IDEA User Testimonial by Sam Steinfath Application: Billings Adjustments

The situation In the communications industry, when a customer calls with a billing question, service representatives make the account adjustments, and management reviews these adjustments to ensure appropriateness and to detect errors and fraudulent activity. A periodic audit was conducted to review these account adjustments. However, the report format generated by the billing system detailing the adjustments (i.e. account, date, amount, remarks, user id, etc.) severely limited managements control of the adjustments. While it could be viewed online or after printing, there was no way to sort or query the report prior to printing, and each report only covered one days activity of adjustments. Other limiting aspects of the report were: 1.) 2.) 3.) the reports cover either the eastern or western states each days report was between 1000 and 2000 pages there were thousands of adjustments per report

It would have taken an exorbitant amount of time to analyze the reports and look for trends that could detect fraud, misuse, and errors. The IDEA solution The audit department had recently acquired IDEA software to assist with our audits. I spent half a day on the tutorial and the help menu before I began my first use of the software. I began my adjustment testing by utilizing the import function of IDEA. I created three months worth of text files of the adjustment reports (roughly 60 individual reports). After the reports were imported into IDEA, I appended the information into one database that contained the 230,306 adjustments. I then imported information from other sources (e.g. name of individual to associate with the user id), and used the extraction function to focus my work on the sector we were auditing. This resulted in a database of 5400 adjustments with a value of almost $300,000. I was then able to perform high impact testing that could detect trends and/or fraud in addition to being informative to management. To perform trend analysis on the information, I extracted the adjustments into monthly databases. I summarized by employees conducting the adjustments to identify who was conducting the most adjustments and who was giving the largest dollar amounts. I appended the databases to get employee trends for a 3-month period.

1250 Wood Branch Park Drive Suite 480 Houston, TX 77079 Phone: 888-641-2800 Fax: 281-749-2800 www.audimation.com

The information obtained using IDEA showed 10 individuals processed 56% of the dollar value of adjustments. I was able to identify when employee personal accounts were being adjusted, I was even able to identify when employees were performing adjustments on their own accounts. On the initial database of 230,000 records testing identified 20 accounts that were receiving repetitive adjustments. With the ability to identify the employee who was conducting the adjustments, it was possible to determine if the same individual was adjusting the account each month. For the final test I was to determine if individuals could and were exceeding their authority levels by possibly splitting the adjustment into multiple adjustments. By summarizing on 1) accounts and 2) users, a report was created. This report showed accounts given multiple adjustments during a single month by the same individuals and the cumulative amount of the adjustments. The report identified 744 accounts that received adjustments with a cumulative value of $71,000, which were in excess of the authority level of the individual making the adjustment. Copies of the reports generated using IDEA were given to management. Not only was management impressed with the results, they were encouraged with what we had to offer as usable reports. In fact, after our initial meeting the auditee became very responsive to our requests and even had suggestions as to what else might need to be reviewed. The Bonus Benefit In the two weeks following the initial meeting with management concerning the adjustments, I received 5 calls from individuals in other areas of the company wanting the information and wanting to know how the auditing department was able to get this information. I believe the use of IDEA in this aspect of our audit allowed for the best audit testing that could have been performed. The results gave us such credibility with our client that they began to proactively participate in the audit. IDEA has been used in other audit aspects and has had the same considerable impact as the adjustment testing.

1250 Wood Branch Park Drive Suite 480 Houston, TX 77079 Phone: 888-641-2800 Fax: 281-749-2800 www.audimation.com