Stratification
Definition
The grouping of numeric values into defined ranges (strata) to reveal the distribution of a dataset. In fraud detection, large concentrations of transactions just below a threshold or in an unexpected value band are the primary flag.
- Method
- Groups numeric values into defined ranges
- Application
- Fraud and forensic accounting audits
- Primary flag
- Clustering near a threshold or in an odd band
- Category
- Computer-assisted audit technique
Common questions
How does stratification differ from Benford's Law testing?+
Benford's Law checks whether leading digits follow the expected natural frequency; stratification instead bins actual values into ranges to expose unusual concentrations, such as many invoices sitting just under an approval limit, that a digit test would not catch.
Why does clustering just below a threshold matter to an auditor?+
Many approval or reporting rules only trigger above a set dollar figure, so a spike of transactions sitting just under that figure suggests deliberate splitting to avoid review rather than a natural business pattern.
Related terms
- CAATs
- Computer-Assisted Audit Techniques: software-driven procedures applied to electronic data files that test the full population of transactions rather than a sample, covering...
- Duplicate Detection
- A systematic search for records that share key fields (invoice number, vendor, amount, date) that should be unique, surfacing duplicate payments, double...
- Gap Test
- A test that identifies missing numbers in a document sequence (check numbers, invoice series, purchase orders) where continuity is expected; gaps often...
- Join-and-Match
- A cross-table technique that links two or more data files on a common key, such as matching vendor bank account numbers against...
- Ratio Analysis
- Calculation of financial ratios across periods or business units to identify statistically unusual deviations that might indicate manipulation: cost ratios, gross margin...
- Sequence Analysis
- Verification that a numbered series progresses in expected order without skips, reversals, or unexpected repetitions. It is the positive counterpart to gap...