The Key Ways Accountants Can Use Big Data to Fight Fraud
Fraud is flourishing at an alarming rate. It is everywhere, ranging from the hacking of the federal government to the corporation for data -intensive industries like financial services and healthcare. Fraud is evident in business news networks and even on Twitter.
The spread of big data, advanced penalties for controlling violations, an increase of regulation and steady need of performance for publicly traded businesses are among the trends that influence business operation manner. These patterns create an intriguing task and chance for managerial professionals.
The Fraud Triangle
The fraud triangle results when there is an increase in demand for reporting information and performance improvement. The essential elements of fraud element include:
– Opportunity results as an increase in the demand for information by competitors and stakeholders, the availability of more opportunities in the business segments plunges accounting professionals to the need to present results in a favorable manner tempting them to enter gray areas of reporting results.
– Pressure in the form of stakeholder reporting necessitates accounting professionals to prepare reports to disseminate to stakeholders. It can result in unethical and fraudulent behavior.
– Rationalization common rationalizations include bonuses, non-cash compensations, and promotions. Making up for little payment or replacing a bonus has been proven to lead unethical professionals to bend the rules.
Accountants should take control of fraud by working on the portion of the fraud triangle over which they have the most control.
Fighting Fraud using Big Data
Big data provides a method through which accountants can increase the value they bring to the organization. The potential of big data focused primarily on its possible benefits to operations, financial decision making and improving reporting metrics. To accounting professionals, these areas are vital but there is an additional angle that should be explored.
With increased perspectives on data flow, both internal and external, measured against the market and internally prepared expectations make the implication clear. The fight against fraud provides a significant potential area for the adaptation and implementation of big data.
Apart from preparing financial statements, accountants also facilitate IT upgrades and implementations. It is, therefore, logical for professionals to exploit all the available tools at hand. In business, the initiative to eradicate inefficiency, wastage of resources and fraudulent activities can only be achieved by having adequate and reliable information. Spotting gaps in process flows saves time and money and at the same time enables management professionals identify fraudulent activities.
Transformation of operational data into financial statistics is the role of accounting and financial information systems. For accountants to take up a leading role in efficiency initiatives it is mandatory to incorporate them within IT, financial systems and enabling them to serve as a go-between for upper management, operations, and external stakeholders.
Taking into consideration the evolving role of accounting professionals, accountants can exploit big data in many ways to help combat fraud and possible fraudulent activities.
Analysis of shifts and trends
The use of big data tools in the analysis of customer profitability, shopping habits and shipping locations in purchase and payment patterns enables accountants to spot irregularities in real time.
Inventory and asset control
Big data provides an advantage of improved data collection and processing to improve inventory and other asset control. Operations with the ability to produce and monitor inventory information in real time enable accountants use the information on inventory counts, valuation, and custody.
Reporting of data to stakeholders
It is the role of financial professionals and organizations to provide frequent reports to stakeholders. Big data enables exploiting real-time information reports of data and analytics required by the recipients. It is attained through an exploitation of internally available information and technology by the accounting professionals. Increased scrutiny and reporting give the professionals greater opportunities to analyze and examine the data before it is presented to stakeholders.
The pressure of competition and stakeholders interested in financial reports of the organizations put forward unique situations for many companies. The opportunity for unethical fraudulent activities continues to increase and, as a result, the penalties associated with them. This scenario creates an opportunity for accountants and financial professionals to create value for organizations. Utilizing technological tools and advances accountants can deduce and initiate ideas to enhance operational efficiencies and detection of any possible fraudulent activity.
Unethical activities cost organizations time decrease productivity leaving the venture vulnerable to fines and penalties. Accountants take a prime position in protecting the body from these penalties. Exploitation of advanced technology keeps analysts at the forefront in business decision making and provides new methods of displaying value brought to the organization.
Reporting data is a crucial competency of accounting professions, but quality data and information continue to grow in importance. Accountants can help organizations attain maximum efficiency. Again, they help prevent fraud for better performance.
I’m a Certified Professional Accountant based in Mississippi. I love to write about Tax and Accounting matters. I’m a businessperson deep down, and enjoy individuals who want to establish companies and add to the economy. I really hope you liked my article. Please do not hesitate to provide me reviews. This year, if you plan to e-file 1099 forms online, consider using http://www.efile4biz.com.
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