The Digital Financial Crime or Manipulation of Financial Information Indicators

Posted in Forensics and Investigations on April 29, 2024
Digital Financial Crime

Digital financial crime or manipulation of financial information indicators refers to the use of technology and digital tools to commit fraudulent activities in the financial industry. This can include activities such as hacking into financial systems or manipulating financial data to deceive investors or regulators.

There are various digital fraud indicators that, when identified, may require initiation of the fraud investigation process. 

Digital Financial Crime

Digital Financial Crime or Manipulation of Financial Information Indicators

When we talk about digital fraud or crime involving manipulation of digital financial data or information, the following are some of the circumstances examples that may indicate the possibility that the financial information or financial statements may contain a material misstatement:

  • Transactions that are not recorded in a complete or timely manner or are improperly recorded as to amount, accounting period, classification, or entity policy.
  • Unsupported or unauthorized balances or transactions. 
  • Last-minute adjustments significantly affect financial results. 
  • Evidence of employees’ access to systems and records inconsistent with that necessary to perform their authorized duties. 
  • Tips or complaints to the auditor about the alleged fraud. Conflicting or missing evidence, including: 
  • Missing documents. 
  • Documents that appear to have been altered. 
  • Unavailability of other than photocopied or electronically transmitted documents when documents in original form are expected to exist. 
  • Significant unexplained items on reconciliations. 
Digital Financial Crime
  • Unusual balance sheet changes, or changes in trends or important financial statement ratios or relationships – for example, receivables growing faster than revenues. 
  • Inconsistent, vague, or implausible responses from management or employees arising from inquiries or analytical procedures. q Unusual discrepancies between the entity’s records and confirmation replies. 
  • Large numbers of credit entries and other adjustments were made to accounts receivable records. 
  • Unexplained or inadequately explained differences between the accounts receivable sub
  • Missing or non-existent canceled checks in circumstances where canceled checks are ordinarily returned to the entity with the bank statement. 
  • Missing inventory or physical assets of significant magnitude. 
  • Unavailable or missing electronic evidence inconsistent with the entity’s record retention practices or policies. 
  • Fewer responses to confirmations than anticipated or a more significant number of responses than anticipated. 
  • Inability to produce evidence of key systems development and program change testing and implementation activities for current-year system changes and deployments.
Digital Financial Crime

Final Thoughts

To prevent digital financial crime, financial institutions and individuals need to implement strong cybersecurity measures, such as using two-factor authentication, regularly changing passwords, and monitoring financial accounts for suspicious activity. Additionally, regulators and law enforcement agencies need to work together to investigate and prosecute criminals engaged in these types of fraudulent activities.