Skip to main content

Critical Thinking for Auditors: ‘Seeing’ Anomalies in Big Data AND Backwards Chaining to the Root Cause Control Deficiency/Fraud

Date(s): Apr 26, 2017 - Apr 27, 2017
Time: 8:30AM - 5:00PM
Registration Fee: $559.00
Cancellation Date: Apr 19, 2017
Location: JOHN M. KEEL LEARNING CENTER
City: Austin
Parking Info:

Parking for SAO, Professional Development courses is in Garage B (1511 San Jacinto Blvd.). The Garage signage may read 1511 San Jacinto or Garage B. The elevator in Garage B is not reliable. If you are unable to walk the stairs, please contact the professionaldevelopment@sao.texas.gov for alternate parking arrangements. Handicapped parking is free at the meters around the downtown area.

A course coordinator will Email you a parking permit prior to the course start date. A permit must be displayed or you will be ticketed.


Course Description

Here is the most common lament offered to Dr. Dan, by audit managers:

“Our auditors perform the steps in the audit program, but don’t seem to find, those critical data anomalies that are the key red flags. Further, if they do locate an anomaly, they have difficulty working backwards to the root cause (control deficiency). Ironically, the data gets in the way of the analysis.”

 

So…ironically, while auditors may have a TON of data, what is lacking is a LITTLE MORE analysis. What is the story behind the data? And what is the root cause behind the anomaly that they (hopefully) found?

 

What we need is an exciting classroom environment, where we encourage critical thinking and unstructured problem solving. Forget keystrokes it’s a given that (auditors already know how to run Excel, Access, SAS…whatever), let’s teach them to heighten their “audit instincts.” Let’s sharpen their senses, so they can “smell” a problem, and “see it” in the data. Frankly, the question is, “Do you see what I (a 30-year veteran auditor) see?”

 

This isn’t just a forensics course: it’s training in tying anomalies to failures in controls, compliance, policies and procedures (root cause analysis). We don’t want to focus on just the symptom (the anomaly) we must ask “how DID this happen?”

 

Specifically, this computer case-driven course will teach auditors/examiners/inspectors how to analytically dissect big data files, and locating the not-so-obvious red flags. Subsequently, the auditors will work backwards, to identify the missing controls (or over-ridden controls) which could have prevented/detected such an event.

Another situation of “auditor misdirection” is getting too hung up on data validity and reliability. In this class, we’ll perform statistical tests of validation while pushing thru unnecessary (and possible false) concerns which cause hesitancy of analysis.

 

While it is important to find control deficiencies/fraud, it is just as important to prove that things are not as bad as the data first appears. Therefore, we’ll learn to utilize Excel’s capabilities to apply the “scientific process” for “tests of significance”. Additionally, we’ll let the “data talk to us” develop Critical Success Factors (CSFs) and Key Performance Indicators (KPIs).

 

This class is team-based, since two heads are better than one. Over 20 computerized data sets will be utilized, providing a wide range of exploration.

 

Send your “best and brightest” … your wild stallions who are way, way, way, out of the box! There is no user guide for creativity!  We need folks who “think” about how a system can be beaten, think like a thief.

 

NOTE: This is not a class in learning how to run Excel or Access. It is assumed that the attendee will have base level skills in one or both packages.


Potential CPE Credits: 16.0
Govt Hours: This class meets 16.0 hours of the 24-hour requirement for governmental CPE under Government Auditing Standards (yellow book), in most cases.
Technical Hours: This class meets 16.0 CPE credits of technical training in compliance with Texas Admin. Code Rule 523.102.

Instruction Type: Live
Experience Level: INTERMEDIATE
Category: Auditing

Course Objectives

 

Upon completion of this course, participants will be able to:

 

  • Enumerate the Audit Risk Model
  • Distinguish between costs of evidence
  • Recognize data anomalies much sooner
  • Discover multiple tests of data validation and significance…in Excel!
  • Explain root causes for anomalies
  • Perform various data mining techniques
  • Consider the root cause control failure
  • Utilize the # 1 statistical fraud finding technique.
  • Develop CSFs and KPIs
  • Invoke macros, wizards and functions in Excel and Access

Course Outline

1: Introduction and Objectives

 

2: The Audit Risk Model

  1. Economies of Scale
  2. The staggering costs of evidence
  3. Cases

 

3: A More Scientific Approach to Auditing

 

4: Risk Analysis: The engine that drives the audit

 

5: Big Data… and Finding Anomalies

a.      What is my “mindset” when staring at 300,000 lines of data?? Yikes!

b.    Divide and Conquer via Parsing…. “slicing and dicing”

c.     Cases

 

6: Validation of your big data file

a.     Don’t get too hung up on data reliability…it is what it is

b.    Cases

 

7: Letting the data talk to you

a.     Do you hear what I hear?

b.    Cases

 

8: Developing CSFs and KIPs

a.     The statistics of metrics

b.    Sources of Industry metrics

c.     Cases

 

9: Backwards Chaining from Data Anomalies to Root Causes (Control failures)

a.     OK, I found an anomaly…now what?

b.    Locating the control failure

c.     Cases

 

10: Data Anomalies to question the accuracy of legacy policies

a.     Hum: the agency policy says “book your flight 21 days in advance to save $”, but the data (statistically) paints a different picture. What do I do?

b.    Cases

 

11: I found an error…is it “significant”?

a.     Statistical tests of significance…in Excel

b.    Cases

 

12: “Smelling” fraud

a.     Maybe this isn’t a control breakdown…maybe its collusion or a control override?

b.    Cases

 

13: Mathematical tests and functions available in Excel

a.     Z and t-tests, chi-squared and other tests

b.    Robust Excel functions for big data

c.     Cases

 

14: Regression Analysis: The #1 way to find outliers

a.     Inserting a trend line in data

b.    Constructing 95% prediction intervals (bounds)

c.     Building an analytics dashboard, and refreshing data

d.    Cases

 

15: The power of Access macros and wizards

a.     Construction of macros

b.    Building switchboards and refreshing data

c.     Cases

 

 


Instructors

Amanda Wall

Amanda has a Bachelor degree in Business with a double major in Accountancy and Public Sector Financial Management, is a qualified CPA and is a member of both the Institute of Internal Auditors (IIA) Australia and the Association of Certified Fraud Examiners. With 12 years of practical experience in the field of audit (internal and external audit) plus over four years as a professional development instructor, Amanda’s goal is to proactively “make a difference”.

Amanda began her career in Australia as a Governmental auditor with the Queensland Audit Office, and got her first taste of teaching when she nominated to lead the Office’s Graduate Development Program as their in-house trainer, over and above her role as a field audit team leader for financial statement audits. After nine years in the field of external audit, Amanda transitioned to the field of internal audit. As an internal auditor she headed the team for the State’s Environmental Protection Agency and subsequently worked with one of the State’s largest Government departments, Queensland Health. It was at Queensland Health where Amanda was introduced to the popular and innovative techniques of Dr. Dan Kneer. Amanda is now proud to be sharing these cutting edge techniques globally.

As a professional development instructor, Amanda promotes techniques helping colleagues to ‘audit smarter, not harder’. Her speaking engagements and workshops have taken her to various international destinations beyond her home base in Australia, including Taiwan, Dubai, Fiji, Thailand, New Zealand, Papua New Guinea, the Philippines and Singapore. Amanda encourages innovation in the field of audit, teaching techniques ranging from statistical data analytics and continuous controls monitoring to statistical sampling and business process analysis in an IT pervasive environment.


Additional Information

If you are making travel plans to come to Austin, we recommend making "refundable" air and hotel reservations or waiting until 14 days before the class to actually book your reservations. Courses are occasionally canceled or rescheduled due to low enrollment. We determine whether a course has enough participants 16 days prior to the course date. If we cancel or reschedule, we will email the participant and his or her billing contact no later than 14 days before the original class date.

The course coordinator will contact you with parking information. Handicapped parking is free at the meters around the downtown area.

Vending machines with Coca-Cola products and various snack items are available. There is also a refrigerator and microwave in our coffee bar area. Feel free to bring in your own drinks and food if you prefer.

You might want to bring a light sweater or jacket, as room temperatures vary.

To see answers to our Frequently Asked Questions, visit http://www.sao.texas.gov/training/faq.html.