For more information on our financial services offerings, contact us at:
Analytic Focus LLC
1116 20th Street South #406
Birmingham, AL 35205
Phone: (205) 672-9253
Fax: (205) 672-9255
E-mail: info@analyticfocus.com

Analytic Focus LLC
5218 Sagail Place
San Antonio, TX 78249
Phone: (210) 465-7838
E-mail: info@analyticfocus.com
Analytic Focus LLC
121 N Washington Street
Suite 300B
Alexandria, VA 22314
Phone: (703) 549-2682
Fax: (703) 483-3977
E-mail: info@analyticfocus.com

Sampling For Audits and Reinsurance

In many investigations, there’s simply too much information to review. In audits, in forensic accounting investigations, in the review of reinsurance claims, and a variety of other applications, there are tens of thousands or hundreds of thousands of records and files to sift through. The question becomes, how much should we look at?

A sample of records is efficient, cost effective, can be completed in a reasonable amount of time, and can in some cases be more reliable than looking at all of the records or files that are available. We provide sample design, selection, and extrapolation services that can aid any investigation.


Case Examples:


For a major auto manufacturer in the State of Michigan, we developed a sample of sales tax records. In each of its 16 plants, the manufacturer made two types of purchases. The first type was of goods used in a plant, such as brooms, paper products, and other goods used to run the plant. The second type of purchase was of goods that were used as part of the cars being manufactured, such as gear shift knobs or tires. This second type of purchase was exempt from sales tax because the good was being resold and would be taxed at the time when the finished car was sold. The audit of the sales tax exemptions was conducted for the manufacturer, but done in conjunction with the State Department of Revenue so that both the manufacturer and the State would agree to the steps of the audit and the outcome, avoiding any potential litigation. Of over 40 million records, we selected a sample of 13,000 records to review, allowing us to generate an estimate of proper sales tax exemptions for each individual plant and for the headquarters of the company. The outcome was an audit completed in months, not years, that was satisfactory to both the state and the manufacturer.

For a reinsurance company, we designed a complex sample of worker comp claims that had been filed against an insurance company seeking reimbursement. The sample was to determine the number of policies that had been issued by the insurer after receiving reinsurance that were not within the agreed upon underwriting standards. The sample spanned offices in 40 states and encompassed a large number of claims totaling hundreds of millions of dollars. The outcome was a settlement between the insurer and reinsurer rather than litigation.

For a fraudulent sale case, we sampled production records of a manufacturing firm to determine the amount of revenue that the firm claimed that resulted from fraudulent activities. The manufacturing firm was acquired by another firm that subsequently found that the firm it had purchased did not generate the revenues expected. The investigation found that the acquired firm had a number of practices it used in its production processes that cheated customers, overstated sales, and recorded higher revenues than warranted. The sample dealt with paper records in a warehouse, but the sample itself had to also tie to general ledger entries and extrapolate to recorded sales. A relatively small sample of 1200 records was selected and reviewed, but the more difficult process was extrapolation of the results to sales recorded in the general ledger.