test the controls)
  • At the end of the audit as a final review tool to detect possible misstatements.

We suggest you review the article, as it also contains some case studies and how rounded amounts testing is used to discover fraud instances.

Is this a test in CaseWare Cloud?

Yes. In CaseWare Cloud Analytics, the entries with rounded amounts test can be found in the Sales, Receipts, Purchases, Payments, Payroll and Other transactions test. It also can be found on the General test category for sub-datasets that you created.

 

Entries with rounded amounts test can be found in the Sales, Receipts, Purchases, Payments, Payroll and Other transactions test

 

Simply select the rounded amounts you want to look for and run the test.

 

Select the rounded amounts

 

 

CaseWare Cloud Analytics will display all the transactions rounded to the specified amount.

 

CaseWare Cloud Analytics will display all the transactions rounded to the specified amount.

 

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