google searches give auditors a glimpse of true sales.
by 卡塔尔世界杯常规比赛时间 research
google trends is a free service at the world’s most widely used search engine. in an instant, users can see how often a keyword has been the target of a search.
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when that keyword is a product, the searches tend to reveal something about sales.
and that should be of interest to auditors.
the mup model
enron and crazy eddie were neither the first nor the last companies to fudge their financials with upward revenue misreporting. by faking sales, a company can fake its value to investors. auditors are supposed to spot such fakes, but too often they miss them because they rely on numbers provided by management.
researchers at california state university and the chinese university of hong kong have found a correlation between google searches and actual sales. the correlation doesn’t constitute evidence, but it can serve as a red flag warning of possible “manipulation up,” or mup.
the researchers developed a “mup model” that provides an instant, no-cost, easy and signficant correlative relationship between the big data analytics of google trends and actual corporate sales performance. the advantage of such an external indicator is that it doesn’t depend on internal management data.
the researchers looked for mup companies – those that were in the top sales growth quartile while showing a large decline in google’s “search volume index” (svi). those companies just happened to score high in a discretionary-revenues model, two other alternative revenue manipulation identifiers, and coverage by analysts and financial media.
the researchers’ report, published by the peer-reviewed accounting, organizations, and society, stated, “we find that the incremental odds of a revenue misstatement are 165 percent for a mup firm relative to non-mup firms after controlling for (other factors).”
mupsimple
the researchers pointed out that the mup model is most effective for companies that sell brand-name products directly to consumers.
the full-strength mup model assesses and accommodates revenue growth information for an audited company’s industry peers, while a dumbed-down “mupsimple” model looks at nothing more than sales growth of 15 percent for a company with a 15 percent drop in svi.
“we hasten to add that the purpose of the mup model is to serve as a feasible prototype diagnostic tool for auditors to collect entity business state evidence to perform evidentiary triangulation,” the report says. “we do not intend for the mup model to substitute for other more traditional indicators of fraud risk.”
in other words, the mup model is a prototype that auditors can already use as a simple tool to enhance one aspect of an audit.
but the real value of the model is that it demonstrates how big data can be a big external indicator of internal fraud. the potentials aren’t just big. they’re huge.