Fraud and Fraud Detection: A Data Analytics Approach, + Website

CHAPTER 3 The Data Analysis Cycle

THE DATA ANALYSIS CYCLE is a three-stage cycle that is constantly changing, and which must be adjusted to in order to be effective. The stages are evaluation and analysis, software and technology, and the audit and investigation stage.

EVALUATION AND ANALYSIS

To start the cycle one must understand the whole business well and, specifically, the subsidiary, division, or business unit being reviewed. A good understanding of the industry in general, along with the business environment, will give you a baseline for comparison purposes.

This cycle includes evaluating areas of potential fraud and identifying symptoms or red flags for frauds. This knowledge allows you to tailor your evaluation strategies to the organization. You cannot apply all the same steps and procedures universally to every business, as business practices in different industries, as well as within the same industries, differ greatly.

With this knowledge, the next step is to identify weaknesses or areas where potential fraud may exist within the business systems. It would be impossible to perform this task on the business organization as a whole. You need to break down the organization to at least the business-unit level to be able to focus on a more detailed level. Each area has different elements and risks. For instance, one area may be dealing with cash or payments and another ...