THIS IS A PROJECCT USING IDEA FOR DATA ANALYTICS TO UNCOVER ACCOUNTS PAYAB

I.
Title: Using IDEA for Data Analytics
to
Uncover Accounts Payable Fraud
II.
Introduction
You are a Staff Auditor at Showker & Associates LLP. A long
–
time client, Home Improvement Inc.
has asked your firm to come and investigate a possible fraud.
Management has noticed a
disproportionate increase in Cost of Goods Sold in the first quarter of the current year (2017) and has
recently been notified through an anonymous tip that a purchasing fraud has taken place at the
company. Home Improvement Inc. i
s a retailer in Harrisonburg, Virginia that sells approximately 24
home improvement products including cabinets, light fixtures, faucets and more. The company buys
primarily from local vendors and sells its products locally. The company currently sells pro
ducts
offered by 200 vendors and has 80 full
–
time employees.
Management at Home Improvement Inc. is concerned that an employee has taken advantage of
the lack of internal controls over the Accounts Payable function and has committed a fraud.
Showker & Asso
ciates conducted the annual audit of the company several months prior for the year
ended December 31, 2016 and found no trace of fraud. However, the firm did note that there was a
lack of internal controls over vendor purchases and payments
and relayed the
ir concern to the
company’s management.
Your firm will be conducting a fraud investigation based on transactions that occurred during the
first quarter of the current year. Therefore
,
the primary focus of the investigation will be on
purchases made from Ja
nuary 1, 2017 to March 31, 2017. Purchases and payment fraud are
among the most common types of fraud in an organization. The audit team has decided to use
IDEA to analyze the company’s data and investigate this possible fraud.
It is important to understan
d the possible ways in which this type of fraud could occur. It has
already been mentioned that there is a lack of internal controls over the Accounts Payable function
at Home Improvement Inc. With that in mind, it is important to think about what could go
wrong at
the company to help determine where to look for the fraud.
Potential Risks in Accounts Payable:
1.
Payments made to unauthorized
suppliers.
2.
Payments made to individuals or
employees.
3.
Unauthorized premiums given to suppliers.
4.
Invoices paid
late.
5.
Invoices paid on irregular
dates.
6.
Invoices processed twice.
7.
Payments made in a way to go undetected by
audit