According to Dr. Mark Lehman, fraudsters often use their home addresses when creating a shell company, a fictitious vendor created to commit fraud. A classic audit test used to detect shell companies is to compare the addresses of employees and vendors. Unfortunately, a simple join command will match only addresses having exactly the same characters.

This case published in the Journal of Forensic Accounting requires students to explore advanced applications of technology to identify matching addresses entered using a slightly different format (e.g., Road versus Rd.). Using ACL, students compare the results of using a simple join command with the (1) SOUNDEX function, (2) SOUNDEX function in combination with the SPLIT function, (3) REPLACE function within a script, and (4) combination of REPLACE and SOUNDEX functions. Students should find that a combination of the REPLACE and SOUNDEX functions is the most effective solution.

Although the article is presented in the format of an educational case, practitioners can apply the method in their audits.

Lehman, M. and M. Watson. 2007. “Detecting Shell Companies Using Dynamic Text Comparison,” Journal of Forensic Accounting.