Decision support systems, 50 (3), pp. 576-584.
ISSN/ISBN: Not available at this time. DOI: Not available at this time.
Abstract: While there is a growing professional interest on the application of Benford's law and 'digit analysis' in financial fraud detection, there has been relatively little academic research to demonstrate its efficacy as a decision support tool in the context of an analytical review procedure pertaining to a financial audit. We conduct a numerical study using a genetically optimized artificial neural network. Building on an earlier work by others of a similar nature, we assess the benefits of Benford's law as a useful classifier in segregating naturally occurring (i.e. non-concocted) numbers from those that are made up. Alongside the frequency of the first and second significant digits and their mean and standard deviation, a posited set of `non-digit' input variables categorized as 'information theoretic' , 'distance-based' and 'goodness-of-fit' measures, help to minimize the critical classification errors that can lead to an audit failure. We come up with the optimal network structure for every instance corresponding to a 3×3 Manipulation-Involvement matrix that is drawn to depict the different combinations of the level of sophistication in data manipulation by the perpetrators of a financial fraud and also the extent of collusive involvement.
Bibtex:
@Article {,
AUTHOR = {Bhattacharya, Sukanto and Xu, Dongming and Kumar, Kuldeep},
TITLE = {An ANN-based auditor decision support system using Benford's Law},
JOURNAL = {Decision support systems},
YEAR = {2010},
VOLUME = {50},
NUMBER = {3},
PAGES = {576--584},
}
Reference Type: Journal Article
Subject Area(s): Accounting