Forensic Analytics and Employee Fraud. Presented by. Mark J. Nigrini Ph.D. Professor, West Virginia University

Transcription

1 The Charleston Chapter of the ACFE 2015 Training Day Date: May 8, 2015 Time: 8:00 4:30 Forensic Analytics and Employee Fraud Presented by Mark J. Nigrini Ph.D Professor, West Virginia University Location: Alpha Natural Resources Running Right Leadership Academy 300 Running Right Way Julian, WV Lunch: Provided Cost: (Limited to 60 Attendees, Reserve Your Spot) Early Registration: $150 (Deadline - May 1, 2015) At the Door: $170 All attendees can choose between an autographed copy of Forensic Analytics or Benford s Law To Register Please Contact: Steven Patterson spatterson@alphanr.com or call

2 Forensic analytics is the procurement and analysis of electronic data to reconstruct, detect, or otherwise support a claim of financial fraud. The main steps in forensic analytics are (a) data collection, (b) data preparation, (c) data analysis, and (d) reporting. Forensic analytics aims to detect of fraud, errors, and biases where biases involve people gravitating to specific numbers or number ranges to circumvent actual or perceived internal control thresholds. This workshop with Mark Nigrini, author of Forensic Analytics, is an opportunity to learn about Benford s Law and other analytic techniques to detect and prevent employee and supplier misconduct using interesting case studies and discussions. The workshop will include an updated version of his Benford s Law presentations at the 2012 and 2013 ACFE Global Conferences, an updated version of his Forensic Analytics pre-conference session at the 2014 Global Conference in San Antonio, an updated version of his fraud numbers sessions at the 2014 Global Conference, and the Lessons from and $8 million fraud sessions that will be presented at the Global Conference in Baltimore in June, The workshop include case studies related to Benford s Law projects, case studies related to analytics assignments undertaken by the instructor, case studies related to fraud cases studied by the instructor, and case studies published by the instructor. In August, 2014 Nigrini and Mueller published a co-authored article in the Journal of Accountancy ( The workshop will include a description of the ING fraud scheme, the preventive and detective steps that would have been effective in preventing and detecting the fraud, together with some personal statements made by Nathan Mueller on the topics covered in his CPA Insider article ( 1

3 The main topics that we will cover are: An explanation of Benford s Law, why we have these skewed digit patterns occurring, interesting mathematical aspects of the law, a review of authentic data sets that conformed and some fraudulent data sets that didn t follow Benford s Law, and some novel applications of the law. Also, an interesting review of Nigrini s current research related relating to published financial statement numbers, accounting text books, and Benford s Law-related exam strategy will complete the session. The tests in the Nigrini Cycle that look for abnormal duplications of digits, digit combinations, specific numbers, and exact duplications or close duplications of data will be reviewed. These duplications point to fraud, errors, or biases which are gravitations towards certain numbers to circumvent control thresholds. This section will include the links to free Excel-based Benford s Law software. The forensic analytics examples will include extracts from an analysis of purchasing card data and purchase order data for the District of Columbia (Washington, DC). The Nathan Mueller ING fraud including a description of the scheme, effective preventive and detective measures, and some personal statements of responsibility from Nathan Mueller. Examples of other frauds and forensic situations such as the Charlene Corley case where a vendor stole $20 million from the Department of Defense through inflated shipping charges, and the Harriette Walters tax refund fraud case where the millions of dollars of losses could have been avoided by using some basic detective controls in the form of Forensic Analytics. The case studies will also include insights from the Rita Crundwell of Dixon, Illinois case and the Katherine Harrell bank fraud where a manager was sentenced to a single day in prison for stealing $500,000+ from customer accounts. The workshop will also review the Duluth, Minnesota Susan Thompson case where a member of the Minnesota Power management team embezzled $220,000 and was sentenced only to probation with only a partial restitution. The conclusion will emphasize that the legal system is overloaded and cannot be relied upon to be a serious deterrent against fraud. Companies and government agencies therefore need to have strong internal controls and effective and efficient proactive fraud detection mechanisms in place. Who should attend? The workshop will be valuable for internal auditors, fraud examiners, and investigators with a general day-to-day familiarity with obtaining and importing transactional data, and who would like to explore and exploit the potential of forensic analytics. The workshop would also be valuable to other accountants and investigators who are thinking of moving into the forensic and data interrogation field. 2

4 Forensic Analytics & Employee Fraud: Charleston (2015) Mark J. Nigrini, Ph.D., Professor, West Virginia University 08:30 09:45 Benford s Law: The mathematical basis of the digit patterns, some fraud examples, and a general awareness of what "suspicious numbers" look like Forensic Analytics on purchasing card data: Periodic graph, data profile, Benford's Law, and number duplication tests. 10:00 12:00 Nigrini Cycle and forensic analytics using purchase orders data and purchasing card transactions: Largest subsets, round numbers, relative size factor, same-same-same, and same-same-different tests Mueller case: Lessons from an $8 million fraud Lunch Break 01:00 02:30 Insights into fraud numbers from fraud investigations performed by the instructor, and data from prosecuted fraud cases. Chapter-by-chapter review of Forensic Analytics A review of Forensic Analytics software Special: Chrysler payment, ATM fraud, casino fraud 02:45 04:30 Fraud case: Charlene Corley of Lexington, SC Fraud case: Harriette Walters of Washington, DC Fraud case: Susan Thompson of Duluth, MN Summary and concluding comments Facebook: Forensic Analytics by Mark Nigrini and Benford's Law by Mark Nigrini 3

5 The instructor Mark J. Nigrini, Ph.D. is a professor at The College of Business & Economics at West Virginia University where he teaches graduate courses in auditing and forensic accounting. He is the author of Forensic Analytics which describes tests to detect fraud, errors, estimates, and biases in financial data. He is also the author of Benford's Law (2012). Benford s Law gives the expected patterns of the digits in tabulated data and it has been used by auditors and scientists to detect anomalies in tabulated data. His academic papers have been published in several accounting journals. His applied papers have been published in journals such as Mathematical Geology, and The International Journal of Mathematics and Mathematical Sciences. Practitioner papers have been published in journals such as Internal Auditor and the Journal of Accountancy. His forensic work has been featured in national media including The Financial Times, New York Times, and The Wall Street Journal. His radio interviews have included the BBC in London, and NPR in the United States. His television interviews have included appearances on NBC's Extra and The Investigative Discovery Channel. He regularly presents professional workshops for accountants and auditors in North America, Europe, and Asia with recent events in Malaysia, Switzerland, and Bahrain. His research focus is on advanced theoretical work on Benford s Law, and occupational fraud and the legal process surrounding fraud convictions. Nigrini has a B.Com (Hons) degree from the University of Cape Town, an MBA degree from the University of Stellenbosch, and a Ph.D. degree from the University of Cincinnati. In addition to his academic credentials he is a Chartered Accountant (South Africa) and his early accounting career included time with Peat, Marwick, Mitchell & Co. (now KPMG) and as a divisional accountant. He has been called on as an expert witness in forensic accounting matters and he has done consulting engagements for organizations such as Procter & Gamble, Burger King, Eaton Corporation, American Airlines, AvalonBay Communities, CaseWare IDEA, and the New York State Comptroller s Office. The University at Buffalo, Buffalo, New York, on October 4,