Automating Vendor Fraud Detection in Enterprise Systems

Abstract

Fraud is a multi-billion dollar industry that continues to grow annually. Many organizations are poorly prepared to prevent and detect fraud. Fraud detection strategies are intended to quickly and efficiently identify fraudulent activities that circumvent preventative measures. In this paper, we adopt a DesignScience methodological framework to develop a model for detection of vendor fraud based on analysis of patterns or signatures identified in enterprise system audit trails. The concept is demonstrated by developing prototype software. Verification of the prototype is achieved by performing a series of experiments. Validation is achieved by independent reviews from auditing practitioners. Key findings of this study are: (a) automating routine data analytics improves auditor productivity and reduces time taken to identify potential fraud; and (b) visualizations assist in promptly identifying potentially fraudulent user activities. The study makes the following contributions: (a) a model for proactive fraud detection; (b) methods for visualizing user activities in transaction data; and (c) a stand-alone Monitoring and Control Layer (MCL) based prototype.

Design and Implementation of Continuous Monitoring and Auditing in SAP Enterprise Resource Planning

“…These tests exposed the prototype to real-world data. Data was also collected on processing (2003), Wells (2008) and Singh et al (2013). time and served as a basis for determining auditor productivity. Findings from the investigation are discussed below.…”

“…It requires the creation of a shell company and submission of fictitious invoices for payment. To successfully perpetrate this scheme, an employee requires the ability to create or modify vendor master records, and enter invoices for payment (Wells, 2011;Singh, Best & Mula, 2013).…”

“…Vendor master records may be created or modified as follows (Wells, 2011;Singh et al, 2013): (a) Create a fake vendor -a fake vendor is added to the list of vendors in the vendor master file. This vendor is not in a legitimate business relationship with an organization.…”

“…No vendor-specific data is stored; it is entered during transaction entry. Invoices may be submitted for processing by creating a fake invoice; using a legitimate invoice; or creating or using a duplicate invoice (Wells, 2011;Singh et al, 2013). Figure 3 summarizes the process of perpetrating vendor fraud.…”

Aplicación de un Modelo de Auditoría Continua Utilizando JD Edwards EnterpriseOne

“…Por otro lado, de acuerdo a Singh, Best, & Mula (2013), en una auditoría continua, los datos que fluyen a través del sistema de un cliente se monitorean y analizan de manera continua usando mecanismos integrados dentro del sistema. Las excepciones a las reglas definidas por el auditor provocarán alarmas, proveyendo comunicación al auditor en relación con cualquier deterioro o anomalía potencial dentro del sistema.…”