HOW A CPA FIRM USED DATA ANALYTICS TO UNCOVER EMPLOYEE FRAUD

AUDIT CASE STUDY

BACKGROUND

With a focus on the non-profit industry, Tate & Tryon provides fraud prevention and consulting services that range from outsourced accounting to audit and assurance, including financial statement audits and consultative services.

During what was thought to be a routine client engagement, Tate & Tryon performed extraction procedures on accounts payable data using IDEA® Data Analysis software.

TESTS ON ACCOUNTS PAYABLE DATA

Testing included: • A match between a vendor’s business address and an

employee’s home address • Total expense reimbursements by employee for the past

year

A review of the data extraction results raised a concern as the Tate & Tryon team noticed what appeared to be an indicator of suspicious activity within the data.

MEET SAM

One employee, Sam, had more than 25 expense reimbursements totaling approximately $18,000 in the past fiscal year—nearly three times more than any other employee. Interestingly, Sam’s home address also matched a vendor’s business address.

These anomalies along with the examination of various financial documents, including accounting records, expense reports, check requests, cancelled checks, invoices and receipts, led to a more detailed investigation.

INVESTIGATION

To determine the types of asset misappropriations that may have occurred, key employees and vendors were interviewed, and the legitimacy of the financial records were examined. A search of Sam’s desk area, computer drives and email activities was also done.

It was determined that assets had been misappropriated in several ways…

ASSET MISAPPROPRIATION

1. Tate & Tryon’s client had been paying Sam’s personal rent, with Sam’s landlord being listed in the client’s vendor master file.

2. Sam received more than 120 reimbursements by submitting fake invoices and receipts from other employees’ credit cards as support.

3. The client had also paid for several repairs to Sam’s personal car.

CONCLUSION

The discovery of fraud led to the termination of Sam’s employment. Emails confirmed that Sam had access to other employee’s receipts, which he then used to support his expense claims. Documents found at Sam’s desk had been altered, including with forged supervisor signatures.

In the end, Tate & Tryon demonstrated that over a six-year period, Sam had embezzled more than $150,000 USD. He eventually pleaded guilty to a federal charge of interstate transportation of stolen property.

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HOW A CPA FIRM USED DATA ANALYTICS TO UNCOVER EMPLOYEE FRAUD

AUDIT CASE STUDY

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