Global Benchmark Role of data analytics for internal fraud detection
2 overview According to the latest findings in the Ernst & Young Global Forensic Data Analytics Survey 2016 and 2016 ACFE Report to the Nations on Occupational Fraud and Abuse, C-level executives are increasing the use of forensic data analytics (FDA) to address current and emerging risks, including internal fraud (travel & entertainment abuse, collusion, etc.). For the purpose of this document, we ll refer to FDA as the examination of structured data (e.g., transaction, employee and/or customer data) to analyze, detect, correct and prevent fraudulent activities or patterns that may lead to non-compliance. the decision-makers for anti-fraud programs According to the Ernst & Young Global Forensic Data Analytics Survey 2016, the following job titles help drive a company s anti-fraud program and could be decision-makers when considering the use of FDA in fraud detection. Job Title Interviews Head of internal audit/cro 192 Other audit/risk 81 Other finance 51 Head of compliance 61 CFO/FD 68 Head of legal 34 Financial controller 58 CEO/COO/CIO 28 Head of business unit/division 16 Head of investigations 14 Head of security 17 Company secretary 5 Other management staff 40
3 Top Beneficiaries of forensic data analytics From the boardroom to internal audit, FDA is helping people in all levels of the organization to manage current and emerging threats as well as regulatory demands. Executive management Internal audit Board increased levels of risk by industry The percentage of respondents who have seen increased levels of internal fraud risks can be seen below and are grouped by industry. Internal Fraud Financial services Life sciences 47% 49% Transportation Manufacturing Consumer products, retail & wholesale Communications, tech & entertainment Oil & gas Mining 38% 32% 42% 49% 35% 30% Power and utilities 34%
4 Top THREE fraud risks using forensic data analysis Internal fraud is the top area where FDA tools are used to investigate incidents and/or monitor risks. This is closely followed by cyber breach/insider threat and bribery/corruption risk. Internal fraud (travel & entertainment abuse, collusion, etc.) Cyber breach or insider threat Bribery and corruption risk spend and perceptions of increased level of risk Internal fraud is the third-most popular risk that is driving spend in FDA. As expected, respondents who expect to increase their spend on FDA are more likely to perceive increased level of risks. All respondents 62% 72% Those who expect to increase FDA spend over the next two years 44% 52% 42% 50% Cyber breach or insider threat Bribery and corruption risk Internal fraud (travel & entertainment abuse, collusion, etc.)
5 SIX reasons for using data analytics From early fraud detection to the ability to detect fraud that could not be detected before, here are the top six benefits of using FDA in an anti-fraud program. Early fraud detection 22% 11% 11% 56% 22% 9% 14% 55% Ability to detect fraud that we could not detect before Faster response in investigations 10% 20% 17% 53% 5% 20% 17% 58% Increased business transparency Getting the business to take more responsibility for managing the company s anti-fraud program 18% 9% 54% 19% 22% 27% 9% 42% Reduced costs of anti-fraud program Fully realized Realized to some extent Realized to a small extent Not realized at all
6 money lost based on anti-fraud controls Proactive data monitoring/analysis yielded the lowest median loss when controls are in place and reduced the median duration of fraud by 54%. Median Loss Control Percent of Cases Control in Place Control Not in Place Percent Reduction Proactive data monitoring/analysis 36.7% $92,000 $200,000 54.0% Management review 64.7% $100,000 $200,000 50.0% Hotline 60.1% $100,000 $200,000 50.0% Management certification of financial statements 71.9% $104,000 $205,000 49.3% Surprise audits 37.8% $100,000 $195,000 48.7% Dedicated fraud department, function or team 41.2% $100,000 $192,000 47.9% Job rotation/mandatory vacation 19.4% $89,000 $170,000 47.6% External audit of internal controls over financial reporting 67.6% $105,000 $200,000 47.5% Fraud training for managers/executives 51.3% $100,000 $190,000 47.4% Fraud training for employees 51.6% $100,000 $188,000 46.8% Source: 2016 ACFE Report to the Nations on Occupational Fraud and Abuse Looking to implement or enhance your anti-fraud program? Data analytics plays a significant role in an effective anti-fraud program. It is important to be able to collect data from various systems from every business unit and use advanced data analytics to perform functions like transaction and vendor risk scoring, customer and transaction analysis and more. Once data has been analyzed, alerts generated and any deficiencies remediated, data visualization dashboards help to give ongoing visibility over internal controls and fraud risks. To learn how CaseWare Analytics can help with your antifraud program, email us at connect@casewareanalytics.com. About CaseWare Analytics CaseWare Analytics is home to IDEA Data Analysis and the CaseWare Monitor continuous monitoring platform. Our software solutions are built on a foundation of industry best practices and expertise, enabling audit, compliance and finance professionals to assess risk, gather audit evidence, uncover trends, identify issues and provide the intelligence needed to make informed decisions, ensure compliance and improve business processes. We offer solutions that meet the needs of auditors, analysts, purchasing card managers, compliance officers and more. With 40 distribution offices worldwide, CaseWare Analytics products and solutions serve more than 400,000 professionals in 90 countries. To learn more visit casewareanalytics.com. www.casewar eanalytics. c oc om m