Data Science Day at Halıcıoğlu Data Science Institute and Rady School of Management, UC San Diego

1. Impact of data science in financial reporting
Emerging impact of audit and tax data analytics
James T Deiotte
Executive Director MPAc
Data Science Day
Halıcıoğlu Data Science Institute and Rady School of Management, UC San Diego
10 May 2019

2. Agenda
• Framing the role of accounting and tax professionals
• How big are the consequences
• What are digital assets
• The legal challenges
• Boardroom considerations
• Auditors role
• Final comments

3. The Infield Shift
This better
work!

4. Leveraging data platforms to raise quality of
analysis and affordability
Descriptive
• Insight based on past
information
• Fraud analysis
• Audit analytics
• Forensic analytics
• Related party transactions
and comparability
documentation
• Data (private/sensitive)
information, storage and
accessibility
Diagnostic
• Ability to examine the
cause of past events
• Analytics for M&A
• Transfer pricing
documentation and support
• Analysis of VAT throughput
charges and refundable
leakage
• Risk based assessment of
where data resides
Prescriptive
• Ability to identify best
option to choose from
• Unstructured data
• Managing large data
• Pricing
• Return on business
investment analytics
• Compliance focused
analytics
• Global tax management
• Transfer pricing
• Forensic application of
cyber theft or improper use
of data
Predictive
• Ability to understand future
possibilities by looking at
patterns and historical data
• Supply chain forecasting
• Consumer behavior
• Risk analysis
• Tax analytics
• Controversy management
and trends
• Risk on regulatory affect of
data restrictions and
improper use

5. Just
because
you can …

6. Should
you…

7. Just
because
you can …

8. Should
you…

9. WHAT ARE DIGITAL ASSETS

10.  How do you determine what is
your assets of value?
• Gain competitive advantage
(e.g. IP, strategy)
• Gain position of power for
exploitation (e.g.
ransomware)
• Cause harm (e.g.
automotive, industrial, grid,
military)
• Theft (e.g. counterfeit,
embezzlement)
• Gain disruptive power (e.g.
political, community)

11. Combining information and creating new
digital assets

12. THE LEGAL CHALLENGE
Always playing catch up!

13. How to protect the asset
• Apple taking action against Facebook and Google
– Reason – protecting privacy…
• Facebook was distributing a market-research app through a
program Apple intended only for developers.
• Apple’s retribution was swift and arguably disproportionate: It
temporarily shut off all of the developer iPhone apps at both
Facebook and Google, which has a similar research app.
• The move wreaked havoc at Facebook and disrupted work for
Google employees.
• Facebook’s practices regularly make a mockery of Apple’s efforts
to protect the privacy.
• Facebook users largely accept that Facebook is an ad-powered
data harvester, Apple must continue to earn users’ trust.
• The story isn’t over. Apple will continue to grit its teeth over
Facebook, and Facebook will continue to extract valuable
data from iPhone users.
See: https://www.wsj.com/articles/apples-cold-war-over-privacy-turns-hot-11549083606

14. Law is unable to keep
up with use (or lack of
use) of technology
enabled decisions
How to protect the use (or non-use) of data

15. BOARDROOM
CONSIDERATIONS
Setting the tone at the top

17. Your wake
up call …
about
internal
accounting
controls….

18. Data misuse is likely a greater risk and problem
• What is Data Misuse?
– Data misuse is the inappropriate use of data
as defined when the data was initially
collected.
– Misuse of information typically can be
governed by laws and corporate cybersecurity
policy.
• However, even with laws and policies in
place, the potential for data misuse is
growing.
– The most common perpetrators? Your
employees and third-party contractors, i.e.
insider threats.
– Insider threat incidents involving data misuse
have serious implications, not least of which is
the high monetary cost associated.
• Without the right people, processes, and
technology in place for insider threat
visibility, detection, investigation, and
prevention can be near impossible to
manage.
See: https://www.observeit.com/blog/importance-data-misuse-
prevention-and-detection/
Controls vs
technology

19. AUDITORS ROLE
Accountant’s role is still being defined and emerging

20. Big data – is shifting the balance of what drivers
enterprise value
• Enterprise value is built on a
foundation of capital
• Each form of capital requires
focus, nurturing and protection
to support enterprise growth
• A success in protecting one
form of capital and failure in
another, can still lead to overall
failure of the enterprise

21. Final comments and wrap up