ACC30003: Forensic Accouting - Forensic Accountant - Dental Offices - Assessment Answer

Forensic Accouting Assignment

Case Scenario

You are a graduate accountant and have just landed your dream job with a forensic accounting firm in Hawthorn, Victoria. Your boss has asked you to travel to their US office to work with the team on a potential dental insurance fraud case, and gain valuable experience in investigative techniques. The company you are assisting processes dental insurance claims for insurance companies. The company receives the insurance claims from dental offices, achieves authorisation from the correct insurance company, and sends payment cheques. In your role you work with the insurance companies and dental offices - you do not deal with dental customers directly.

After two months with the company, you think a number of frauds may be occurring, and you feel the best way to search for these frauds is to investigate documentary evidence. Because hundreds of dental

offices send insurance claims to your office, some may not be real dental offices. You contact the IT department and receive a set of files that represent the documents involved in transactions for the past three months:

Assignment Task

1. As a forensic accountant, the first thing you should do with these files is calculate a checksum.

a. Explain thoroughly what a checksum is, and why this is the first thing you should do with these files.

b. Using the following online checksum calculator https://defuse.ca/checksums.htm#checksums calculate the SHA-

1 checksum for the following files:

i. Claims.csv

ii. Dentists.csv i

ii. Patients.csv

c. Why might your checksums be different from other students in this class? d. Explain what each of the files represents – what information is contained within.

2. Some dental offices may not employ real dentists and may be front companies that are sending claims out for work not performed. Are there any dental offices that you suspect may not be real? What makes you suspect this?

3. Sort the claims file by columns C & B. Are there any suspicious entries? Why?

4. Using the claims file, ascertain if any patients seem to be visiting their dentist too often? Which dentist and patients makes you most suspicious and explain why you are suspicious?

5. Are there any anomalies in patient addresses that make you suspicious of fraudulent activity?

Introduction

Question 1

A

Simply put, checksum is a way of detecting error across data. They are sued to ensure that the file being process is of high integrity after being transferred from one storage device to the other. The medium through which files are transferred can be across the internet or just through the same network (Rouse, n.d.). Whichever way is adopted, it is important to ensure that the file that is being processed is exactly the same as the main file, and this can be determined with check sum (Microsoft, n.d.).

Check sum are normally calculated with the aid of hash function and they are usually processed together with downloads. In order to testify the integrity of any given data, the analyzer should calculate the check sum with the aid of a checksum program or calculator in order to compare the two data and make sure they match (Tips, n.d.).

Form the above understanding, the overall benefit or objective of conducting a check sum prior to any analysis is to make sure that the data is authentic (Rouse, n.d.). If such is the case, the quality of data will be retained but if the data is not authentic, quality will be impaired of observation made totally void due to difference in data analyzed.

There is no doubting the fact that the quality of any data is integral based on the understanding that it directly influence the variables to be defined, and findings that will be made from such data if processed. It is understandable that even single misrepresentation (especially in cases where integers are involved) can directly affect the whole data. For instance, add (-) to a nominal positive integer can affect all the data when processing them – in relation to findings established. Thus, checksum is very important and it is the first measure to be carried out before analysis.

B

Claims.csv

Dentist.csv

Patients.csv

C

The two major reasons why the checksum above can be different from that of other students are if: 1) the student interfered with the data prior to performing the analysis, or 2) they recorded a different checksum value for a different data. Thus, the findings will not be the same in the above two cases. Additionally, the issue of processor need to be considered. In order for the checksum result to be accurate, it is important to adopt a reliable processing system or calculator. Thus, I would expect that in cases where the students adopted another checksum calculator besides the one recommended in this case, it might result to variation in findings especially if the processor is of low quality.

D

Claims.csv

This file represents the claims that have been submitted by the insured parties, and they contain information about insurance claims (such as insurance id, value claims etc.).

Dentists.csv

This file contains information about the dentists which each claim can be referenced to. They represent the dentist where the insurance claims where submitted to.

Patient.csv

They contain information about the company’s patients with reference to their id and other details that can be used to trace them to a given dentists or insurance claims.

Question 2

Yes

It does not specific what part of the river it is located. Whether it is River Avenue or River Street and if River Street, whether it is north, south, east, or west as this is the normal order for other dentists located in Laken with code 4405.

Question 3

Yes

Two different dentists have the same claim ID. Why would two different dentists with two different dentist id be accorded the same claim id? This is a high pointer and it does imply that there is an issue somewhere that needs proper investigation. Claim id are issues as the claims come in, which implies that it would not be normal to have two people with the same id as different cases are treated differently in the insurance industry. Thus, the only possibility here is either that it is mistake from the system (or recorder) or it does imply that the data had been manipulated at some point with intention of effect certain changes – probably for fraud related intention.

Question 4

Yes

The patient visited the same dentist twice in the same day. This is highly suspicious. Why would a patient visit the same dentist within the same day to submit an insurance claim? Does that imply that the client has two issues but only submitted one at the first visit, or does it mean that the client experienced the second event after submitting the first one? If such are not the case, then the only possibility is fraud – which will definitely serve as an incentive to further investigate the case.

Question 5

Yes

The above patient does not have address. His/her address just contains the word address without specifying where the patient lives. One would naturally expected that forms involved in the course of registering for insurance related deals does involve binding terms and conditions between the insured and insurer. Thus, issues like not have a valid home address or an addresses for contact is expected to make such terms void as they represent sensitive information in such business. The advance of a valid address in the case above is as such suspicious and need to be properly investigated especially as earlier indications does show that the possibility some of the claims being bogus for the purpose of filling claims in cases where issues were not recorded are high.

PART B

Introduction

It is no long a secret to the fact that the issues of financial fraud has plagued the financial industry for years. This is based on the understanding that most a times, people try to make claims of insurance policies that they have not be victimized off. Generally, the purpose of to get reimbursed for an insured policy, without the insurance terms actually take place – taking advantage of certain loopholes and the inability of the company to properly validate the whole process effectively (Insurance Europe, n.d.).

It is also important to note that fraud has an effect on all types of insurance, whether it is life and protection cover, non0life insurance, or health insurance. There are numerous way that people can always attempt to get the company to pay them for something that company shouldn’t actually have paid them. In terms of definition, insurance fraud include:

• Providing the company with untruthful or incomplete information when applying for insurance or when answering an insurance proposal form;
• Submitting a claim for lose that is based on misleading or untruthful circumstances, which can include exaggerating a genuine claim; and
• Generally being misleading or untruthful when it comes to dealing with an insurer, with the intention to take advance of the insurance and gain benefits under the insurance contract (Insurance Europe, n.d.).

Insurance fraud can actually be committed by either the policy holder or a third part by making claims against an insurance policy. Such claims can range from opportunity claims, to claims for phantom passengers and untrue injuries that occurred in road accidents, to well organized crime ring.

Examples of insurance fraud

• Good examples include the case of a man faking his own death by drowning in the UK. He was later traced to Panama, where he was enjoying the proceeds of the insurance claim with his family. He was later convicted with his wife and both services numerous years in the prison (Insurance Europe, n.d.).
• Three individuals in Slovenia took out numerous life and injury insurance policies before embarking on holiday in Canada. While they were in Canada, they were alleged to have sustained personal injuries in car accident and claimed for their injuries under the established insurance policies. Later findings indicate that the three had actually made insurance for other accidents during the period that the injury took place. This resulted to criminal and civil charges being brought against them and they were all forced to pay the cost of investigating the fraud as well as to repay all the sums that have already been paid out under the insurance policies (Insurance Europe, n.d.).
• Another example is in France, where a famous surgeon faked the circumstances surrounding how he sustained injuries that he suffered in an off-piste skiing accident; which is an activity that was not covered by his travel insurance. In his allegation, he first said that the injuries had been caused by another skier. When the issue was investigated and rejected, he resorted to making another exaggerated fake claim, stating that the injured has bene sustained in a car accident with a third party. Also, the claim was investigated and rejected and je never received any payment for his genuine injuries (Insurance Europe, n.d.).

As such, it is evidently clear that there are numerous ways people can fake injuries in order to take advantage of the insurance policy and to cause numerous loss to the affected company. Thus, it is important that the insurance companies take necessary measures to combat such issues (HOLBROOK, 2014).

Consequences of insurance fraud

Fraudulent claims and the costs of investigating such does enhance the premium of honest customers. Investigating insurance fraud also enhances the ability of the insurer to deal with genuine claims more precisely. Also, evidence from contemporary studies done by insurers does suggest that insurance fraud funds can lead to other serious crimes. Such as a third-party benefactor effecting serious damage on the insured party in order to successfully make insurance claims. In any case, insurers are very much committed to paying all the genuine claims as fast as possible, and their main objective involves striving to attain a high balance between conducting an investigation on potential fraud and actually ensuring that the genuine claimants are no put through rigorous process when processing their insurance claims (MCMANUS, n.d.). Although it is generally considered important for insurers to investigate potential fraud, they adopt necessary measures to ensure that genuine claimants can actually get their insurance claims as fast as possible.

Ways of effecting insurance fraud in the dental sector

In line with findings in this study, there are numerous ways that fraudulent claims can use to effect insurance fraud. They can do such independently or in some cases with the help of their medical health provider (dentists). They include:

• Providing wrong information (such as wrong contact address or phone numbers) or not providing any information at all;
• Conniving with the dentists to effect frequent visits and obtain fraudulent documents about issues that the claimant was not actually suffering from;
• Registering for different kinds of claims for a single issues, with exaggerated heath claims; and
• Ignoring doctor’s warning in order to complicate health issues and make bigger claims.

Clearly, the documented example are similar with what is generally obtainable in the health related insurance cases. That is to say, the fraudulent claimants generally have the intention of defrauding the insurance company through complex and exaggerated claims that are far beyond the actual sustained injury. In essence, it is important that insurance providers are conscious of these issues in order to ensure that they don’t fall victim to these fraudulent intentions.

This will be possible by conducting proper investigation on each cases to highlight weak areas and certify their claims as true. The benefit of conducing proper investigation is that it will also allow the insurance provider to enhance their investigative skills and become more competent with investigating insurance clams – enhancing efficiency and effectiveness in their work flow.