New SEC Technology to Focus on Suspicious Corporate Disclosures

by Dan Brecher on February 26, 2013

The Securities and Exchange Commission (SEC) is increasingly turning to technology to help root out fraud. The agency recently announced plans to launch a new computer software program that will detect accounting anomalies in corporate disclosures submitted to the regulator.

The new data driven approach is expected to bolster the SEC’s risk assessment process when it comes to accounting fraud. Under the “Accounting Quality Model” (AQM), the SEC will be able to analyze a company’s financial disclosures and assign a specific risk score, which will be used to identify outliers. “It is a model that allows us to discern whether a registrant’s financial statements stick out from the pack," Craig M. Lewis, Chief Economist and Director, Division of Risk, Strategy, and Financial Innovation, stated in a recent speech.