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Research: Welcome To The Real World

Wall Street - just one of many places in the real world where research applies.

A new study shows that social-science research done by “ivory tower” academics does have utility in the real world, specifically in the business community. And, even more specifically, it could help catch the next corporate fraud.

The accounting firms tasked with auditing corporations and identifying fraud are required to have brainstorming sessions as part of their fraud-detection processes. Social scientists have published at length about rules that can be used to make brainstorming efforts more productive. But, and this may shock you, corporate American often takes academic research with a grain of salt.

So a group of researchers from NC State, UGA and Virginia Tech decided to see if these brainstorming rules were beneficial in a real-world setting. Namely, they looked to see if following these brainstorming rules helped audit teams during actual audits. Answer: yes. Big time.

The work was done with some of the largest accounting firms in the United States, and found that teams that used the “enhanced brainstorming techniques” did a better job of solving complex problems. For example, teams that found a high fraud risk and used the brainstorming rules came up with multiple ways of detecting whether there was actual fraud taking place. Meanwhile, teams that detected risk – and didn’t use the rules – often took no pursuant action at all. Oops.

A paper describing the research was published in The Accounting Review, but could hold real value for the business world beyond accounting. I would imagine that the need for complex problem solving crops up in all sorts of situations.

Score one for the ivory tower. Welcome to the real world!