Data Analysis for Corporate Fraud Risk

by Bell, Alexis C.

• ISBN13: 9781475086324
• ISBN10: 1475086326
• Format: Paperback
• Copyright: 2012-04-02
• Publisher: Createspace Independent Pub

Summary

All companies have an inherent risk for fraud estimated at 5% of revenue, according to the 2006 ACFE Report to the Nation on Occupational Fraud and Abuse. In response to the inherent risk for fraud, many companies are developing anti-fraud programs. The ultimate goal of an effective anti-fraud program is to mitigate risk to the organization due to fraud through a combination of preventative, detective, and deterrent controls. Ratio analysis is performed around specific financial relationships to identify areas of concern, or red flags, as a part of the company's detective controls over fraudulent financial reporting. The ratio red flags for fraud analysis provide indicators that are meaningful at varying levels such as store versus consolidated. It incorporates both the balance sheet and income statement for a complete analysis. The analysis indicates indicators for a company experiencing economic difficulty which can trigger potential earnings management in the future. It provides indicators of fraud currently occurring for broad categories of fraud as well as for specific fraud schemes. Finally, the analysis includes an initial assessment that can then transition to the continuous monitoring process as part of the on-going anti-fraud program. Whether you are a forensic accountant interested in where to start an investigation, an internal auditor interested in due diligence for fraud, an analyst interested in identifying aggressive accounting tactics, or an external consultant interested in adding value for your clients, ratio red flags for fraud analysis will give you an effective tool for your anti-fraud process.