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Automated Auditors to Chase Down Cheats

Data mining and math tricks might catch a Madoff or an Enron earlier

3 min read

In December, when Bernard Madoff’s hedge fund turned out to be a gigantic Ponzi scheme that was US $50 billion in the red, everybody wondered how this had gone undetected for more than a decade. Amazingly, in separate audits, government auditors saw no evidence of wrongdoing.

Embarrassed into action, the U.S. Securities and Exchange Commission (SEC) has announced plans to implement an off-the-shelf electronic monitoring system that tracks transactions conducted by 8000 hedge funds. The system will allow SEC accountants to examine hedge funds using scenario analysis and dozens of different graphical representations of the data it collects. But the SEC is intended to be the backstop in the financial accounting system, with most crooked firms getting caught by internal or outside auditors. So technological sleuthing capability belongs in the average auditor’s toolbox and not just the government’s.

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Why Functional Programming Should Be the Future of Software Development

It’s hard to learn, but your code will produce fewer nasty surprises

11 min read
A plate of spaghetti made from code
Shira Inbar

You’d expectthe longest and most costly phase in the lifecycle of a software product to be the initial development of the system, when all those great features are first imagined and then created. In fact, the hardest part comes later, during the maintenance phase. That’s when programmers pay the price for the shortcuts they took during development.

So why did they take shortcuts? Maybe they didn’t realize that they were cutting any corners. Only when their code was deployed and exercised by a lot of users did its hidden flaws come to light. And maybe the developers were rushed. Time-to-market pressures would almost guarantee that their software will contain more bugs than it would otherwise.

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