Industry Solutions Research

These research projects are conducted with participants from three broad areas. Industry partners who provides practical research problems, proprietory data, and some funding; 2) Accounting domain experience who frame these problems into research questions related to some foundamental and theoretical accounting structure and guide the data analysis with the accounting theoretical insights; 3) Computer science or other technical research experts from CMU's School of Computer Science or other departments who provide technical solutions to the research questions posted by the accounting domain experts and industry partners. Example of such projects include

1. Anamoly Detection of Bookkeeping Data
2. Optimal Dynamic Sampling in Auditing

Accounting Structure

We theoretically develop and empirically apply a new information measure that quantifies the structural dimension of financial statements. Building on the entropy concept from Shannon's (1948) information theory, our approach captures firm fundamentals directly embedded in accounting numbers and formally measures the information conveyed by their classification structure. The current projects include

1. Accounting Classfication Entropy (ACE)
2. Accounting Graph Entropy (AGE)

Foundational and Theoretical 

In this position paper, three laws are proposed to describe the conventional double-entry system of bookkeeping: (1) the balance law; (2) the conservation law; (3) the linearity law. The three laws, and their associated algebraic identities, are then expressed in the bookkeeping language of journals and ledgers, and equivalently in the mathematical language of a directed and weighted graph (or network). The three laws are shown to impose a certain recognizable classification structure on the records generated by conventional double-entry bookkeeping. The current projects include "Three Entropy Measures of Double-Entry Bookkeeping"