View Complete Reference

Bhattacharya, S, Xu, D and Kumar, K (2010)

An ANN-based auditor decision support system using Benford's Law

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.

@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