1.  The ADZ.xls file included with this exam contains the Balance Sheet, Income Statement, and Ratios for 2015

and 2016 for the firm. You will need to calculate the ratios. Once you have done so, identify two patterns in the data that might indicate fraud and explain how the pattern might indicate fraud by describing a specific fraud act that might have produced that pattern. Also, describe possible non-fraud explanation for the same pattern. By “pattern” I mean something more complex than just a change in an account balance. A “pattern” needs to include more than a change in one account. Ratios by themselves do represent a “pattern” because they are based on more than one account. You are free to do additional calculations on the data to provide more evidence to support your conclusions. 

a)         Possible Fraud indicator 1

i)          Description of pattern and explanation of why it might be fraud.

ii)         Alternative explanation of why this pattern might not be fraud

b)         Possible Fraud indicator 2

i)          Description of pattern and explanation of why it might be fraud.

ii) Alternative explanation of why this pattern might not be fraud

2.  You are an internal auditor for a dental insurance company. The firm processes claims for dental services from dentists’ offices; determines their validity; and approves or disapproves the claims. You are running a proactive screening of dental claims data to screen for false claims. You have extracted some data from your system, which is included in the Test Data.xlsx data and attached to this assignment. It contains three worksheets. The Patient worksheet lists patients unique IDs and their addresses. The Dentists worksheet lists the dental offices that have filed claims and their address. The Dental Claims worksheet lists all the dental claims your firm approved for March, April, and May of 2015. 

You need to review the data in the file and see if you can detect any fraud symptoms. I don’t expect you to be Excel experts and so limit your search to things that you can accomplish by merely sorting the data in the various worksheets in various ways. However, if you have access to more powerful software like ACL, feel free to use it. 

To help you in the task, here is a description of basic features of a typical dental office.

·           Dental offices must have a physical presence to treat patients. Thus, a real dental office usually has a street address. However, some dental offices can outsource their billing to firms that might use PO Boxes. 

·           Each dentist office sequentially numbers their claim forms. However, dentist deal with a variety of insurance companies. Thus, the claim numbers from a given dentist to one insurance company should not be sequential unless that dentist office bills the same insurance company for several different patients in a row, which is unusual. 

·           There is a natural limit to how much dental work is normally done on a single patient within a three-month period. Because of the discomfort involved with dental work, patients normally spread how multiple procedures over time. Also, dentists spread the procedures out over time so that the patient can recover from one procedure before they start the next. For example, a dentist would not fill two teeth on opposites of the mouth at the same time so that the patient can chew food on one side while the other recovers. While multiple procedures can be done at once, the number is still limited. Generally, very few patients would have more than a dozen dental procedures done in a three-month period.

·           Patients tend to use dental offices near their home. I don’t want you to try to do a detailed analysis of the patient and dentists’ addresses because that would be too labor intensive, but you can scan the files for out-of-state patients. 

Required – List three fraud symptoms your find and explain why they are a fraud symptom. However, these are just symptoms and not evidence. Therefore, I also want you to discuss how strong a symptom you think each one is and discuss non-fraud alternative explanation for the patterns you spot. If you believe the symptom is so extreme that there couldn’t be a legitimate alternative explanation, explain this as well.

a)         Possible fraud symptom 1

b)         Possible fraud symptom 2

c)         Possible fraud symptom 3

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