In the context of fraud detection, what does 'transaction testing' involve?

Transaction testing involves analyzing specific transactions for errors or irregularities. This method is essential in fraud detection because it allows investigators to closely examine individual transactions to identify any discrepancies, unusual patterns, or anomalies that may indicate fraudulent activity. By focusing on the details of each transaction, analysts can spot signs of manipulation, unauthorized changes, or other fraudulent behaviors that might not be evident when only looking at overarching data or summaries.

In the context of fraud prevention, transaction testing is a proactive approach. It is particularly useful in identifying fraud schemes such as invoice fraud, payroll fraud, or expense reimbursement fraud, where transactions may be altered or falsified. This targeted examination can also assist in validating whether controls are effectively preventing fraudulent transactions from occurring.

While reviewing employee performance, assessing overall business strategies, and conducting market analysis may contribute to a comprehensive fraud risk management framework, they do not specifically target the examination of transactions in the same focused and detailed manner that transaction testing does. These other activities are broader in scope and typically serve different purposes within a business context.