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Software and Technology

Utilizing the identified red lags or symptoms, various software and hardware tools can be deployed to source information and data. Analysis can then be done against the data and information obtained. If issues are identified, automated technology can be used to minimize or prevent future occurrences.

With a list of symptoms in hand, one can decide what data is needed to perform meaningful analysis to conform to the audit objectives. With data in hand, analytical software such as IDEA can do tests to target the selected areas. It should be noted that some general tests, such as Benford's Law, highlight anomalies and can be used to compliment the specific testing.

The audit plan needs to be expanded to review and investigate suspicious items or anomalies. Most of the anomalies will be false positives that can be explained after additional investigation. Actual fraudulent transactions are normally few and far apart. If actual issues are determined, automated procedures and processes, such as continuous monitoring, can be implemented to immediately lag the issue to mitigate the risk of reoccurrence. Continuous monitoring can be both proactive and detective. This may come after the audit and investigative stage.

Audit and Investigative

No amount of technology can confirm a fraud. Technology can merely provide a starting point or identify potential transactions that may or may not indicate fraud. Technology reduces the amount of daily routine transactions to those that are high risk and require further review. Risk analysis is used to dictate whether further resources should be allocated to expand the audit or to investigate specific transactions. The audit trail must be followed and source documents should be reviewed. It may also be necessary to interview staff to obtain additional information, clarification, or reasoning behind the transaction. This may cycle back to the need for better understanding the business in more detail in the evaluation and analysis stage.

Once a fraudulent transaction is identified, technology may be able to assist in quantifying or for rooting out additional fraudulent transactions of the same type. The result of the audit or investigation determines additional procedures necessary to be implemented or included in the automated monitoring procedures.

The three stages of the cycle are ever evolving and continuous. They need to be proactive as new methods of fraud are constantly arising, especially with the rapid changes in technology. While technology may assist the auditor or investigator with new detection methods, technology also provides new tools for the fraudster to attack systems and perpetrate fraud. Where one area may be secured by various controls today, it may be compromised tomorrow. An auditor must include routine checks, like a night watchman on patrol who checks that doors are locked properly several times during the routine patrol. Have a plan but constantly adjust the plan accordingly!

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