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Fighting fraud with figures

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23rd Mar 2016
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Everyday our planet generates 2.5 quintillion bytes of data, and it’s increasing exponentially.

Over 90% of the world’s data has been produced since 2011. Digital data isn’t new, of course, but as the volumes of information swell, they are expanding beyond the organised databases where it was traditionally stored.

In a recent Supplier news item on AccountingWEB Aqilla observed how the understanding of, and the ability to derive meaning from, the huge range of information held within an organisation” will play a key role in shaping strategy.

“Big data is disrupting how we live, consume media and shop online. An algorithm could even predict the causes that matter to a certain individual. Data can be used to revolutionised the way we live our lives and the way people connect with causes,” Aqilla noted.

Web-based industries (such as the online publishing world that AccountingWEB inhabits) are fuelled by data analytics, while accountancy has already explored different avenues around business modelling, planning and forecasting, this article takes a look at another, occasionally overlooked opportunity in anti-fraud work.

An opportunity to add value

“Big data offers an intriguing method by which accountants can simultaneously increase the value they bring to the organisation,” wrote Sean Stein Smith on AccountingWEB.com.

“The potential of big data has, until this point, focused primarily on the potential benefits and opportunities that leveraging technology can bring to operations, financial decision-making, and improving reporting metrics. These areas are obviously key to accounting professionals, but there is an additional angle that can, and should, be explored.”

According to Stein Smith, the fight against fraud is a “major potential area of growth” for big data. “At the end of the day, the true value that an accountant - whether working/owning at an accounting firm or within an organiszation - brings to the proverbial table is information and data,” he said.

Through analyses, an experienced accountant can pick up fraud’s tell-tale signs. The streams of data emanating from a business generally follow known patterns. Through data analysis, an accountant can become familiar with a business’s “personality” and draw on data tools to analyse shifts and trends, and spot potential irregularities in real time.

Real-time data analysis is also improving inventory and asset control. “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,” Stein Smith said.

The promise of big data

It’s not just fraud, however. “Big data is for anyone who is trying to better understand, analyse, and add value to the business,” he explains. “Big data does not have to mean overly sophisticated software; rather it means the application of analytics to business problems.

“Even relatively simple tools and techniques such as regression and cluster analyses can help you narrow down which pieces of data are driving results or issues.”

The information gleaned from data must then be integrated into client conversations and presentations. “Analytics are what users want, but they have to be able to understand what they are saying,” says Stein Smith.

“Organisations… are driven by a host of forces, but only a percentage of those are under the control of management to improve.

“Average order per customer might be where an organisation wants to start improving, but that in turn is driven by the usability of the website, the bundles offered at team of checkout, and how simple it is to click through to purchase.

“Understanding this via analytics and drilling into the data already produced and stored by the organisation, accounting professionals can drill down and help management identify what factors are under their control to improve, and drive the business forward.”    

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