The Way To Identify False Indicators In Reporting In A Few Minutes

Instruction from a partner in the company Eldey Consulting Group Nikolay Molchanov. Sometimes we doubt the veracity of the reports submitted by the company or top managers. To understand yourself in a variety of indicators — for a very long time.

To call the auditors — expensive. I will tell you about a quick and simple technique for the detection of manipulation in financial and production reports that can be used by any Manager. This method is adopted to the IRS and the largest auditing firms, but virtually unknown to Russian business owners.

You dont need to be a financier to see the signs of manipulation. You can own to detect suspicious place with the help of Benfords law.

According to this law, the set of numbers, taken from real life, with a 30% chance in the first place to meet number 1. And figure 9 is only 5% of cases. Confirmation of this thesis literally all around us. For example, it can be used to predict the first digit in the length of rivers and the molecular weight of chemical compounds.

But I guess we are not too interested. And the interesting thing is that the law can work in an “alarming signal” for detection of cases of fraud reporting. Using Benfords law to test. Customer payments, transactions, inventory, advances, investment performance, daily sales, insurance and warranty payments, shipments, card transactions, stock prices and other data groups that occur naturally.

Analyzing potential problems in the management and accounting of the clients, we noticed that the distribution of digits obey Benfords law. Also, the method can be used for data validation operating activities. Production performance, unlike financial, to correct not so scary, and is used by a number of companies demonstrating their results to the owners or investors. The main idea of Benfords law. The real sequence numbers are different from manually entered.

The method can be applied to detect fraud reporting it is because it never take into account changing data. We can hardly expect that podtasovyvaya number, a Manager will think, what digit is in the first, second and so on place will look the most likely. Practice shows that people come up with figures, subconsciously preferring:

The idea of using technology is that we define that is a fact specific intervention in the real data company. Before applying the method it is important to note that Benfords law:

For example, take the most readable article for 2016. On this page, there are a scattering of numbers. Date and time of publication, the number of views, likes, rating, comments, some numeric values in the text. In total I got 85 numbers.

Not enough for statistics, but itll do. Heres what I got: First, even a small amount of data, the results are largely similar to the proposed Benfords curve.

Secondly, we found a significantly larger number of twos in comparison with the theoretical assumption. I could pretend that pre-figured it out and took this article for a vivid example, but I wont. Only after plotting a graph, I saw the numbers, they were amazed and began to understand.

The situation with excess twos perfectly demonstrates what above I called a conscious intervention. Article contains a selection of 62 films from 2000 to 2016. Dates are mentioned quite often, and is caused by abnormal growth of the numbers 2.

This is a good example of the fact that the emissions do not correspond to the theoretical distribution, usually are quite innocent reasons. So you need to be careful. The data obtained in the result of analysis, cannot be used as direct evidence of fraud. They are only showing the area that would do well to look deeper. If there is a striking discrepancy, it is advisable to understand the reason why.

In most cases it will have nothing to do with cheating. For additional control it is possible to compare the suspicious figures with data from previous periods, budget plans, the average performance of the industry. Also there are many other ways to analyze.

For the first three and the last two digits, comparing duplicates, rounding and so on. But rather, it is the task of professional auditors. To independently use the equipment very easy.

It is included in many specialized software systems, but its simplicity allows you to make all the necessary calculations by yourself in just a few minutes. It is sufficient to write the appropriate formula for calculating the numbers in Excel, and load the whole array of information. Also, you can easily find the files with the calculation in Google or to take templates Excel our page in Facebook or Vkontakte.

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