The client is a publicly-traded, global manufacturer and distributor of high-quality, consumer, and commercial electronic devices.
The client received a whistleblower complaint alleging certain improper shipping practices undertaken to overstate revenue and manipulation of payment terms for select customers to increase sales at the end of the period. The client was uncertain about the pervasiveness of the suspected fraud and whether it had a material impact on the audited financials. The client engaged outside counsel and Baker Tilly to perform a comprehensive forensic investigation. The company was under an extremely tight deadline to prove or disprove the allegations to comply with the upcoming stock exchange filing deadline. Failure to meet the deadline would have resulted in the client being delisted from the exchange.
The investigation team determined at the onset the need to partner with Baker Tilly's digital team. The investigation and digital teams collaborated, resulting in the team leveraging its knowledge by applying advanced analytic techniques and tools that allowed the investigation team to ingest over 1 million lines of accounting data. This data included invoice data, purchase order data, manifest data, carrier shipping data, customer master, vendor master and accounts payable data into a relational database using Incorta, AWS QuickSight and AWS RDS for Postgres. This reporting tool enabled an end-to-end “story of the order,” from entry of the order by the sales staff to delivery and receipt by the customer. The application of advanced analytics allowed the investigation team to quickly apply multiple red flag indicators to the entire population of sales transactions going back three years and identify all sales transactions that had similar red flags and anomalies that were observed during initial manual review testing procedures, including:
The tools employed by Baker Tilly helped prioritize the investigation team’s focus on highly suspicious sales transactions while also quickly scanning and reviewing key fields in the data. As a result of Baker Tilly’s application of advanced analytics, we identified approximately $14 million in misstated revenue. Our approach was vetted by the client’s independent accounting firm and their shadow investigation team without exception and permitted the client to meet its filing deadline.
