Integrity Tests of High-Volume Databases in an Argentinean state owned and run company: use of Benford law

Essex

Conferencia; 2º Conferencias de Contabilidad y Rendición de Cuentas en Economías Emergentes (AAEE) en Essex Business School; 2021

Purpose ? The purpose of this paper is to explain the technical feasibility of using Benford?s law to assist internal auditors in reviewing the integrity of high-volume datasets and the feasibility of performing scroll down tests. Enterprise resource planning (ERP) systems record tens of thousands of transactions daily in sets of relational databases. Auditors have access to very detailed and lengthy reports that do not help to perform quick analysis to determine if a more detailed investigation is needed. The use of Benford?s law streamlines the search for possible abnormalities in the data increasing the effectiveness of the internal audit process. Design/methodology/approach ? Data was obtained from the records of eight databases of a large government owned service company in Argentina. The data comprises between 3 and 12 years of transactions. The study develops step by step the application of Benford?s law first to test the records in each ERP module and then within one module. Findings ? The paper contributes a simple, cheap to implement and useful tool that can be employed by internal auditors in emerging economies to effectively perform a first scan of the data contained in the relational dababases of their companies. Research limitations/implications ? This study is not about detecting fraud, it aims at helping internal auditors to red flag some data sets that will need further attention allowing them to make the most out of the limited resources available particularly in government owned organizations. Practical implications ? This paper provides a tool to test if large amounts of data behave as expected and if not, they can be pinpointed for future investigation. The study offers some tests on the application of the tool and it is explained so it can be easily used by internal auditors of government owned service companies in emerging economies, particularly those that must serve two or more masters with divergent interests.Originality/value ? This paper demonstrates that even in contexts of limited IT tools available for internal auditors, there are simple and cheap tests than can be performed to determine where to focus the scarce resources to review the integrity of high-volume datasets. Also it points out that internal auditors can employ analytical tests without upsetting any of the internal power groups that compete for power and resources in government owned companies of emerging economies.