Computer Assisted Auditing Techniques (CAATs) are increasingly used in domains with vast amounts of data to extract information of real value in the audit process. Techniques based on applications of Benford’s Law have been utilized in various domains. This paper goes beyond by introducing a class of focused tests (called Behavioral Shift Models) that can be tailored to the scenarios being investigated. The discussion is grounded by using scenarios related to policies around receipts. The new focused tests are compared with an adaptation of Benford’s Law using carefully engineered synthetic data and real data from the business travel and entertainment expense management (T&E) domain. Results indicate that focused tests are robust with good detection power and significant reduction in false alarms when compared to either intuitive approaches or general tests based on Benford’s Law. Application and validation with production data in the T&E domain suggests that these focused tests can leverage the deep knowledge of domain experts and play a valuable role in audit and business control processes.
By: Vijay Iyengar
Published in: RC24491 in 2008
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