Presentation on theme: "=Largest divided by second largest Small set of high-risk transactions Relative Size is an error-detecting test Access or Excel Prepared by: Mark J. Nigrini."— Presentation transcript:
Company wired $600,000 to a charity Usual amount was $3,000 The wire was 200x larger than normal RSF takes largest divided by 2 nd largest Identifies the abnormally high amounts Small sample of high-risk transactions
Decimal point error, $320000 > $3200.00 High risk when subset has many records Errors in perpetual inventory records Insurance claims approved by adjusters Health care payments to providers Beverage sales by an airline Sales prices of a sportswear manufacturer
Test aimed at detecting errors and fraud Tests gives a small set of high-risk transactions Formula: Largest ÷ second largest Based on company wiring $600,000 to a charity This is a reasonableness test Finds the decimal point error Useful for audits of health care claims Somewhat complex Access or Excel routines
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