WASHINGTON— The Securities and Exchange Commission plans to launch new computer software later this year to spot accounting anomalies, including potential fraud, in the financial statements companies file with the agency.
The software would scan a firm’s financial disclosures, assess risk factors, and generate a score based on a model developed by the agency, Craig Lewis, the SEC’s chief economist said in a recent speech. The score would be used to identify potential outliers within a peer group.
“It is a model that allows us to discern whether a registrant’s financial statements stick out from the pack," said Lewis, who also heads the agency’s risk, strategy and financial innovation division.
The software is scheduled to be available in nine months.
The effort is the most recent sign of the agency’s commitment to beef up its technological prowess as it tries to better police Wall Street and avoid oversight lapses, like the ones that allowed the Bernard Madoff Ponzi scheme to go undetected for years.
The new software is based on an existing model that the SEC has used to evaluate hedge fund returns and identify fraud, mostly by looking for performance that was inconsistent with a fund’s investment strategy. The agency brought seven cases based on information culled from that project since 2011.
“This success has only fed our ambition for what we can do with sophisticated data- driven monitoring programs," Lewis said. The goal is to make use of the “veritable treasure trove of information" that the SEC regularly receives from companies.