Fraud Detection in Auditing

🚨 AI + Font Forensics = ₹68 Lakh Tax Fraud Busted in Hyderabad 🚨 The Income Tax Department in Hyderabad recently used AI-powered font forensics to uncover a Long-Term Capital Gains (LTCG) fraud worth ₹68.7 lakh. A taxpayer claimed improvement costs from a bill dated 2002, but AI tools flagged the use of the Calibri font—which was only released in 2006–07. This inconsistency exposed the document as forged, prompting a revised ITR and additional taxes paid . 🔍 Why This Matters for Auditors & Risk Professionals 1. Innovative Forensics AI isn't just for big data and predictive insights—it’s now a frontline tool in document authenticity verification. Font analysis is a low-cost, high-impact method. 2. Red-flag Awareness It’s not enough to verify the content—verify the context. Details like font age, metadata timestamps, or even document origin can reveal fraud. 3. Regulatory Relevance Tax authorities are stepping up forensic capabilities. Expect similar methods to be applied in other regulatory areas—GST, money laundering, financial filings. 4.Upgrade Your Toolkit Incorporate similar forensic checks—font, metadata, version histories—into due diligence, vendor audits, expense claim reviews, and whistleblower investigations. ✅ Action Steps ✅ Add font & metadata analysis to your internal audit and investigation playbooks. ✅ Train teams to look beyond signatures—validate document authenticity at a granular level. ✅ Evaluate simple AI tools that can detect anomalies in fonts or document history. ✅ Share this knowledge in audit committees, risk forums, and compliance training. This case is another reminder: fraudsters adapt, but so must we. In a world where even fonts can betray deception, staying ahead requires curiosity, precision, and technology-backed scrutiny. What forensic techniques are you using to catch today’s more subtle frauds? #Forensics #Audit #RiskManagement #AI #InternalAudit #Compliance

Silent observers spot what systems miss. If you want to close control gaps, start by identifying who sees what because fraud is often visible to those who aren’t formally responsible, but are closest to the action. Map every role, even without sign-off power, and you’ll find hidden fraud sensors:  • Admin & exec assistants → see paperwork shortcuts  • Accounts payable clerks → catch duplicate vendors  • Payroll staff → notice “special” wage bumps  • Floor or shift managers → witness off-book inventory moves  • Internal auditors & controllers → connect the dots others ignore  • External bankers & advisors → hear side-deal whispers Give them safe ways to speak such as voice-of-the-staff surveys, anonymous reporting.  When people feel heard, patterns surface faster, and control gaps begin to close on their own. #FraudDetection #InternalControls #RedFlags #ForensicAccounting #Fraud #ForensicForesight

User Access Review: UAR is a critical detective control in ITGC ensuring authorized access to systems and data. 1. Vulnerabilities in UARs Lack of Timeliness: Delays in reviews lead to unresolved unauthorized access. Ineffective Scope: Missed systems, roles, or user populations. Inadequate Mechanisms: Failure to detect orphan accounts or excessive privileges. Manual Errors & Poor Documentation: Risk of overlooked issues and insufficient audit trails. 2. Risks Associated with UARs Unauthorized Access: Data breaches or fraud risks from improper access. Data Integrity Risks: Potential malicious or inadvertent modification of critical data. Regulatory Non-Compliance: Non-adherence to compliance requirements such as SOX or GDPR. Operational & Financial Risks: Increased potential for fraud, financial loss, or business disruption. 3. Compensating Controls When UAR is ineffective or absent, compensating controls help mitigate risks: Real-Time Monitoring & Automated Access Controls Multi-Factor Authentication Periodic Access Re-Certifications Logging and Automated User Provisioning 4. UAR as a Compensating Control UAR can act as a compensating control for deficiencies in: Role-Based Access Controls (RBAC): Detect and correct misaligned access. User De-Provisioning: Identify orphan accounts for timely removal. Segregation of Duties (SoD): Detect conflicting roles during access reviews. Logging & Monitoring: Detect unauthorized access missed by logs. Privilege Escalation & MFA Absence: Identify unauthorized access and mitigate risks. 5. Key Considerations for Auditors Auditors must ensure that the UAR process is comprehensive and effective by focusing on key attributes: Reviewer Independence: The reviewer should not review their own access. Reviewer should be authorized and have appropriate knowledge of access policies and system functionality. Timeliness of Review: Reviews should be conducted on time as per the defined schedule (e.g., quarterly or annually). Senior Oversight: Reviewer’s access should be reviewed by a senior or control authority to ensure accountability and prevent conflicts of interest. Actionable Follow-Ups: Issues identified during the review must be addressed promptly. Documentation and Approval: All reviews should be properly documented, with evidence of approval and follow-up actions. 6. Important Attributes to Review User Roles & Privileges: Ensure access follows the principle of least privilege, and users only have access necessary for their role. Orphan Accounts & Excessive Privileges: Detect accounts no longer in use or access rights exceeding the user's job requirements. Segregation of Duties: Ensure there are no conflicting responsibilities that could lead to errors or fraud. 7. Segregation of Duties (SoD) Conflicts Key SoD conflicts to be aware of during access reviews: Admin vs. Security Roles Development vs. Production Access Finance Roles & Approvals Audit vs. Operational Roles

The Economic Crime and Corporate Transparency Act (ECCTA)'s "failure to prevent fraud" offense just took effect in the UK this month. This means companies can now be held criminally liable for employee or agent fraud if they lack reasonable prevention measures. This is no longer your compliance team's problem, it's an enterprise accountability issue. Leaders must understand their defenses and gaps. And regulators have outlined exactly what a credible defense requires: risk assessment, proportionate controls, top-level commitment, due diligence, training, and continuous monitoring. Black-box tools won’t help you prove any of that. What does this look like in practice? - Explainable decisions → Log clear reasons, features, and audit trails for every action - Documented governance → High-impact actions need approvals with traceable sign-offs - Proactive detection → Real-time risk detection to catch patterns early and link incidents to behavior - Continuous monitoring → Track drift, bias, and performance with change logs to prove model effectiveness Regulators expect proactive fraud detection, not cleanup after the fact. That's why explainability matters so much in fraud prevention. At Oscilar, we've built these principles into everything we do so leaders can see their true exposure, close gaps quickly, and demonstrate reasonable procedures.

In Financial Services, detecting and handling fraudulent transactions is mission critical. Top institutions invest millions into AI/ML solutions to improve automated fraud detection. But there’s still a common gap: the workflows for investigating ambiguous cases often remain stuck in spreadsheets and ticketing systems—slowing review times and frustrating customers. With Databricks, organizations can build sophisticated models that automatically classify most transactions as fraudulent or legitimate. However, there's always a critical grey area of transactions that fall between these extremes—requiring hours or days of manual verification, leading to mounting operational costs and frustrated customers. Our Solutions team quickly prototyped an integrated approach based on a common Databricks reference architecture, using Superblocks for the operational workflows. Here’s the breakdown: 🔍 The Intelligence Layer (Databricks): - An isolation forest model identifies unusual patterns - An XGBoost classifier provides fraud probability scores - Models run automatically through MLflow pipelines - Predictions are stored efficiently in Delta tables 💡 The Action Layer (Superblocks):  Our application transforms these ML insights into an actionable workflow where analysts can: - Review a queue of flagged transactions with full context - Make informed decisions on potential fraud cases - Create and document investigations comprehensively - Feed decisions back to Databricks with full data governance to improve model accuracy This approach unlocks a key operational workflow and improves the model through RLHF: - Analysts can swiftly handle this tricky grey area, drastically cutting resolution times and improving customer satisfaction. - Every review action becomes fuel for even better fraud detection, creating a virtuous cycle of learning and improvement.

🔐 Real-Time Fraud Detection with AWS Bedrock Agents and MCP 1. Multi-Agent Collaboration for Specialized Tasks AWS Bedrock’s multi-agent collaboration framework allows the deployment of specialized agents, each focusing on distinct aspects of fraud detection: • Transaction Monitoring Agent: Analyzes real-time transaction data to identify anomalies. • Behavioral Analysis Agent: Assesses user behavior patterns to detect deviations indicative of fraud. • Risk Scoring Agent: Calculates risk scores based on aggregated data from various sources. This modular approach ensures comprehensive coverage and efficient processing of complex fraud detection tasks. 2. Standardized Data Access with Model Context Protocol (MCP) MCP provides a standardized method for AI agents to access diverse data sources securely and efficiently: • Unified Data Integration: Agents can seamlessly retrieve data from various systems, including transaction databases, user profiles, and external threat intelligence feeds. • Scalability: MCP’s client-server architecture supports scalable integration, allowing the system to adapt to growing data needs. By leveraging MCP, agents maintain consistent and secure access to the necessary data for accurate fraud detection. 3. Adaptive Learning with Generative AI Incorporating generative AI models enhances the system’s ability to adapt to evolving fraud patterns: • Synthetic Data Generation: Generative models create synthetic fraud scenarios to train and test detection algorithms. • Continuous Learning: The system updates its models in real-time, incorporating new data to improve detection accuracy. This adaptive approach ensures the system remains effective against emerging fraudulent activities. 4. Real-Time Decision Making The integration enables real-time analysis and response to potential fraud: • Immediate Alerts: Suspicious activities trigger instant alerts for further investigation. • Automated Actions: Based on predefined rules, the system can automatically block transactions or require additional verification. Such prompt responses are crucial in minimizing the impact of fraudulent activities. By combining AWS Bedrock Agents’ multi-agent capabilities with MCP’s standardized data access and generative AI’s adaptive learning, organizations can establish a robust, real-time fraud detection system. This integrated approach not only enhances detection accuracy but also ensures scalability and adaptability in the ever-evolving landscape of financial fraud.

📊 Must-Know Excel Formulas for Internal Auditors ✅ VLOOKUP / XLOOKUP – Find missing or incorrect data 👉 Example: You’re auditing supplier invoices and need to check if every invoice in the accounts payable report exists in the purchase order report. Instead of manual checking, use XLOOKUP to instantly match invoices and flag missing ones. ✅ IF & IFERROR – Error-proof your audit checks 👉 Example: While checking expense claims, you can use: =IF(B2>10000, "High Risk", "OK") to flag claims above a threshold for further review. ✅ COUNTIF – Find duplicate or suspicious transactions 👉 Example: Identify duplicate vendor payments by using: =COUNTIF(A:A, A2) If the count is more than 1, you have a duplicate! ✅ SUMIF / AVERAGEIF – Summarize risk areas 👉 Example: Find the total value of high-risk transactions by summing only those that exceed a specific amount: =SUMIF(B:B, ">10000", C:C) ✅ TEXT, LEFT, MID, RIGHT – Extract hidden insights from data 👉 Example: If invoice numbers start with a branch code, you can extract it using: =LEFT(A2, 3) ✅ Identifying Missing or Delayed Payments using XLOOKUP Scenario: You're auditing customer payments and need to check if all invoices have corresponding payments. Formula: =XLOOKUP(A2, Payments!B:B, Payments!C:C, "Missing Payment") ✅ Detecting Duplicate Invoices using COUNTIF Scenario: You suspect duplicate invoices in the sales ledger, which could indicate fraudulent transactions. Formula: =COUNTIF(A:A, A2) ✅ Aging Analysis for Overdue Receivables using IF & TODAY() Scenario: You need to identify overdue invoices and categorize them into aging buckets (0-30, 31-60, 61-90 days). Formula: =IF(TODAY()-B2<=30, "0-30 Days", IF(TODAY()-B2<=60, "31-60 Days", IF(TODAY()-B2<=90, "61-90 Days", "90+ Days"))) ✅ Customer Credit Utilization using SUMIF Scenario: You need to check if a customer has exceeded their credit limit. Formula: =SUMIF(A:A, "Customer_Name", B:B) ✅ Trial Balance Verification using SUMIF Scenario: You need to check if all debits and credits match in the trial balance. Formula: =SUMIF(B:B, "Debit", C:C)-SUMIF(B:B, "Credit", C:C) ✅ Bank Reconciliation using Conditional Formatting Scenario: You want to highlight bank transactions that are missing in books. Steps: 1. Use XLOOKUP to compare bank statements and books. 2. Apply Conditional Formatting to highlight missing records. Formula: =XLOOKUP(A2, Bank_Statement!A:A, Bank_Statement!B:B, "Not Found") ✅ Variance Analysis using ABS & IFERROR Scenario: You need to compare budgeted vs. actual expenses and highlight significant variances. Formula: =IFERROR((B2-C2)/B2, 0). ✅ Fixed Asset Depreciation Calculation using SLN Scenario: You need to calculate straight-line depreciation for fixed assets. Formula: =SLN(Cost, Salvage, Life) hashtag #Dailypost hashtag #Knowladge hashtag #ExcelForAuditors hashtag #Finance hashtag #O2C hashtag #R2R hashtag #AuditTools hashtag #ProcessImprovement hashtag

Think your bookkeeper couldn’t possibly steal from you? So did the U.S. State Department. A recent case involving a former State Department budget analyst who embezzled over $650,000 serves as a stark reminder that even trusted insiders can become threats. Over two years, this individual exploited her position, manipulating financial systems to divert funds undetected. How did she do it? Over the course of two years, she wrote 60 checks to herself and three more to a close personal friend. That equates to over $10K per check. Then she changed the payee information in #Quickbooks to cover her tracks. How did the #USGovernment let this happen? 1️⃣ Unchecked Authority: Granting unchecked access to financial accounts can lead to significant vulnerabilities. 2️⃣ System Manipulation: Altering accounting entries to mask fraudulent activities highlights the need for robust audit trails. 3️⃣ Delayed Detection: The prolonged duration of the fraud underscores potential gaps in oversight and monitoring. Action Steps for Businesses: ✅ Implement Segregation of Duties: Ensure that no single individual has control over all aspects of financial transactions. ✅ Regular Audits: Conduct periodic internal and external audits to detect and deter fraudulent activities. ✅ Enhance Transparency: Maintain clear and accessible records, and encourage a culture where anomalies can be reported without fear. ✅ Invest in Training: Educate employees about ethical standards and the consequences of fraudulent behavior. Internal fraud can have devastating financial and reputational impacts. It's imperative for organizations to proactively establish and enforce comprehensive internal controls. If your business has been a victim of embezzlement or internal theft, DM me. We can implement a plan to keep your business safe. Follow Fraud Hero to stay informed about fraud and scams. #fraud #fraudprevention #embezzlement #government #fraudhero

Fraud grows unchecked without anyone noticing? That's exactly what happened to one of my clients. Because his businesses basic internal controls were non-existent, allowing a single employee to process payments, reconcile accounts, and destroy evidence without oversight. Then we helped him, here’s how: 1️⃣ Segregation of Duties – Strategically divide financial responsibilities so no single person controls multiple critical functions, creating natural checks and balances that make fraud exponentially more difficult. 2️⃣ Authorization Hierarchy – Establish clear approval thresholds and verification protocols for transactions, ensuring appropriate scrutiny based on risk and materiality. 3️⃣ Documentation Standards – Implement rigorous record-keeping requirements that create audit trails for every significant transaction, eliminating gaps where impropriety can hide. 4️⃣ Independent Reconciliation – Deploy regular account reconciliations performed by someone other than the transaction processor, catching discrepancies before they become systemic problems. 5️⃣ Periodic Internal Audits – Conduct surprise reviews of financial processes and transactions, creating accountability and deterrence through unpredictable oversight. The results?  ✅ Fraud risk reduced by 94%  ✅ Operational errors decreased by 76%  ✅ Stakeholder confidence strengthened Later, the business owner confessed: "I trusted completely and verified never. I didn't realize that internal controls aren't about suspicion, they're about creating systems that protect everyone, including honest employees." Strong internal controls make fraud difficult and detection inevitable. Weak controls create temptation and opportunity. I help businesses implement effective internal controls without bureaucratic complexity. DM "Controls" to safeguard your financial future. #internalcontrols  #finance  #accounting 

Internal controls are the one thing that will make a difference between preventing or detecting fraud and watching your clients lose potentially thousands of dollars. You probably already do most of the basic internal controls in your accounting firm, maybe without realizing it's a control! But first, what is an internal control? Internal controls are accounting and auditing processes used to ensure the integrity of financial reporting and regulatory compliance of a company. The top three internal controls that we as accountants for small business clients should implement are: ➡ Separation of duties: don't let one person handle all aspects of the accounting for one business! Ensure particularly that approvals are spread out among different employees. This has the added benefit of cross-training employees on a client! ➡ Regular bank reconciliations: you already do this one! Conducting regular bank reconciliations ensures that you know what is going on with your clients' finances and can detect any issues immediately after they occur. ➡ Approval procedures: anything that involves large transactions or transactions that cannot be undone should have a second set of eyes on them before they are completed. You can identify some processes within your company that might need signatures, as well. Remember: our clients are most often entrepreneurs, and not accountants. They rely on us to let them know when something doesn’t look quite right. But first, we have to know what doesn’t look right! #FraudPrevention #FraudDetection #AccountantsandAccounting #CPAs #InternalControls