Beyond the Lab: N.C. A&T Research Explores New Way to Identify Corruption Risk Through Google Searches

EAST GREENSBORO (Nov. 4, 2016) – The intersection between auditing and Google may not seem obvious. But research by Kecia Williams Smith, Ph.D., dean of North Carolina Agricultural and Technical State University’s Willie A. Deese College of Business and Economics, explores how a Google search can give auditors another way to assess corruption risk and design more effective audit procedures.

Smith and her research co-authors at the University of Illinois developed a Google-based measure that examines how often the ticker symbols of companies listed on U.S. stock exchanges appear near the word “corruption” in online documents. They compared those results with the overall volume of online information associated with each company.

“This paper is very interesting and innovative, but easy to understand because it’s a new and novel approach using something that everybody knows — Google — and the documents that are in the Google space in terms of what generates with a search engine, and then how that is really linked to risk assessment,” she said.

Using company-year observations from U.S. publicly traded companies between 2008 and 2014, the researchers found that the Google-based measure was a significant predictor of corruption risk.

While the measure can give auditors another tool to identify potential corruption and noncompliance risks and focus their attention and resources, the findings suggest that identifying risk is “only half the battle.” Auditors may recognize the risk and adjust their fees and resources accordingly, but they may not always design audit procedures at a level that effectively identifies restatements or other errors.

The research underscores the importance of not only identifying potential risks, but also designing targeted audit procedures to address where those risks are most likely to occur.

These findings have real-world implications extending beyond the auditing profession, offering a practical way to teach students about fraud and risk analysis. Using information from an everyday technology like Google, they can apply this method to complex business problems.

“In a classroom setting, this is another way that students can understand how to assess risk,” said Smith. “And then as they transition into their profession, this is something they can think about to understand areas of corruption and fraud, and it gives them an early alert system that helps them to further investigate things.”

The research also reflects the broader role of faculty scholarship at A&T, where research, teaching and service contribute to the university’s academic mission and impact on society.

“For students, you see us in the classroom, you see us on the fourth floor as we’re helping you,” said Smith. “But research is an integral part of what we do to make sure that we are giving our intellectual capacity and our capability to society.”