Financial Accounting Fraud Detection Using Business Intelligence

Abstract

The paper investigates the inherent problems of financial fraud detection and proposes a forensic accounting framework using business intelligence as a plausible means of addressing them. The paper adopts an empirical case study approach to present how business intelligence could be used effectively in the detection of financial accounting fraud. The proposed forensic accounting framework using business intelligence (BI) provides a three-phase model via novel knowledge discovery technique to perform the financial analysis such as ratio analysis for a business case scenario. The implementation of the framework practically demonstrates by using their accounting data how the technologies and the investigative methods of trend analysis could be adopted in order to investigate fraudulent financial reporting unlike traditional methods of vertical and horizontal analysis for the business case study. Finally, the results justify the effectiveness of the proposed BI model in proactively identifying, classifying and evaluating financial fraud in the organisation. This research further leads to practical follow-up steps that would serve as guidelines for the forensic accounting auditors and management to focus on the prime areas of financial fraud present in the case study. Overall, the proposed model caters to detecting various types of accounting fraud as well as aids in continuous improvement of an organisation's accounting, audit, systems and policies through the feedback loop.

Predictive Relationships among the Elements of the Fraud Diamond Theory: The Perspective of Accountants

“…In a study by Wong and Venkatraman (2015) asserted that business intelligence must be used in the detection of financial accounting fraud. Business intelligence is based on mining accounting data through ratio analysis and investigating the trends to determine the anomalies.…”

Factors Affecting the Capacity of Accounting Software in Controlling Frauds and Errors in Small and Medium Enterprises (Smes): A Case Study of SMEs in Hanoi, Vietnam

“…In addition, the application of accounting software also enables easier and more effective supervision of finances and other judicial issues, which certainly supports fraud reduction (Güney, 2014). While the conventional manual approach is more suitable for discovering anomalies due to unintentional errors found regularly in data based on the "double-entry" principle, computer-based approaches could detect even intentional frauds by an employee in selected financial transactions, or frequently controlling full populations of data (Wong & Venkatraman, 2015).…”

Denetimde İş Zekâsı Uygulamalarının Artı ve Eksileri

“…Moreover, the research by Wong and Venkatraman (2015) has established a modern forensic accounting method using BI that provides a three-stage model via new information discovery methodology to perform financial pattern analysis of fraudulent financial data in a feasibility study environment and according to that study, adopting BI approach allows auditors or forensic accountants to achieve a high level of accuracy in the detection of accounting fraud with a minimal time and skills needed. As well, Ali (2020) mentions that using Benford's Law or a similar other theory, a BI tool can reveal suspicious activities based on monitoring of the first digits of the numbers and amounts in records.…”