Fraud Data Analytics Methodology

Chapter 3Data Analytics Strategies for Fraud Detection

Now that the fraud scope is established and the fraud scenario register is created, the next step is to select a strategy for each fraud scenario and understand how the strategy is impacted by the sophistication of the concealment. Your initial use of this process will seem overly bureaucratic. However, eventually the process will become just a way of thinking. The thought process is important to understand what your data analytics plan is designed to detect and what the data analytics plan will not detect.

This chapter is intended for the fraud auditor who wants to understand fraud data analytics in the later chapters. In the real world, you will need to adapt the suggestions contained in the book to your data files. You will be eventually requested to perform data analytics in business systems for which you have no practical business experience or you will use fraud data analytics to perform an investigation. You will need to develop a fraud data analytics plan where no auditor has gone. I believe the guidelines will serve you well. For the auditor who simply wants a software vendor to provide you with a list of tests, you should pass over this chapter and proceed directly to Chapter 7. For that auditor, I will provide my top three reports that you should create for the business system as part of the chapter summary.

In Chapter 2, I referenced the building of a house. I said the fraud scenarios provided the foundation to ...