A Model to predict accounting fraud!

Imagine that your auditor has a magic wand to predict if your company has a high probability for financial fraud. It is true now as researchers came up with a model to predict material accounting manipulations. The mathematical model released in June, focus on 5 areas where manipulations likely to take place: accrual quality (in terms of the number of accruals being booked), financial performance (including earnings growth, cash margins, and transaction management), nonfinancial performance (order backlog and employee head count), off-balance-sheet activities (operating leases and pension assumptions), and market-based measures (valuations and price-to-earnings ratio).

As accounting numbers are balanced and inter-connected, a fraud score exceeds the norm sends immediate red signal to auditors. For more details about the model, please check out CFO.com What’s your fraud score.

A tool like this could be an option to easily spot the high risk areas for auditors. This means reducing the auditing money for companies. 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: