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Forensic Analytics, 2nd Edition
book

Forensic Analytics, 2nd Edition

by Mark J. Nigrini
May 2020
Intermediate to advanced content levelIntermediate to advanced
544 pages
18h 51m
English
Wiley
Content preview from Forensic Analytics, 2nd Edition

CHAPTER 9Comparing Current Period and Prior Period Data: Part 1

THE PREVIOUS CHAPTERS REVIEWED the high-level overview tests, the series of Benford-based tests, the number duplication tests, the subset-based tests, and the tests for abnormal duplications. The tests described in this chapter take a new turn and examine two sets of data to determine whether there has been a significant change between the current data and the data from the prior period which forms the benchmark for measuring the change. Deviations from the benchmark could be due to fraud or error, or they could be due to a change in circumstances. In general, when it comes to comparing current period data with that of prior periods, the usual techniques applied are:

  • A horizontal analysis. This involves a comparison of the balances of the current period with those of previous periods. Forensic accountants would look for large changes in absolute values and large percentage changes. These comparisons should involve more than just the ledger balances shown on the trial balance. Other metrics such as the cost-per click, daily active users, revenue guidance, and the adjustments to earnings based on Generally Accepted Accounting Principles (GAAP) should be assessed.
  • A vertical analysis. This is also called a common-size analysis and it involves converting the income statement and balance sheet line items to percentages and then comparing these percentages with those in the prior period.
  • An analysis of the elements ...
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Publisher Resources

ISBN: 9781119585763Purchase book