SEC Launching New Fraud Detection Software
Financial Times recently published the article, “SEC to roll out ‘RoboCop’ against fraud.” According to the article, the SEC will be implementing new software that will spot accounting anomalies in corporate financial statements filed with the SEC and is expected to be launched by the end of this year.
This new software is the most significant development to date regarding the SEC’s use of XBRL-formatted financial data. According to Craig Lewis, who also heads the agency’s risk, strategy, and financial innovation division, the software is being developed to scan financial disclosures and analyze areas that can be manipulated by management: “When firms are choosing accounting treatments that are unusual—that’s something we would like to highlight [for SEC examiners].”
As The Center for Excellence in Accounting and Security Analysis at Columbia University stated in its recent report, “An Evaluation of the Current State of XBRL and Future of Interactive Data for Investors and Analysts”:
… the usefulness of these data to regulators and enforcement/compliance agencies is a likely and potentially desired method. That is, digital filing of regulator-required information with filer-tagging is not an unreasonable societal expectation in the 21st century.
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