Testing the Internal Diagnostics of Current Period and Prior Period Data
Chapters 4 through 8 reviewed the suite of tests in the Nigrini Cycle. These tests should be included in every forensic analytics project. The tests included the high-level overview tests, four digit-based tests, and the number duplication tests. Some tests used all the transaction data whereas a few of the tests (the first-order tests and the last-two digits test) used only the amounts greater than and equal to 10.00. The first test to do a comparison was the comparison of the positive and negative number duplications. The tests described in this chapter are a comprehensive comparison of two data tables to determine whether there has been some significant change in the events being measured.
Bolton and Hand (2002) state that fraud detection tools all have a common theme in that actual data is usually compared with a set of expected values. Depending on the context, these expected values can be derived in various ways and could vary on a continuum from single numerical or graphical summaries all the way to complex multivariate behavior profiles. Their discussion of expected values includes a discussion of Benford's Law. They contrast supervised methods of fraud detection, which uses samples of both fraudulent and legitimate records, and unsupervised methods, which identify transactions or customers that are most dissimilar to some norm (i.e., outliers). They correctly note that we can seldom be ...