SEC Automates Accounting Fraud Detection

The SEC has signaled that it intends to intensify its scrutiny of public company financial reporting. One of the tools it will use is called the Accounting Quality Model, an automated system for detecting early signs of fraudulent or improper accounting. The AQM “may well shift the SEC’s regulatory approach to increasingly incorporate the detection of potential accounting issues at earlier stages, prior to more rigorous examinations by the SEC,” writes Jerry Arnold, Affiliated Academic at NERA Economic Consulting. His post takes a detailed look at what kind of “anomalies” the AQM will be looking for and how it works.