Forensic Accounting: Investigations, Fraud or Abuse Sheri Fiske Schultz David Kaplan CP A/ ABV/ CFF CP A/ ABV/ CFF , JD - CV A The Use of Artificial Intelligence in the Accounting and Legal Professions BDO US BDO US BDO US A, LLP, a Delaware limit ed liabilit y part nership, is t he U.S A, LLP, a Delaware limit ed liabilit y part nership, is t he U.S A, LLP, a Delaware limit ed liabilit y part nership, is t he U.S . member of BDO . member of BDO . member of BDO Int ernat ional Limit ed, a UK company limit ed by guarant ee, and forms part of t he Int ernat ional Limit ed, a UK company limit ed by guarant ee, and forms part of t he Int ernat ional Limit ed, a UK company limit ed by guarant ee, and forms part of t he int ernat ional BDO net work of independent member firms. BDO is t he brand name for t he int ernat ional BDO net work of independent member firms. BDO is t he brand name for t he int ernat ional BDO net work of independent member firms. BDO is t he brand name for t he BDO net work and for each of t he BDO Member Firms. BDO net work and for each of t he BDO Member Firms. BDO net work and for each of t he BDO Member Firms. www.fiskeco.com | Not for Distribution 1
Artificial Intelligence and the Future of Accountancy • WHAT IS THE LONG-TERM VISION FOR AI AND ACCOUNTANCY? • HOW DO ARTIFICIAL AND HUMAN INTELLIGENCE WORK TOGETHER? • HOW ARE ACCOUNTANTS USING AI CAPABILITIES? Learning Objectives • Participants will learn about the current AI tools that are being used in litigation and forensic accounting matters. • Participants will learn to recognize alternatives to traditional methods of dealing with large and complex data in litigation and internal investigations. www.fiskeco.com | Not for Distribution 2
NOTE: All examples are for illustrative purposes only. What do you think of when you hear the term “Artificial Intelligence?” www.fiskeco.com | Not for Distribution 3
Artificial Intelligence – Overall Definition The theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. The Evolution of AI As AI continues to evolve and machines become smarter, significant opportunities will emerge across the complexity spectrum. First, repetitive and routine manual and cognitive tasks will be automated to provide assisted intelligence; Next, in situations where the complexity of decisions is greater, AI will augment human decision making; and Finally, when machines are able to learn enough about the situation and make reliably predictable recommendations that humans can trust, they will become autonomous. www.fiskeco.com | Not for Distribution 4
Where Are We Currently? The Crossroads of Analytics & Augmented Intelligence • Cloud S torage and Computing • Big Data / Data Analytics • Unintelligent Applications to AI • Text Recognition • Augmented Intelligence includes AI-related disciplines like machine learning, natural language processing, image recognition, and neural networks. Current Capabilities of Artificial Intelligence www.fiskeco.com | Not for Distribution 5
Poker-Playing Artificial Intelligence Artificial intelligence “ It’s not about the money, it’s about preserving human dignity, and it’s not going well.” • 80,000 hands of poker (tournament was 20 days, 10 hours per day) • Humans are losing by $750k • AI system has vulnerabilities but fixes them quickly • Learned to bluff • S pends nights improving strategy and decisions while lazy humans sleep https:/ / www.theverge.com/ 2017/ 1/ 25/ 14358246/ ai-poker-t ournament-cmu-libratus-vs-human-losing ROSS Intelligence The ROS S Intelligence tool is an AI platform supporting legal research activities. Built on ROS S Intelligence’ s proprietary legal AI framework, Legal Cortex, combined with technologies such as IBM Watson's cognitive computing technology, ROS S uses Natural Language processing and machine learning capabilities to identify legal authorities relevant to particular questions. Users conduct searches by entering questions in plain language, rather than by complex search strings. ROS S ’ s cognitive computing and semantic analysis capabilities permit the tool to understand the intent of the question asked and identify answers “ in context” within the searched authorities. www.fiskeco.com | Not for Distribution 6
Terminology Boolean Search Natural Language Processing Method of search using keywords to identify Artificial intelligence technology that derives documents containing particular words and computer-processable semantic and contextual Boolean connectors or operators that narrow meaning from natural, human language. results based on the relationships between the terms. Machine Learning Natural Language Search Artificial intelligence capabilities that permit a Method of search where a query is entered in computer or application to alter operations plain language and is parsed by the search without explicit programming as it is exposed to algorithm to identify content addressing the new data. same topic. BDO’s Use of Data Analytics and Artificial Intelligence www.fiskeco.com | Not for Distribution 7
Investigation 6,000 Vendors Limited by: • Location of interest • Vendor spend over $50,000 160 Vendors to Review CFO S tart Date CFO Termination Date Limited by: • Specific user time of employment Investigation • Round dollar amounts 11 Vendors to Review CFO S tart Date CFO Termination Date $350,000 fraud 2010 - 2015 www.fiskeco.com | Not for Distribution 8
Investigation Vendor Geographic Review www.fiskeco.com | Not for Distribution 9
Related Party Distance Analysis Payments begin with $40* Benford’s Law ($400, $4,000, $40,000) $500k of payments are to Heavy Equipment Training Company www.fiskeco.com | Not for Distribution 10
MINDBRIDGE AI AUDITOR Statistical Machine Cross Domain expertise methods Learning correlation business rules MindBridge‘s Humint Scoring Standard tests Benford’s law, External data source Outlier detection Ai Auditor Advanced tests regression, 3 Sanction Lists Reinforced Completeness checks digit testing… Learning Negative Databases Artificial Intelligence ARTIFICIAL INTELLIGENCE TOOLS BDO’s use of artificial intelligence and machine learning ensures that our review of transactions is complete and limits the false positives for review www.fiskeco.com | Not for Distribution 11
Contract Review CONTRACT REVIEW TOOLS Import PDF documents, such as engagement letters or client contracts and apply text analytics to review for completeness and compliance. Future Potential of AI in the Accounting and Legal Professions www.fiskeco.com | Not for Distribution 12
Machines as Fiduciaries? S ome professionals, both financial and legal, bear considerable fiduciary responsibilities. We trust them to make sound decisions but as they are not only professional but also human, misinterpretations and biases can occur. Could AI someday evolve to be more effective fiduciaries than their breathing counterparts? Would they be less prone to undue influences or poor decision making? In the case of public trust funds (e.g., for parks, educational institutions, and medical research), it is conceivable that AI could provide continuity over decades or even centuries to adhere to the original mandate. Artificial Governance? In the near future, intelligent machines may not only monitor compliance with regulations and organizational policies but could also evaluate employee performance or even control hiring and firing. One common perception is that AI may cause an invasion of privacy by monitoring human behavior and managing information about our lives. According to The Economist , “ machine learning” is a way of programming computers to understand things by producing for themselves the rules their programmers cannot specify. If machines someday assume a greater role in assessing situations on its own, where do we strike a balance between the gray area of human empathy and the black and white, yes or no, lines computers would draw? www.fiskeco.com | Not for Distribution 13
Questions info@ fiskeco.com | 954.236.8600 www.fiskeco.com www.fiskeco.com | Not for Distribution 14
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