# Combating manipulations

The ‘Relative Size Factor’ can unearth various frauds

Accounting manipulations stemming from intelligent planning can be easily camouflaged in vast data populations, and, even if noticed, can be explained as errors. Such manipulations are more often than not revealed by accident. However, there are certain tools which facilitate detection of such frauds and one of them is a mathematical tool called ‘Relative Size Factor’ (RSF).

The RSF is simple to understand: In a group of any given transactions, it is a ratio of the highest value divided by the second highest value. For instance, a vendors statement of account had these invoice values: Rs 10,000, Rs 12,000, Rs 3,400, Rs 7,600, Rs 15,000. The RSF is the ratio of the highest value 15,000 divided by the second highest 12,000 i.e. 5/4 or 1.25. If the RSF exceeds 10, then a very strong possibility exists of something being wrong and further inquiry is necessitated. For example, if the vendor’s highest bill was Rs 12.000 (Instead of Rs 15,000), the ratio of 10:1 is obviously inconsistent. Of course, this RSF is meaningful only where volumes of transactions are high because in essence, what the investigator attempts in finding out is the extraordinary. This example is one such case where the RSF revealed manipulation of a staggering value.

1. CA. Gargi Akolkar says: