Does a high Šóta Score mean there is definitely fraud? 
No, a high Šóta Score does not mean there is definitely fraud in a company. A signal does not mean definitive proof of fraud. It is a symptom that there is an issue and requires further investigation. It provides the starting point and direction of inquiry. It does, however, indicate a high risk for material misstatements and requires further inquiry. It signals uncertainty in the reliance on the financials. A high Šóta Score means an organization could become a company of interest. 

What is considered a “high” Šóta Score?
There are a number of different use cases for Šóta Signal Analytics. For some users with an increased tolerance for risk, any Šóta Score above a specific value could be considered high risk. For other users that are risk adverse and more conservative, a Šóta Score above a lower value could be considered high risk. Conversely, users such as short sellers could consider high Šóta Scores as being desirable. As a result, we have left the cutoff for any threshold up to the user. We simply provide the Šóta Scores. Any meaning assigned to a specific score remains with the user’s risk appetite and tolerance percentages relative to that appetite. Similarly, any decisions resulting from user defined cutoffs are also decided by the user. Over time, as academic research answers interesting questions relative to Šóta Scores, users can become more informed about recommendations provided by researchers for certain cutoffs for a given use case.

Does a low Šóta Score mean there is definitely no fraud? 
The absence of a fraud indicator does not provide evidence that fraud is not occurring in that area. A skilled fraudster can manipulate numbers within the financial statements with an end goal of hiding the fraud. Though the level of sophistication required to perpetrate such a complicated ruse is high, it is possible and the analysis would not uncover such manipulation.

Does Šóta Signal Analytics have indicators for all fraud schemes? 
No, Šóta Signal Analytics does not signal for all fraud types. For example, core fraud scheme categories such as asset misappropriation and corruption are not included at this early stage. However, it’s important to remember that significant misappropriation and corruption schemes could impact consolidated financial statements. It is this space where  Šóta Signal Analytics operates. Other industry specific fraud schemes, such as insider trading, are not directly included yet. The algorithms address the susceptibility to material misstatements with a focus on financial statement fraud schemes. The analysis signals the degree of confidence or uncertainty in the financials.

The analysis will not uncover all fraud. Remember that a doctor is aware of the fact that one patient may have more than one problem, and thus multiple diagnoses. As such, a company can have multiple fraud schemes and many fraudsters. Some fraud schemes are more sophisticated than others, and thus more difficult to detect.

Does Šóta Signal Analytics have indicators for all financial statement fraud schemes? 
No, Šóta Signal Analytics does not have indicators for all financial statement fraud schemes. We currently do not have risk scores for the financial statement fraud scheme related-party transactions.

Do you have something that shows all of the schemes in one place?
Yes, we have designed a Fraud Landscape (TM) poster. It maps out the relationship of the schemes and subschemes for asset misappropriation, corruption, and fraudulent statements. It shows all 114 core fraud schemes, a graphic of the relationship of the fraud landscape to other elements of the fraud risk management program; and key definitions of terms often confused in fraud risk. You can call us at +1 (813) 426-3208 to make poster purchase inquiries.

Why did you choose to focus on financial statement fraud schemes?
Having been practitioners in both complex fraud investigations and fraud risk management for many years, we observed that financial statement fraud was by far the most illusive and impactful category of core fraud schemes. We have been using the algorithms in our professional services firm and evolving those calculations in the field, one company at a time. Given the recent changes in the fraud landscape, the availability of standardized data across countries, the advances made in computing power, and the increased need for timely visibility into a company’s risk for material misstatements in today’s economic environment, the time had come for us to transition our offering into a solution that operates at scale.