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The Diligent team
GRC trends and insights

20 ways to track fraud with data analytics

October 24, 2022
0 min read
Woman demonstrating the numerous ways to track fraud with data analytics

Has your business experienced problems with fraud? If so, you’re not alone — and if not, it’s possible that you just haven’t looked hard enough.

A 2020 study from PwC found that 47% of businesses had at least one incidence of fraud in the previous two years, with an average of six instances per company. Customer fraud was the most common, followed by cybercrime, asset misappropriation, bribery and corruption. The incidents were almost evenly split between internal and external perpetrators. Altogether, the losses for the 5,000+ businesses surveyed amounted to $42 billion.

With the destabilizing nature of the COVID-19 pandemic, the likelihood of fraud is even more prevalent. A report from the Association of Certified Fraud Examiners (ACFE) found that 77% of companies surveyed as of August 2020 experienced an increase in fraudulent activity since the start of the pandemic, with 92% expecting fraud to increase over the next 12 months.

Companies are rushing to fast-track the onboarding of new vendors, sometimes without proper vetting. And with many businesses flying blind in their newfound remote work environments, it can be easy to overlook the financial checks and balances that might occur in the corporate office. But if you’re not looking closely, it can be easy to miss situations where your ledger doesn’t balance out correctly.

Fortunately, data analytics can spot warning signs that humans sometimes miss. Here’s a look at some key types of data inconsistencies that data analytics solutions can spot from insider and outsider forces.

General Ledger Entries

Ledger entries should be scrutinized closely for potential fraud or errors. For instance:

1. Identify and Search For Suspicious Keywords

Identify suspicious journal entry descriptions using keywords that may indicate unauthorized or invalid entries.

2. Stratify General Ledger Accounts

Look at the normal range of values to spotlight entries outside that range — if your average ledger entry for payroll is $2M and one shows up as $500K, the entry may warrant further scrutiny.

3. Hunt for Outlier Journal Entry Amounts

Use your analytics solution to flag entries more than two standard deviations away from typical entries, which may point to an accounting error or potential fraud.

Business Expenses

Expenses in areas such as travel and entertainment are often where unscrupulous employees may fudge numbers through multiple methods. Here are a few ways to monitor for fraud in expense tracking:

4. Analyze the Average Spend by Department

Your sales department likely has much higher travel costs than your programming team. Monitor department spending over time to understand the average range for each division and set up an alert to trigger if the department deviates from that range. Sometimes, a specific seasonal event, like a conference, may throw off the balance, so do a line-by-line analysis to confirm whether everything is on track.

5. Check for Suspicious Reimbursement Claims

One common area where employees may (often inadvertently) double-dip is around fuel and mileage reimbursement. If they’re already submitting mileage for reimbursement, fuel charges should be flagged as a duplicate item.

6. Identify Split Purchases

Employees may skirt around purchase limits by breaking one large purchase into two different line items — your analytics solution can alert you to such “split purchases.”

7. Watch for High Group Dining Expenses

Historical records give you a good baseline level for average group dining expenses. A record should be flagged for review if it is out of the normal range.

8. Find Round Amounts

See an expense for a round amount, like a $200 charge? These charges aren’t likely to happen by chance, so it may mean that the employee is using their company card to take out cash advances.

9. Identify Duplicate Claims

Some employees may submit expense reports for purchases they’ve already charged to their corporate accounts, getting reimbursed twice for the same expense.

10. Deactivate Dormant Company Cards

If an employee leaves your company, but their card is still active, it may be susceptible to fraudulent use. Make sure these credit cards get shut down immediately.


11. Flag Suspicious Salary Increases

Keep an eye out for multiple small salary increases for the same employee within a single calendar year, and contact HR to verify they are approved.

12. Identify Phantom Employees Still on the Payroll

Are employees who have left the business still showing up on the payroll? This may sometimes mean another employee has modified the payroll to their bank account details to conduct financial fraud.

Vendor Payments

Contractor payments are rife for fraudulent behavior, as either the vendor or an unscrupulous employee can funnel money through fake or inflated invoices. Here are a few tips for avoiding vendor fraud and billing oversights:

13. Segregate Vendor Creation and Billing

Ensure that the employee responsible for creating vendor profiles isn’t also responsible for generating and approving invoices. A dishonest employee can take advantage of this role to create fake invoices from fictitious vendors, as can an outsider who’s gotten access to system credentials.

14. Flag Duplicate Invoices

Vendors may submit the same invoice multiple times, either by accident or to follow up on unpaid bills. You may pay the same invoice twice if you don’t have a system for tracking and flagging duplicates.

15. Watch for Frequent Changes to Vendor Details

For example, if a master table includes frequent changes to a vendor address, this is a potential indicator of fraud.

16. Identify Matches Between Vendor and Employee Details in Your Master Table

Pinpoint matching bank details, address or other data between a vendor file and employee payroll details. This may indicate that the employee has set up a fraudulent vendor account.

17. Find Non-PO Purchases Above the Dollar Limit

At most companies, purchases above a certain threshold are associated with a purchase order. If you notice large purchases that aren’t, they may indicate fraud or an accounting or vendor error.

18. Track Blanket Receipts

Blanket receipts refer to invoices for multiple services that haven’t yet been rendered. Make sure that, if vendors are issuing payment in advance of service or receipt of goods, you have a way to track the delivery of their work.


Fraud and accounting errors can also cause problems when working with your customers. Here are a couple of ways to verify accurate accounting with your customers:

19. Validate Customer Credit Limits

Ensure all your customers have consistent credit limits in line with their business credit profile and company size, flagging those with outsize credit limits. Those customers may not be able to pay back outstanding loans.

20. Identify Sanctioned Customers

Run your customer accounts through a database that will flag sanctioned customers from public records, including OFAC’s SDN list, the SAM list, HHS’s LEIE list and others. This will help you identify customers who may need further validation or should be cut off.

Next Steps: Preventing Fraud With Data Analytics

There are many ways to identify fraud and accounting errors within your business, but if you only review transactions manually, you’re likely to miss a lot. Errors, unauthorized charges and signs of fraud can slip past your accounts payable team’s sight, potentially leading to millions of dollars of losses over the course of a year.

In order to accurately detect and quickly remediate fraud before it has a major impact on your organization, it’s important to implement best-in-class analytics that can analyze 100% of your financial data (instead of sample testing) to identify red flags automatically.

Your toolset should integrate with internal and external datasets, including your ERP, payroll system and government datasets such as census data and other public records that can be used to verify your data’s accuracy. A continuous delivery system, which will instantly provide alerts regarding potential violations, can also use custom rules and triggers designed for your industry. By deploying advanced machine learning, your accounting, compliance and IT teams will have vital intelligence available to help them keep your organization secure.

Download our Detecting & Preventing Fraud With Data Analytics eBook to learn more.


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