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Transforming Microsoft Excel Into an Audit and Cash Recovery Engine
By Richard B. Lanza, CPA, Cash Recovery Partners LLC

June 2005 (SmartPros) Spreadsheet software like Microsoft Excel have proven to be an indispensable tool for data analysis be it part of an audit or to identify cash recoveries for an organization. While data files may be limited to 65,536 rows of information, users can often summarize large data sets down to a "spreadsheet size," allowing them to use Excel as the analysis engine.


Excel can perform a wide array of analytical tests and data analysis, including:
 
Analytical Tests  Data Analysis
· Benford’s law.
· Horizontal and vertical analytics.
· Ratio analysis.
· Regression analysis.
· Statistics.
· Stratification and aging.

· Append and merge.
· Cross tabulate and pivot table.
· Detect duplicates and gaps.
· Extract and filter.
· Join and relate.
· Sample.
· Sort.
· Summarize and subtotal.
 
One key benefit of performing data analysis using a spreadsheet is that most business professionals are already trained and therefore, more comfortable experimenting with the tool. Further, spreadsheet user interfaces have improved over various iterations of the products and the graphing capabilities are highly functional while easy to operate. Lastly, Excel is part of the Microsoft Office productivity suite that comes with most business computers. For all these reasons, business professionals looking to enhance their activities with data analysis can look to Excel as a great starting point.
 
With the software ready and waiting, the three top processes for overall recoveries include the accounts payable, accounts receivable and payroll areas. Sample reports in these areas include:
 
Accounts Payable
  • Identify duplicate payments based on invoice number, vendor number, and invoice amount. Then, identify duplicate payments based on the invoice number and invoice amount with a different vendor number.
  • Filter invoices in sequential order that may signal a fraudulent invoicing scheme.
  • Match the vendor address file to the employee address file on the first few characters of the street address field and the zip code. This may signal fraudulent vendors established by employees to process false billings.
  • Summarize by vendor the number of invoices processed to identify vendors that have a high number of invoices paid within a month who may be able to move to a monthly billing, thereby reducing accounts payable processing.
Accounts Receivable/Revenue
  • Calculate a days sales outstanding by invoice and extract high days sales outstanding deviations.
  • Extract customer invoices that exceed 10 times the average invoice amount to that customer to identify potential fraudulent or erroneous overbillings. Then do the reverse to identify erroneous underbillings.
  • Summarize invoice credit memos, refunds, and other adjustments by customer and enterer of the adjustment to identify process issues and potential fraud.
Payroll
  • Match the payroll check register to the human resource file to identify ghost employees who exist in the payroll check register but not in the human resource file.
  • Complete a trend analysis over two periods of the payroll by employee to identify overpayments.
  • Calculate the percentage of overtime to gross pay (on a person by person basis) and sort from high to low to find inefficiencies in resource management and potential fraud.
With the report ideas in mind, an extensive free guide is available for download explaining how Excel can be used as an audit and cash recovery software.  The document details how to complete each of the various data analysis and analytical tests presented above.

 
RICH LANZA, CPA, CFE, PMP, is President of Cash Recovery Partners, LLC. He is the author of 12 publications and training courses in ACL, IDEA, Access, ActiveData, and Excel and has over 50 articles for major audit publications. For more information or to contact Rich, visit his SmartPros column, The Bottom Line.

2005 SmartPros Ltd. All rights reserved.

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