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Beyond the Algorithms

The use of computer-based technology in the fields of financial forensics and fraud examination leads inevitably but wrongly to the conclusion that computer application skills are what distinguish high from low performance; e.g., the idea that the ability to negotiate through numerous macros and other routines within spreadsheets and databases separates the expert from the novice. This is wrongheaded. There is no attribute more important than having the capacity of an up-to-date BS detector, a mental faculty that transcends pivot tables, extended projections, and granular detail. While false experts touted their sophisticated analyses of Enron financial statements over numerous periods, real experts explained how the emperor was naked.

The use of gobbledygook, notwithstanding the practice of transcribing it into an Excel spreadsheets, is generally a public indicator of an overly slick salesperson and/or charmingly effusive fraudster. It creates false differentiation where it does not exist in reality. Those with well-oiled BS detectors have aged and progressed beyond their school days wherein obedience to authority was the habit, norm, and source of good grades (i.e., positive feedback). It is the power of authority figures, whose financial and non-financial pronouncements carry the presumption of legitimacy, that facilitates the most hazardous of conditions. Their capacity to wreak social harm is well in excess of the street person begging for currency “to get home.” They can exploit the inability of most of us to independently verify / falsify the validity of their data. (This is where an impartial, aggressive, imaginative financial publisher is needed.)

Individuals misrepresent reality frequently. Some do intentionally, and some do inadvertently. Some don’t care whether their words reflect reality and facts. In these times of comprehensive computer programming writing logically consistent financial statements, it is not so much discovery of the failure of the general ledger to reflect a relevant subsidiary ledger but the failure of the reporting entity narrative to reflect the conditions on the ground that is the tell. There are instances almost too numerous to mention, but the so-called Internet boom / dot-com bubble of the mid- to late-90s illustrates this principle all too gravely. So far as I can tell – many of the things that grow rapidly in the real world are none too beneficial (e.g., some cancers and “weeds”).

BTW – ever notice how when something ‘too good to be true’ happens, it is not long before one convinces oneself that he/she deserves the disproportionately beneficial opportunity?

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