Name: Annie Yoder, CPA, CFE, CFF
Web Site: http://www.reacpa.com/annie-yoder
Posts by Annie Yoder, CPA, CFE, CFF:
Whether it’s due to limited resources or staffing, you may find it difficult to find time to closely review the financial activity of various departments within your business. But here’s the thing: not doing detailed reviews can leave your business exposed to increased risk of error or fraud. Incorporating analytics into your review process can be an efficient way to detect errors and fraud and will allow you to identify areas of risk within your business. Analytics are frequently part of audit procedures, and compare the correlation between key statistical data and actual financial activity.
How To Use Analytics In Your Reviews
- Identify the information. Identify the department, segment or line item you want to review and determine a time period that will allow the most effective review. Analytics can be used to compare financial activity on a monthly, quarterly or annual basis. Determine what information will allow for the most effective review. For example, if you’re reviewing the revenues related to food service operations you may want to breakout the revenues by type (i.e. lunches, breakfast, a la carte, adult).
- Identify the primary driving factors. The most important step in an analytic is identifying the primary factors that will cause significant changes in the activity you are reviewing. Use the changes in those factors to set expectations for the amount you expect the actual financial activity to change. Continuing with the example above, if you noticed the number of lunches served increased 10 percent in the current month compared to the previous month then you would expect the revenues to correlate with that change.
- Review the results. Compare your expectations to what actually happened. Based on the example I’ve been using, if your actual revenues decreased by 2 percent then you will want to investigate this change further. If actual revenues increased by 9 percent then you may determine the variance is acceptable and you don’t need to investigate any further.
The Discovery Of Potential Errors
If after you’ve compared the results of the analytics and identified a few areas that didn’t meet your expectations, what do you do next?
- Contact the person responsible for the area you reviewed. Determine if there are additional factors that would have caused the variance from your expectations.
- If you have determined there are no additional factors or what was communicated to you was not reasonable, you may want to consider a more detailed review. Theoretically, if you have considered all factors in your expectations, the only plausible explanation at this point for a variance is a misstatement probably due to error or fraud.
- If you have identified an error, review the controls and processes in place to determine what caused the error. This is where you can identify steps to improve the control strength to prevent future errors.
- Inform your auditors of the results of your analytics and the areas of risk you identified. This will allow your auditors to focus on these areas and provide more value to your audit. Your auditors will more than likely ask these questions and you’ll already know the answers.
Using analytics within your business will allow you to properly allocate more of your time and resources to the areas with the most risk. You will be able to efficiently identify the riskier areas and make the necessary improvements in processes and controls to address the risk. This can prevent possible audit findings, adjustments and can even help prevent fraud.
Analytics and Financial Review Help
If you are looking to step up your game as it relates to financial reviews within your company, contact Rea & Associates. Our team of Ohio government auditors can help you incorporate analytics into your reviews so you can get a better picture of how funds are being used throughout your organization.
Looking for more information on how to reduce fraud risk within your business? Check these articles out:
As a business owner you likely have heard more than once that you should treat your vendor listing like Fort Knox – keep it secure and prevent access to all but authorized personnel. Typically this conversation is geared toward access to the vendor master, which lists all the important information for approved vendors. The Fort Knox comparison is apt; vendor master security is extremely important. Access should be limited and only granted to appropriate individuals. Read the rest of this entry “
Is your school struggling with declining funding? If so, you’re probably worried about the top line. You’re closely watching what’s coming in. You’re exploring ways to generate revenue. But, you need to be equally worried about what’s going out.
Credit cards are one of the most common ways for funds to escape your district. This type of fraud is particularly destructive because it tends to be long-term, continuous and difficult to spot. Employee fraud is like a hole in a bucket – no matter how much water you add, slowly but surely, the water level keeps going down. However, if you understand where fraud may be taking place, you can take steps to deter it. Read the rest of this entry “
All too often, school clients come to us asking about fraud detection. But, needing fraud detection implies that there’s fraud to detect. Clients should really be asking us about fraud prevention. A proactive approach to fraud prevention, rather than a reactive approach to fraud, helps schools to stop fraud in its tracks.
One of the most important parts of fraud prevention is risk assessment. Determining your organization’s high risk areas will allow you to focus your efforts on the areas where they’ll be most effective – giving you the best bang for your buck. Read the rest of this entry “
When we speak to clients about fraud prevention, they’re often overwhelmed. They often think they can’t possibly be watching every part of their operations all the time. Fraud doesn’t occur equally in all parts of an organization’s operation and is often committed in the same ways: false invoicing, fake vendors and inappropriate employee expense reimbursements. By watching for easy-to-spot signs in each of these areas, organizations can go a long way towards preventing fraud. Read the rest of this entry “