Fraud Data Analytics Methodology

Chapter 11Fraud Data Analytics for Corruption Occurring in the Procurement Process

Corruption in the purchasing function is all about creating the illusion of compliance with purchasing procedures and competitive purchasing practices. In reality, the selection of the supplier was predetermined and the process was rigged to ensure the favored supplier was selected. Sounds simple! In reality, corruption in the purchasing function is the most difficult to identify and prove for the fraud auditor. Therefore, our goal for isolating our fraud anomaly is to search for circumvention of the selection process or for the appearance of favoritism in the selection process. The fraud auditor through document examination and interviews will need to determine if the selection of the supplier was corrupted with an evil motive.

In fraud data analytics, it is important to understand the scope of the project and what fraud scenarios can be realistically identified with the fraud data analytics plan. In the expenditure cycle, corruption can occur at the selection process or at the administration process. This chapter is solely for the selection process; supplier overbilling was covered in Chapter 7. The realistic goal of fraud data analytics for corruption in the selection process solely depends on the technique used to corrupt the process.

What Is Corruption?

Corruption is the act of doing something with the intent of giving some advantage inconsistent with the official duty and rights of others. ...