KEY POINTS:
Accounting and consulting firm Deloitte has unearthed some bizarre financial irregularities by running its clients' corporate records through a new automated data analysis process.
The list includes a $2000 expense claim payment for babysitting, an employee who had supposedly accrued 125 weeks of leave, and the batch of
doubled-up payments made by one business totalling $960,000.
Over the past 18 months Deloitte has processed files from hundreds of New Zealand businesses through its DTect auditing software which can spot anomalies that manual auditing would never pick up.
As well as marrying up information from previously disjointed internal databases, DTect compares a company's files with external information such as IRD records.
"We've found for example that our clients did not realise the extent of personal relationships their employees have with each other - that's something we're finding quite a lot of - people who have the same bank accounts, or the same address," says Deloitte risk and assurance partner Faris Azimullah.
While relationships between staff members are not necessarily problematic, issues of conflicts of interest and unfair treatment can arise if those relationships are not identified.
DTect has highlighted a similar issue that is common to a large number of businesses: relationships between employees and contractors.
"We look for duplicates and in the process of finding duplicates we find different names that are profiled as the same [perhaps through a linked bank account]," says Azimullah.
"We ask ourselves: why is that the case? And we realise that we've got employees that are effectively writing contracts with the companies that they are associated with."
DTect audits have shown that 20 out of every 5000 employees will be linked to a contractor that the organisation deals with.
"We've found fraud as a result of this," Azimullah says.
"When you've got employees who are spending the company's money in a decentralised manner and you can't really monitor and supervise everything, they will eventually deal with people they are associated with - and again that is leading to errors and fraud."
Deloitte has run DTect across businesses ranging in size from several thousand down to 50 staff.
As a result of a DTect audit, one organisation unearthed overpayments it had made totalling $960,000 while another had found $500,000 in overpayments.
Azimullah says companies often run multiple databases and consolidating them could help reduce instances of error.
Costly errors or concerns often surface in the payroll department simply because it is the largest area of expense for most businesses and even small weekly payment errors become significant over time.
Revelations around expense claims are often an eye-opener for businesses, with many surprised to find they are paying out thousands of dollars to cover staff members' speeding fines and parking tickets.
Azimullah says while detecting these anomalies can save a company significant money, it also highlighting business processes which could be improved to prevent future problems.
He would not say how much Deloitte charged for the DTect service but said it was relatively cheap because it was an automated process.
DIGGING DEEP
* Deloitte's DTect software analyses corporate records to find anomalies.
* It is able to unearth facts about companies that normal auditing can't, such as relationships between workers, overpayments, and employees contracting out work to businesses they are associated with.
