CEO Update: Fraud on the Rise

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In his latest blog update, CEO Craig Waldon is joined by Pauline Laidlaw, the Product Manager for analytics to discuss fraud.

Craig: Hello, I’m Craig Waldon the CEO for CaseWare Australia and New Zealand. Today I have Pauline Laidlaw who is our Product Manager for analytics with me. Pauline has been with CaseWare for 15 years, and there’s a great deal of experience in the analytics space, especially with CaseWare idea and our new AnalyticsAI software. Pauline, I understand you’re going to be doing a tech talk soon with the IIA.

Pauline: Yes. I am Craig, thanks. Next month, the beginning of August, 6th of August I’m going to be doing a tech talk and it’s going to be all about Benford’s law.

Craig: Very good, very good. So today we wanted to highlight fraud and what we’re hearing in the press. This morning I saw another article on Wirecard fraud about their missing COO. There really does not seem to be a day go past where we don’t see the commentary in social media or the press, it’s a problem even in business as usual times. As you certainly need to consider COVID’s probably adding another layer of uncertainty and problems that make it a perfect environment for people to commit fraud. There’s things like uncertainty, confusion, increased workloads where people have been put off and the rest of the team that’s left have to do a lot more work. Relaxation of processes to help people and customers mean there are opportunities there and working from home, all driven by COVID and this is all giving fraudsters the opportunity to commit fraud. Pauline, what have you seen in the past?

Pauline: Yeah, well, thanks, Craig. I agree with you with the opportunistic element of fraud has always been there and it probably is a lot more now with COVID but the people working from home as you’ve said. The typical areas of fraud that I worked with clients when they’ve been using analytics especially have been in the area of the high-risk areas in such as your accounts payable, your payroll and of course like travel and expenses anything along those lines are the higher risk areas that I tend to have seen clients use analytics with in the past.

Craig: What are some of the indicators of fraud that we’re hearing about? Some of the stuff that CaseWare IDEA has promoted, and some of the indicators of fraud.

Pauline: Well, there’s been some really great interviews recently that CaseWare have done interviews with Dr Mark Nigrini, a leading forensic accountant, and he actually is pointed out seven patterns of fraud and the number patterns. I won’t go through all seven, but some of the main ones, the most common ones are round numbers. They are the one of the most common and they link to a lot to bribery, he was saying as well. Numbers that are just below threshold and that leads us into numbers that do not follow along with like Benford’s Law, which Dr Mark Nigriniis an expert in. So that’s us going right just underneath what we’re allowed to actually approve or doesn’t get picked up in our controls, we’re exploiting the gaps and the controls perhaps when we do things like that. There’s there’s definitely patterns in there which analytics can certainly help.

Craig: Have you come across any other examples of fraud where tools like ours of helped?

Pauline: Yes, some of the other ones with outliers, definitely anything that’s an anomaly or an outlier in data could point to fraud perhaps happening. That’s where our analytics tools really do all of these types of tests and allow us to test for all of these types of patterns. Rounded numbers is also a very common one, ending in 999 so quite typical tests. Which actually are the bread and butter of the type of technology that we offer our clients.

Craig: What sort of Technology do we have to assist with fraud detection?

Pauline: CaseWare has been involved with data analytics tools for many many years. The latest tool that we’ve been excited to work with is the CaseWareAnalyticsAI tool which is in the cloud. That’s been specifically designed to allow you to look for high-risk transactions and highlight those high-risk transactions in your general ledger files. So that has been a new tool that we’re very excited to work with. Also, CaseWare IDEA has have been around for a long time as a well-known advanced data analytics tool. It’s used a lot for really large data sets and be able to do all the sort of testing that we mentioned before, those seven patterns. Both of these tools will allow us to test for those types of things and IDEA comes with some apps now that allow you runs of suits of standard test very quickly, very easily. So you can actually analyze that data quickly, our latest one called Exceptional Exceptions.

Craig: That one is really interesting.

Pauline: Yes Craig, that’s a really fascinating one and it’s similar in its way that it’s highlighting items with the highest risk of fraud or error in data sets as well. So that’s the interesting thing now that we’re now all looking at the tests together, not just individually all together. They’re pointing at high-risk entries or transactions that needs further investigation. That’s another thing that Dr Mark Nirgrini always talks about, is analytics is only the starting point of this and we need to make judgments now on the results that come out but it certainly helps us highlight them for sure.

Craig: Yes, we do have a really good range of tools and the additional apps that are available, as I agreed with Pauline, Exceptional Exceptions is a really good new app that’s available with CaseWareIDEA 11.1 and above. So if you’re a CaseWare user, you want to get onto that, if you’re not, get on to it as well. Thanks, Pauline for your comments on the topic. If any of you out there interested to hear more about CaseWare IDEA, CaseWare AnalyticsAI, all the apps that we’ve been talking about, please head to our website and you’ll find more information and contact details there, thank you, everyone.

Pauline: Thank you.