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The AGR® (Accounting & Governance Risk) rating is a powerful measure in fraud prediction.

While regulatory agencies are directly involved in fraud prevention and prosecution, the majority of stakeholders are primarily concerned with the personal financial damage they may incur through the fraudulent behavior of others, including dramatic stock price declines; litigation; bankruptcy; debt defaults; and other negative events.

Traditional modeling tools currently address many such negative events. We have found that the predictive power of traditional approaches is substantially increased by incorporating the measure of integrity (AGR) in the analysis. The addition of AGR greatly improves the accuracy ratio of each model. This improvement can be measured by a substantially higher ratio of “true positives” (correct identifications) and far fewer “false positives” (incorrect identifications).

The higher predictive power of using AGR with traditional risk models not only translates into more accurate identification of potential problems, but also enables the user to focus on those companies that pose the highest degree of risk.

AGR-based Risk Management Models

Regulatory Enforcement Model

The AGR (Accounting & Governance Risk Rating) directly measures the likelihood of fraud.

Model Variables: Non-Financial Concerns

  • Corporate Governance – compensation, management changes, financial reporting, insider trading, and other governance issues.
  • High-Risk Events – M&A, divestitures, restructurings, share repurchases, equity financing.

Model Variables – Accounting-related Concerns

  • Revenue Recognition – accelerating top-line growth through premature, non-recurring, or fictitious revenue activity
  • Expense Recognition – deferring/delaying expenses to improve margins by capitalizing or amortizing expenses
  • Asset-Liability Valuation – over-valueing assets (Receivables), under-stating liabilities (Payables), manipulating reserves (pensions)

Bankruptcy Model

Uses AGR to model the risk that a company will file bankruptcy over the next 12 months.

Model Variables include:

Class Action Litigation Model

Uses AGR to model the risk of a securities-related class action lawsuit being brought against the company over the next 12 months.

Model Variables include:

  • AGR Score
  • Additional AGR Factors
  • Stock Performance
  • Company Size
  • Industry Classification

Financial Restatement Model

Uses AGR to model the risk that a company will restate current-period financials to correct accounting-related errors.

Model Variables include:

  • AGR Score
  • Company Sizet
  • Industry Classification

Stock Price Model

Uses AGR to model the future total return of company stock based on accounting, governance and related factors. This model incorporates only AGR variables in order to enhance predictiveness. The Equity Risk model is designed to be used with traditional equity models including Dividend Discount models, CAPM models, and other multifactor models.

Model Variables include:

  • AGR Score
  • AGR Persistence
  • AGR Variance
 
 
 

Audit Integrity Services

Web Service

  • Search over 12,000 public companies in North America and Europe to view specific flags indicative of potential risk. Compare current metrics to the company’s 15-year history or its industry peer group.
  • Company Overview includes Flagged Metrics; Recent Events; Risk Impact; Metric Definitions; Company Events; Risk Models; Financial Ratios; and Fundamental Ratios.
  • Peer Benchmark Report allows for comparison of companies based on User selections.
  • Company Analysis includes the AGR Profile; Rating History; Company Background; Officers & Directors; Insider Trading; Quote/Chart; Risk History; Flagged Metrics; Financials; Statement Filings; Company Events; News Headlines; Competitor Ratings; and Industry Ratings.
  • WatchLists can be created and managed by the User.
  • RiskLink is used to integrate latest Audit Integrity ratings into your spreadsheet.
  • RiskBook provides a consolidated, Word-format document of all of the critical data and analytics used to evaluate corporate risks.
  • RiskProfiler is used to obtain a risk assessment using unpublished data or private company data.

Data Feeds

  • Standard or Custom Data Feeds delivered weekly, including risk metrics, fraud metrics, historical AGR ratings, SEC actions, restatements, and litigation easily integrated with internal risk management platforms or models.

Distribution via Bloomberg, FactSet, or Standard & Poor’s Capital IQ

Email Alerts

  • Monitor a Custom WatchList or receive regular Alerts of ratings changes and high-risk events impacting companies of interest.

Proprietary News and Commentary

  • Topical research and commentary from Audit Integrity’s analysts include Early Warnings, Most Trustworthy Companies, Insights, SEC Bulletins, and Industry Reports.

Consulting Services

  • Our Governance experts will assist your Audit Committee, Board, or Executive Suite in establishing controls and protocols to protect against risk.
 
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