1. Advantages of the data-driven ap

1. Advantages of the data-driven approach:

• Will not alert possible suspects
• Identifies possible red flags
• Can find fraud early—before it gets too large and expensive
• Places control of fraud detection in the investigator’s hands (rather than a reactive approach)
• Can be performed on any database
• Can analyze full populations of data
• Can be tailored to the exact needs and cultures of organizations
2. Disadvantages of the data-driven approach:
• Higher cost than reactive approaches
• Fraud can be lost in the detail of large data sets and analyses
• Is general purpose, and it is difficult to refine results
• May give mis-signals
• Very difficult to eliminate the mis-signals


3. The reactive approach is still useful and acceptable. This new approach simply provides another technique for finding fraud. Students should offer commentary on the advantages and disadvantages in Case 1.