FRAUD EXAMINATION ALBRECHT, ALBRECHT,

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FRAUD EXAMINATIONALBRECHT, ALBRECHT, ALBRECHT
Proactive Approaches to Detecting Fraud

• CHAPTER 6

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Learning Objectives

1. Explain the importance of proactive fraud
   detection.
2. Describe the role of commercial data-mining
   software plays in detection.
3. List the advantages and disadvantages of data
   mining and digital analysis.
4. Recognize Benfords Law.

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Learning Objectives

1. Understand inductive fraud detection.
2. Identify how fraud is detected by analyzing
   financial statements.

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How is the Case of Mr. Hamanaka Typical of Most
Frauds?
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Match Terms and Definitions.
Inductive fraud detection
Determining the types of fraud that can occur
then query to see if they exist
Proactively searching for fraud without
determining the type of fraud to look for
Deductive fraud detection
A mathematical algorithm that predicts the
percentage a digit will occur
Commercial data-mining software
Commercial software used to detect patterns in
data
Benfords Law
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Differentiate Between Detecting Investigating
Fraud.

• Detection

• Investigation

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Explain Data-Mining as a Means of Detecting Fraud.
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Review How Benfords Law Works.
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List Disadvantages of Benfords Law?
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What is the 5 step Process for Inductive Fraud
Detection?
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Compare the 3 Approaches.
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Compare the 3 Approaches.
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Compare the 3 Approaches (contd)
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Summarize the Process Which Results in Financial
Statements.
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What Effect Does the Size of the Fraud Have on
the F/S?
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Explain How Revenue Affects the Companys
Accounts.
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How Can You Convert Balance Sheets Income
Statements to Change Statements?
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Match Ratio to Name.
CA Inventory Average A/R
Current
Current Assets Current Liabilities
Quick Test
Sales Average A/R
A/R Turnover
365 Days A/R Turnover
Days in Receivables
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Match Ratio to Name.
Bad Debt Expense Average A/R
Receivables
Bad Debt
365 Days Inventory Turnover
Inventory Turnover
Cost of Goods Sold Average A/R
Accounts/Receivable Total Assets
Days in Inventory
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Match Ratio to Name.
Cost of Goods Sold Percent
Cost of Goods Sold Total Sales
Inventory Percent
Sales Returns Total Sales
Property, Plant Equipment Percent
Inventory Total Assets
Sales Ave. Property Plant Equipment
Sales Return Percent
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Match Ratio to Name.
Total Liabilities Total Assets
Debt to Equity
Net Income Share of Stock Outstanding
Debt Percentage
Profit Margin
Total Liabilities Total Equity
Days in Receivables
Net Income Net Sales
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Describe How to Perform Vertical Analysis on
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Describe How to Perform Horizontal Analysis on
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What Questions Should Asked When Using a
Statement of Cash Flows to Detect Fraud?
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Statement of Cash Flows
Cash Flows
Cash Balance
Cash Flows
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Discuss the Use of Software for Detecting
Identifying Fraudsters.