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Crunching the Words

Crunching the Words

by Toby Lucich on April 25, 2008

When auditors seek evidence of fraud, they take a careful look at a company’s financial statements. Maybe they should examine other statements, such as those uttered by company executives.

That’s the theory behind new fraud-detection software developed by two professors at Virginia Tech, who say that the story a company crafts around its numbers often says much about whether those number are solid.

“We want to add another tool to the auditor’s toolbox,” says Greg Jenkins, associate professor at Virginia Tech and the program’s co-developer. The idea is “to look at all the communications a company makes public [including MD&A; disclosures, public statements, and a range of SEC filings] and see if there are patterns that are inconsistent with the company’s performance, or with the performance of other companies in the industry,” he says.

Crunching the Words

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