Looking For the Largest Fish

By Richard B. Lanza, CFE, CPA/CITP, PMP
Fear Not the Software

Many companies, after completing a risk assessment, want to immediately catch every fish – big or small. However, just as it’s impossible for a batter to hit five baseballs pitched at the same time, a company with a limited fraud detection budget won’t be able to correct every problem at the same time. You need to determine not just the likelihood of the frauds but their significance as you make your priority list. You can do this qualitatively but because we need to “follow the money,” the quantitative data analysis usually is most beneficial.


Before we discuss the meat of this column – detecting the most significant areas for fraud review – let’s step back and ask some questions about the organization, or even more specifically, key departments:

  • Who has the most spending authority within the company? More authority leads to higher spending and, therefore, more opportunity for fraud.
  • Which departments provide the most revenue to the company? The larger the revenue base, the larger the risk that fraudulent sales could be posted and not detected.
  • Has the organization recently been part of a merger or acquisition? Obviously, such events increase the size of the organization. But they also result in stretching of employees (I’m thinking, specifically, of IT people, among others) who can become quite unhappy.
  • Has the organization experienced rapid growth, increasing business demands, and exposure? Transaction volume can rise at these times and processes become even more complex, which can be fertile ground for an undetected fraudster.
  • Has your organization recently had a system conversion? With new technologies or system implementations, the priority becomes simply ensuring the transactions are processed, with little time left for verifying their accuracy.

Answering these questions can identify departments that, generally, have the largest amounts of company processing because the answers reveal more about spending than revenue and companies tend to be more focused on detecting misappropriation schemes that impact their cash flow.


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