Aug. 30, 2021

This paid piece is sponsored by Eide Bailly LLP.

You hear it in the news every day: “XYZ company suffers cyberattack” or “ABC company falls victim to fraud.”

These types of incidents are increasing in number and happen frequently in Sioux Falls and surrounding communities. Often, the bad actors are targeting an organization’s data to encrypt it and render it useless until a ransom is paid. This article provides options for those organizations dealing with financial data loss.

When financial data has been lost or destroyed, it’s imperative that organizations have their data reconstructed quickly and efficiently to move forward. Forensic data reconstruction allows organizations to re-create their accounting systems.

Here’s what you need to know about financial data loss and how forensic data reconstruction can help.

Types of financial data loss

Financial data loss can occur because of a variety of things, including accounting system failures, intentional record destruction by insiders or cyberattacks. However, there are a few common areas organizations can watch for that are prime for potential data fraud or loss.

Internal threats

Many cases of lost and destroyed data are the result of an insider’s action. If employees are committing fraud, they may be destroying data to cover their tracks. In the case of a fraud allegation, data reconstruction can be done so that you can be certain of the integrity of your accounting. When investigating suspected financial crimes, you may not be able to rely on accounting entries even if they are available.

Accounting system failures

Using legacy, on-premises software and not performing regular backups could be the biggest threat to your financial data. However, it is also the easiest to mitigate. Making sure your data is stored securely in the cloud with regular backups will decrease the risk of experiencing a catastrophic hardware or software failure that results in total data loss.

Ransomware

While many cases are related to internal threats, there’s also the possibility of a cyberattack. Ransomware is often created to target accounting system files, such as QuickBooks, and encrypt them, making them unreadable for an organization. When accounting systems are inaccessible, it’s hard to make strategic decisions or retrieve what was lost.

We recently had a client who dealt with over 40 encrypted QuickBooks files. While the company did have backups, they weren’t up to date. This led to over three months’ worth of financial data needing to be re-created to operate the business.

Use of forensic data reconstruction

An organization’s accounting system houses a great deal of vital information relevant to a company’s success and growth. When that information is compromised, the organization is left in a perilous position. Forensic data reconstruction can help organizations more quickly get back up and running.

What is forensic data reconstruction?

Forensic data reconstruction is the use of forensic technology to extract data from source records such as bank statements or invoices. This information along with coding is then used to re-create the accounting systems. Regardless of how the data was lost — internal threat, ransomware encryption, etc. — forensic data reconstruction can help rebuild the needed information to move forward in an efficient and effective manner.

Process for forensic data reconstruction

Forensic data reconstruction uses a variety of forensic technologies to restore necessary financial transactions. Forensic investigators do this by using source documents such as:

• Bank account records.
• Investment account records.
• Credit card records.
• Invoices.
• Payroll records.
• Other financial records.

Once the data has been extracted from the source records, a comprehensive database of financial transactions is created. This information then can be coded and imported into an organization’s accounting system. Organizations can choose to have their own accounting staff work on this or outsource the work to a bookkeeping or accounting outsourcing firm to ensure the data is properly coded before import.

Next steps

Dive Deeper: Visit EideBailly.com to keep reading about the role of forensic data reconstruction in insurance coverage and how to choose a forensic accounting firm to perform data reconstruction.