APEX Analytix, an international provider of accounts payable software for error prevention and fraud detection, has announced enhanced software and business services to detect vendor fraud. FirstStrike Fraud Detect software and Vendor Risk Analysis services were developed to identify payments to fictitious companies, conflict of interest vendors, kickback vendors, prohibited vendors associated with the U.S. Patriot Act, and other potentially fraudulent vendors and transactions.
Experts agree that fraud is a serious issue affecting large companies, further complicated by the fact that many accounting processes are now automated. According to a 2006 report by the Association of Certified Fraud Examiners, five percent of a company’s annual revenue is lost to fraud, representing $652 billion in losses within the United States alone. The survey goes on to say that only 19.2% of the 1,134 frauds reviewed were identified via internal controls. The 2005 PricewaterhouseCoopers Global Economic Crime Survey reported a 50 percent increase from 2003 in fraud that led to a loss of assets – an average of more than $1.7 million per company surveyed for “known” frauds.
Traditional systems approach fraud by creating specific workflow processes or by segregating the duties of accountants. APEX Analytix’s new systems work by monitoring data that is already in company financial systems. In addition, the company’s accounts payable system may be continuously monitored or reviewed on a regular basis to detect new cases of high-risk activity. According to Michael Lustig, chief executive officer of APEX Analytix, continuously monitoring or regularly reviewing data have proven to be the most effective methods of early detection of fraud in the procure-to-pay cycle.
There has been increased visibility to this issue as the Public Company Accounting Oversight Board issued a report in January of this year focusing on the issue of poor fraud detection practices by auditors. In summary, the PCAOB is not pleased with the amount of effort put forth by auditors for fraud detection and found the approach taken and results garnered from current fraud detection activities unsatisfactory. According to a February 15th article in CFO Magazine, the PCAOB is assessing the need to mandate regular forensic audits every three to five years that would impose a significant fee increase to current audit costs.
“Beyond the direct losses of fraud is the enormous collateral damage to a company’s brand, supplier relationships, staff morale, and of course, market value,” said Lustig. “In order to minimize this risk, attributes from the invoice, payment, vendor and employee files can be systemically analyzed in real-time to flag suspect vendors. This is not unlike the sophisticated techniques currently in use to detect credit card fraud. With FirstStrikeTM Fraud Detect transactional vendor data is assessed and flagged for potential fraud using a combination of fraud factors, such as documented scam vendors, use of private mail services, consecutive invoice matching, entities on government lists with whom companies are prohibited to do business and others,” said Lustig. “FirstStrikeTM Fraud Detect provides the ability for companies to set their own tolerance levels for each fraud factor being used.”
“Asset misappropriation frauds are becoming more common-place because as companies get bigger, they rely on more outside vendors,” Lustig said. “Another factor is the overwhelming feeling of employee displacement in the midst of corporate mergers and acquisitions. They feel mistreated and therefore entitled to more money and when the opportunity presents itself for them to use internal systems to do so, there is little hesitation. It’s easier for people to work their way into the system and get lost in the hundreds of checks issued every day. Our clients didn’t want to rely on luck to catch fraud. They needed an automated system that would detect and identify fraudulent transactions as they occur.”
Vendor Risk Analysis services employ FirstStrike⢠Fraud Detect as well.
FirstStrikeTM Fraud Detect works by applying advanced fraud detection algorithms to transactions and flagging those that appear to be fraudulent. Once a transaction and vendor are flagged, they can then be analyzed further to determine legitimacy. According to Lustig, between 1/4 and 1/2 percent of vendors are flagged for evaluation. Although much of the analysis is confidential, some of the attributes for vendor flagging include:
– Use of initials in vendor name
– Private mail service address
– Appearance on a Government Watch List
– Benfords (mathematical distribution)
– Even dollar amounts
– Consecutive invoice numbering
Vendor Risk Analysis uses a multi-phase approach that combines an automated process to flag high-risk transactions with a manual evaluation by APEX Analytix’s trained fraud prevention forensic analysts. The service includes both an automated process to determine high-risk scoring vendors and subsequent manual review involving review of documentation, public and proprietary databases and resources.
APEX Analytix is the fastest growing provider of accounts payable software for error prevention and fraud detection, recovery audit services, and productivity and performance management solutions to the Fortune 500. Its clients include 28 of the country’s Fortune 100 companies.
APEX Analytix is continually expanding its service and software offerings based on emerging technologies and the needs and requests of corporate America and the world. APEX Analytix offers a full suite of auditing services and software including A/P audit, contract compliance audit, statement audit, sales and use tax audit, escheatment review and freight compliance audits – in addition to a suite of software for preventing and capturing overpayments electronically called FirstStrikeTM.
About Apex Analytix
APEX Analytix, founded in 1988, started as an A/P recovery audit services provider and soon transformed the industry with the first standardized, highly functional software solution for the identification and prevention of A/P errors. The company has over 40 software installations – more than any provider of A/P recovery audit services and prevention software. The software has prevented more than $1 billion in overpayments. APEX Analytix serves 28 of the Fortune 100 and has 110 active software and service clients. For more information call 1-800-284-4522, or visit www.apexanalytix.com.
