Data key in battling business corruption
Chinese companies can use improving forensic data analytics in the fight against corruption, according to recent research by Ernst & Young.
Eric Young, partner and Greater China forensic technology leader for EY’s Fraud Investigation and Dispute Services, said corporations can rely on data sources that are rapidly growing to conduct commerce.
The latest data tools have enhanced analysis beyond traditional methods of reviewing documents. They are able to visualize outliers of data that may serve as early warnings to clients, enabling them to take action before fraud or corruption can occur.
The report stated that this understanding will use data to help detect potential instances of fraud, and implement effective fraud risk-mitigation programs.
EY conducted a survey of 2,719 executives globally, including 50 from China’s mainland and 50 from Hong Kong, between November 2013 and February 2014. Participants said bribery and corruption remained widespread in many countries around the world, and Chinese compliance risks were still high amid growing competition and slower economic growth.
China’s business executives show more willingness to break the law. About 46 percent of Chinese respondents said they were willing to pay cash to win or retain business; the global average was 13 percent. More than 20 percent of polled CEOs said they had been asked at least once to pay bribes in order to win or retain a business.
Academics say the simultaneous existence of three preconditions is usually present when fraud occurs: financial pressure, opportunity and rationalization, referred to as the “fraud triangle.
Diana Shin, partner at EY’s Fraud Investigation and Dispute Services, says the fraud triangle has been seen in many countries and regions, especially when economic growth has slowed.
Young said that general ledgers, accounts payable, travel and hospitality expenses, social media, email, cell phone data, human resources and sales force data can all play a role in detecting fraud. For instance, a meal bill with extra-long hours may signify suspicious activity. An expense entry from a date when an employee was on vacation could also draw scrutiny from auditors.
Chinese enterprises have been aware of the importance of strengthening anticorruption and fraud prevention. The ones that have taken action have enhanced performance, according to Young. He said that an increasing number of enterprises have realized that proactive measures can significantly reduce corruption and fraud risks and have extended budgets to optimize their compliance systems.
“Wisdom City” information exhibition is on display during the Beijing International Design Week. Big data could be used in various areas from social life to the fight against corruption.