Chapter 2Fraud Scenario Identification

To start with an old saying, the house is only as strong as the foundation. In this chapter, the fraud data analytics plan is the house and the fraud scenario is the foundation. The purpose of this chapter is to explain the fraud risk structure and how to write a fraud scenario. In one sense, it sounds like an easy task. In another sense, it is a daunting task. If you have read my other books, you will hear a similar reading, but hopefully the methodology is refined based on more years of practical experience.

The purpose of the fraud risk structure is to define the scope of the fraud audit project. The purpose of the fraud scenario is to act as the design plan for the programmer. Using the fraud scenario the programmer creates the search routines of databases for transactions that meet the data profile for each fraud scenario. The red flags associated with each fraud scenario provide the basis of the selection of transactions for audit examination. The programming can only be as good as the fraud scenario statement. The red flags can only be as good as the integrity of the data in the database.

Fraud risk identification requires a methodology and standards to be followed in identifying and writing a fraud scenario. This chapter will focus on the methodology as it is related to fraud data analytics plan. As such, not all aspects of the fraud risk structure will be covered in this book. Only those aspects that are relevant to fraud data analytics ...

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