Using Analytics to Detect Possible Fraud: Tools and Techniques

Chapter 1

Overview of the Companies

Before beginning any analytical testing of financial information, a financial forensic examiner needs to consider preliminary discussions with management to gather information that may become useful in analyzing financial information. For use within this book, a financial forensic examiner is any individual who wants to pursue a detailed analysis of a set of financial statements to determine not only the consistency of the financial information but also possible anomalies that may suggest the possibility of fraudulent activity. Discussions should provide information relating to general company operations, allowing the financial forensic examiner to understand management's philosophy and general operating style. These discussions should also include financial matters, such as profit margins built into pricing products and any unusual transactions or changes that might have occurred during the period under examination. These discussions may reveal information that the financial forensic examiner will need to assess in determining the results of analytical testing of financial information.

Herein lies a lesson for the financial forensic examiner: Anomalies in financial information may occur and may not be representative of fraudulent activity.

The Four Companies

Before beginning any of the analytics noted in future chapters, this chapter is dedicated to providing general information about each company, including basic financial information ...