Thursday, March 19, 2009

intelligent Knowledge based system (2)

There are also some inherent analytical weaknesses, which cannot easily be eliminated from expert systems.They are at their strongest When they are looking at numerical data .so they are good at analyzing balance sheets and other historical financial data;at their best with quantitative opposed to qualitative analysis .The areas where they are particularly vulnerable are :
- relying on extrapolation techniques ;
- the impact of creative accounting ;
- weak on assessing business risks ;
- weak on assessing management quality.
the first problem arises because in testing future projections ,expert systems essentially extrapolate trends from the past .Of course,the past is probably the best guide to the future there is ,but there are clear risks in extrapolating it without question .
The second point relates to the fact that ,to save costs ,financial data is input into the model by Junior and relatively unsophisticated staff,who do not have the capacity to understand the important nuances of balance sheet from the back forwards so that you can understand how the figures have been arrived at .the staff inputting figures , often simply by rote or in accordance with simple instruction, cannot be expected to understand the impact of subtle accounting policy changes and the numbers may not represent the true financial situation of the business.

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