Editor’s note: The following case study is excerpted from The 2014 AICPA Survey on International Trends in Forensic and Valuation Services.
Although the buzz about Big Data has certainly been growing, electronic data analysis, which topped this year’s list of top issues for FVS practitioners, is not new to CPAs in this area. “It’s something we’ve been dealing with for some time,” noted Tim Bryan, CPA/CFF/CITP, a forensic accounting and technology services senior manager at Crowe Horwath in Sacramento, Calif.
The important changes that have moved data analysis to center stage include new technologies that support greater data mining, and the fact that clients have developed a more sophisticated understanding of its potential. “They are demanding a higher level of data analysis capabilities,” Bryan said.
He described one recent engagement that involved a government agency whose investigation of a company required an analysis of all sales data for that entity over a three-year period. “With every transaction, the company is going to generate a lot of data, so we were working with about 60 million lines of data that had to be synthesized into something the attorney could use to defend the client,” he explained. Key considerations include data validation. “Tying the data to a source that you know is complete and accurate is the biggest challenge, followed by getting it into a usable format.”
This case required taking the data out of a SQL server (a database that implements the structured query language) and moving it to the firm’s own SQL server.
New skills required
This work requires a broader set of skills. “Spreadsheet tools are no longer good enough,” Bryan said. “Database experience is vital for CPAs in these cases. At our firm, we have invested in people with this experience and given them database training opportunities and encouraged obtaining certifications. Spreadsheet tool capabilities stop at around 1 million rows of data, which is powerful but not enough for a case like this one.”
CPAs also must be able to slice and dice all that data to make sense of it. “We are running queries and sampling data by query to understand it and make sure we have a good understanding of the data,” he said. “The analysis is driven by the need to answer a query or test a theory raised by your side or a claim from the other side. We are analyzing massive amounts of data, trying to synthesize it to validate or invalidate a theory.”
The availability of Big Data is behind several new cases that Bryan has seen in wage and hour litigation. State and federal labor laws require employers to offer workers a certain amount of break time and an uninterrupted lunch break. Employees must clock in or out before and after each break or lunch, but if they are required to do so five minutes early, say, that could add up to significant overtime during a year. In one case, “we’re downloading years and years of time-slip-level data on every single employee,” Bryan said. “It will all be used to determine trends and whether the employees are getting their breaks and meal times.” Wage and hour litigation is not new, but there is a new demand for an analysis of raw data. “At the end of the day, data is going to tell the truth,” he said.
In his hiring, Bryan seeks people who can add IT abilities to their CPA skill set. “In addition to a CPA, I look for course work or minors in information systems,” he said. “We also offer internal training. We have one person doing continuing education in university-level classes in R, a programming language.”
One potential stumbling block for organizations is the failure to have the requisite systems to efficiently and effectively manage data analytics. “You have to beef up your systems and hardware and know how to use them,” he said.
New approaches require taking a more holistic approach that goes beyond sampling to consider every transaction. Bryan recommended that CPAs take some data analysis courses related to Big Data, which can easily be found online and are often free. “It’s a great way to introduce yourself to the subject, and the price is right,” he said. “When clients need data analysis, they think of CPAs, and they expect us to have the skill set to get it done.”