The Value of Advanced Data Analytics

Kelly J. Todd
Managing Member
January 2, 2018

A picture says a thousand words – and nothing tells a story better than electronic data. FSS has successfully used advanced data analytics for years to ferret out the truth and bring a story to life through data visualization, from supporting or challenging a plaintiff’s testimony to identifying the patterns and relationships that help uncover a multi-million-dollar fraud scheme.

Although most of us don’t realize it, we all leave an electronic trail of evidence a mile wide on a daily basis. Consider the injured plaintiff who claims their loss of business is related to their injury – most would look to the financial statements for supporting evidence. However, I would suggest a deeper dive. What story does the detailed transactional data reveal? It can often be quite different from what it appears to be on the surface.

It has become common for businesses to use big data for business intelligence, but it hasn’t been adopted widely to uncover relevant facts behind allegations of false claims or whistleblower allegations. The reality is that data holds the answers to many questions, regardless of which side of the aisle you are on in a case. Advanced data analytics can help to isolate and understand details of transactions at the core of allegations such as these.

To illustrate the power of advanced data analytics, I often point to a case that involved whistleblower allegations of underreported revenue to the IRS. FSS was hired to investigate the validity of the allegations. Our investigators analyzed daily sales records, management reports, reports to accountants, financial statements, tax returns and government prepared reports detailing the alleged underreported revenue. These records included electronic data and manual reports. What did we find? The amount of alleged underreported revenue was significantly lower than determined by government accountants. Additionally, we identified significant errors made by the company’s external accountant. Our findings were presented to the IRS, and our revenue amount was accepted as the correct amount of underreported revenue.

Principals of the company avoided substantial jail time because of our work. They also paid significantly lower amounts of fines and penalties. These results underscore the necessity of looking deeper into electronically stored information to reveal critical patterns and insights.

Another prime example is a case from many years ago. FSS was working for a school district with an annual budget of over $11 billion. The school district had a control in place that limited the funds that could be transferred without board approval to $50,000. So, we looked for transactions of exactly $49,999. We found that one of our persons of interest had transferred this exact amount 48 times in 60 days. Thanks to electronic data, this nefarious activity was easily identified among millions of transactions – something that couldn’t have been accomplished with sampling or statistics.

Electronic data allows us to achieve results for our clients in a short period of time. We can relate disparate sets of accounting records, normalize transactions into a single platform for analytics, and conduct data mining to uncover a number of abusive activities. Always remember that the real story is often more complex than it first appears, and electronic data leaves a trail that can be easily followed to find the answers.

CATEGORIZED UNDER: Forensic Accounting