An overview of data analytics its use in accounting and fraud investigations and its pros and cons

Ranging from the hacking of the federal government to small-time embezzlers seeking to cover gambling debts, fraud is an ever-present, growing, and increasingly dangerous threat to both businesses and the financial services profession.

In these circumstances, in which development of the IT systems plays a central role in the creation of competitive companies, the amount of processed data has grown exponentially.

These areas are obviously key to accounting professionals, but there is an additional angle that can, and should, be explored. How Big Data Can be Used to Fight Fraud Big data, however, offers an intriguing method by which accountants can simultaneously increase the value they bring to the organization.

Leverage the more frequent and real-time reporting requirements demanded of both organizations and financial professionals. Its results can be used to identify areas of key risk, fraud, errors or misuse; improve business efficiencies; verify process effectiveness; and even influence business decisions.

If operations has the ability to produce and monitor inventory information in real time, accountants can certainly take this information and use it to assist in inventory counts, valuation, and custody.

Against this framework, and with the evolving role of accounting professionals in mind, there are several specific examples in which accountants can leverage big data to help combat fraud and possibly fraudulent activities.

When she needs to, she can also drill down into more granular information underlying financial statement line items. This ongoing struggle is by no means simply an academic matter, and multibillion-dollar fines, sanctions, and other regulatory punishments are increasingly common for organizations found guilty of fraudulent or unethical activity.

DA can be relatively simple, but it can also be extraordinarily complex. A big reason may be that those involved with internal and external financial reporting are limited, by training and inclination, to working with structured data — the kind that can fit readily into tables, Excel spreadsheets and, ultimately, financial statements.

In counterbalance to the slow economic recovery, managers need to start a series of antifraud measures, as a leverage of cost control, while reducing available resources.

Data analytics DA coaxes order from the chaos. Books, articles and white papers have been published about the virtues of using computers to manipulate data to ramp up the task of locating smoking guns in fraud cases. The report does not include questions relating to the use of technology in uncovering frauds.

Following is a chart showing the responses: On one hand, opportunities for unethical and potentially fraudulent activity continue to increase, as do the penalties associated with them, but this pressure simultaneously creates opportunities for accounting and financial professionals to create value for organizations.

However, what is certain is that the software programs currently available for streamlining the fraud-audit process are both very affordable and not that difficult to master.

Comparable data are not available for the U. Accountants are in a prime position to protect the organization from these potential penalties.

Since the companies usually operate with large volumes of data, it is absolutely necessary to implement such processes of continuous monitoring, in order to identify anomalies in the data stream or behavioral patterns, potentially fraudulent.

Though the request was playful, the airline might well have considered compensating him, since it had received something valuable in return. Advertisement There are several major trends that are influencing business operations in an increasingly active and progressively real-time manner.

Opportunity comes in the form of increased demands for information, and the more opportunities business segments, leads, and other professionals have to present results in a favorable manner, the more likely it is for those people to be tempted to enter gray areas of reporting results.

Accountants still need to become more familiar with statistics and decision science in order to grasp how Big Data can enhance their skills and vice versa, she thinks.

Analyze customer profitability, shopping habits, and shipping locations to determine purchase and payment patterns using big data tools to analyze shifts and trends, as well as irregularities, in real time. We strive to provide an overview of the way in which technology can be implemented to improve fraud prevention and detection, inside of a public or private economic entity.

Additionally, and perhaps more importantly, taking advantage of advances in technology and tools keeps accountants at the forefront of business decision-making and provides accounting professionals with new methods to showcase the value brought to the organization.

Another 23 percent of auditors said they determine on a case-by-case basis when to employ data analysis but do not appear to have a defined strategy. Fraud involves inclusively significant financial risks which may threaten profitability, and the image of an economic entity.

Accountants Increasingly Use Data Analysis to Catch Fraud

From her perch in a firm that uses data analytics on day-to-day basis, Tan waxes bullish on the ability of the accounting and finance functions to expand their roles to encompass huge amounts of unstructured data. To confirm that the KPIs are leading the company where it wants to go, the executives will analyze the correlations between the success of certain salespeople and the performance indicators.

At the end of the day, accounting and financial information systems serve a relatively simple role — the transformation of operational data into financial statistics.

Accountants — already immersed within IT, financial systems and reporting, and serving as the go-between for upper management, operations, and external stakeholders — are well-positioned to take a leading role in efficiency initiatives. The proliferation of big data, increasing regulation, higher penalties for regulatory violations, and the need for consistent performance for publicly traded corporations creates an interesting challenge and opportunity for managerial professionals.

3 Ways Accountants Can Use Big Data to Fight Fraud

Additionally, and perhaps most important of all, increased scrutiny and reporting allow accounting professionals greater opportunities to examine and analyze the data before it is disseminated to stakeholders.

Information is the essential ingredient to any business, strategic plan, or initiative to combat inefficiency, waste, or possible illicit and fraudulent activities.Meanwhile, mastery of data analytics can help businesses generate a higher profit margin and gain a meaningful competitive advantage.

Some experts even predict that companies ignoring data analytics may be forced out of business in the long run.

Data analytics -- the practice of assessing bodies of business data to identify potential indicators of fraud -- is slowly, but surely, becoming a mainstay of the fraud fighter’s professional repertoire.

Accounting’s Big Data Problem

The role of data analytics in fraud prevention Data analytics process 1. Fraud test definition analysis on data from a variety of business accounting cycles such as Accounts Payable, Accounts Receivable, Procurement Cards, Payroll, Expenses, General Ledger, and more, all.

Selection and peer-review under responsibility of Asociatia Grupul Roman de Cercetari in Finante Corporatiste doi: /S(15) ScienceDirect Emerging Markets Queries in Finance and Business Detecting and Preventing Fraud with Data Analytics Adrian Bănărescua,b,* aInstitutul de Economie Nationala, Calea 13.

Video created by West Virginia University for the course "Forensic Accounting and Fraud Examination". What is "big data"? Big Data, Benford's Law and Financial Analytics. What is "big data"? Learn how data analysis, Benford analysis and other tools can help you identify fraudulent activities.

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The Fraud Examiner

Leverage the more frequent and real-time reporting requirements demanded of both organizations and financial professionals. More frequent reporting, and the data and analytics desired by the recipients of this information, necessitate that accounting professionals become more adept at leveraging internally available information and .

An overview of data analytics its use in accounting and fraud investigations and its pros and cons
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