Red Flag Fraud Examination and Prevention Tools

The number one method of monitoring and preventing long term fraud.

Many Internal Control Managers use Benford's Law to periodicly monitor their own financials, in order to follow up early on all suspicous activity.

When Benford's law is ran periodicly as part of an effective internal control process, and compared to prior results, it is the most effective and fastest method in determining irregularities in data. Wheather it is ran on vendor accounts, inventories or sales ledgers, the data should show Benfords Distribution.

Fraud examiners use Benford’s Law tests on natural numbers, like payment amounts. The theory is that if a fraudster submits fake invoices for payment, he won’t submit invoices for $125 or $189, he will submit invoices for $789 or $857. If this is repeated enough, it will alter the natural order and distribution.

Quickly determine any variance on any natural occurring numerical data; vendor accounts, income statements, general ledgers, insurance claims data, banking deposits, Municipal Agency budgets, etc.

Any large variances from period to period should be investigated as soon as posible in order to determine the reasons and minimize any duration of fraud, if it is determined to have accured.