International Journal of Accounting and Financial Reporting

ISSN 2162-3082
2021, Vol. 11, No. 4

Financial Statement Fraud: Challenges and Technology

Deployment in Fraud Detection
Intan Waheedah Othman
Faculty of Accountancy, Universiti Teknologi MARA
Selangor Branch, Malaysia
E-mail: waheedah87@[Link]

Received: October 4, 2021 Accepted: October 30, 2021 Published: November 17, 2021
doi: 10.5296/ijafr.v11i4.19067 URL: [Link]

Abstract
Fraudulent financial reporting and other forms of earnings misstatement are catastrophic and
pose a considerable threat to capital market stability. This study reviews the literature on
existing technology-based methods of detecting financial statement fraud. The aim is to
describe the challenges of predicting a rare fraud event and provide an understanding of the
various data-mining based techniques for financial statement fraud detection. Given that
fraudsters are becoming more adaptable and are constantly devising new ways to outwit the
fraud detection system, the study provides directions for future research in detecting the
evolutionary fraudulent financial reporting.
Keywords: Anti-fraud technology, Data mining, Fraud detection, Fraudulent financial
statement
1. Introduction
Fraud cases have significantly increased and continued to gain prominence. Following the
well-renown fraud cases such as Enron and WorldCom that had their earnings decreased by
billions (Graham et al., 2008), recent cases such as Tesco, JP Morgan and Green Mountain
Coffee have caused severe erosion of shareholder confidence in capital markets and drawn
public attention to the criticality of fraud (Peterson & Buckhoff, 2004; Rezaee et al., 2004).
Financial statement fraud is one of the main classes of fraud and is defined as “the material
omissions or misrepresentations resulting from an intentional failure to report financial
information in accordance with generally accepted accounting principles” (Nguyen, 1995). It
includes malpractices such as fabricating or altering records, documenting bogus transactions,
omission of transactions or events from records, and masquerading substantial information
(Stolowy & Breton, 2004). Financial statement fraud or financial misstatements which are the

1 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

focus of this study are distinguished from unintentional financial misrepresentations such as
accounting errors.
The global fraud survey by The Association of Certified Fraud Examiners (ACFE, 2020)
documented that fraudulent financial reporting is the least common (10% of schemes) but the
costliest form of fraud. It is reported that each occupational fraud case would incur a median
cost of $125,000 over a median period of 14 months. Whilst asset misappropriation and
corruption happen more frequently than financial statement fraud, the impact of the latter
crime is considerably greater in magnitude. Financial statement fraud cases alone reported a
median loss of $954,000 with a median period of 24 months.
Generally, financial statement fraud results in the impairment of a firm‟s productivity,
operational efficiency, and innovation. It shifts resources to unproductive business projects,
restricts a firm‟s prospect to grow, reduces a firm‟s equity value and places a company in a
risky position of being delisted from the stock exchange (Rezaee, 2005). Over the last two
decades, a projected amount of $5.127 trillion has been incurred being the financial
repercussions from fraud activities that have occurred worldwide. This phenomenon is
associated with the rise in related losses by 56% in the last ten years [Gee & Button, 2019].
The true underlying costs of fraud might be greater when considering the indirect costs
suffered, such as the credibility damage faced by creditors, employees and investors,
including the destruction of business reputation caused by the accounting scandals. The
eventual bankruptcy and delisting of companies exacerbated the situation (Craja et al., 2020).
The deployment of an effective fraud detection strategy is crucial due to the costly and
catastrophic nature of fraud. Fraud detection further facilitates fraud prevention. As firms
continually improve fraud detection methods, employees become more certain that fraud will
be detected, thus discouraging them from committing fraud in the future. Ngai et al. (2011)
highlight that the detection of financial statement fraud allows decision makers to design
suitable measures to minimize the effect of fraud and generate an average yearly gain in
profit ranging from 10 to 40 percent. It is also contended that the long-term benefits of
implementing fraud prevention and detection control measures outweigh the associated costs
(Hopwood et al., 2012).
The Statement of Auditing Standards (SAS) No. 82 issued by the American Institute of
Certified Public Accountants (AICPA) highlights the responsibility for detecting fraudulent
activities lies heavily with the auditors. Nonetheless, no specific guidelines on detecting fraud
were provided, regardless of the task being complicated for the auditors. Based on the ACFE
2020 report, external and internal auditors detected only a limited number of fraud incidences,
at rates of 4% and 15% and 4%, respectively (ACFE, 2020). Superseding SAS No. 82, SAS
No. 99 established a framework for addressing weaknesses in fraud detection processes, with
the aim of boosting auditor quality and effectiveness in detecting fraud via an assessment of
fraud risk factors in companies. Nevertheless, despite reforms of accounting and auditing
standards, and new anti-fraud laws being enacted to combat the prevalent cases of fraudulent
financial reporting, numerous firms‟ anti-fraud measures are rather superficial and outdated
(Andersen, 2004). The commonly applied red flag approach, which entails a checklist of

2 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

fraud warning signals, is deemed ineffective. Krambia-Kardis (2002) argued that red flags do
not indicate the occurrence of fraud incidences, but they serve as cues to warn auditors of the
likelihood of fraud incidences. It is further contended that the red flag approach suffers from
two main drawbacks, i.e. (i) there is an association between red flags and fraud, however, the
association is imperfect, and (ii) red flags put emphasis on specific cues which prevent
auditors from discovering other causes of fraud.
The detection of fraudulent financial reporting cases is very challenging in view of the
contemporary business environment, which is very much information-oriented, with complex
and dynamic business operations and systems (Chen et al., 2019). The use of automated
systems for detecting fraudulent financial reporting has gained increasing attention as a result
of the application of computer-assisted mechanisms to commit fraud and the evolution of
technologies used to evade fraud detection (SEC, 2019). These automated systems for fraud
detection are critical, especially for auditors, since they enhance the pace and accuracy of
auditing (Abbasi et al., 2012; Albrecht et al. 2008). A faster and efficient fraud detection
strategy can substantially reduce the magnitude and loss of fraud (ACFE, 2020). In
addressing this issue, significant attempts have been undertaken to develop intelligent
systems capable of detecting financial statement fraud. This paper discusses (1) the low
predictability of rare events, (2) explores existing technology-based methods in financial
statement fraud detection, and (3) suggests future research in detecting the evolutionary
fraudulent financial reporting.
2. The Low Predictability of Rare Fraud Event
Financial statement fraud is a rare event and rare events can be very hard to predict.
Forecasting business and economic activity, and particularly fraud event prediction, is almost
always difficult owing to the high degree of uncertainty surrounding the activities. It is
asserted that the possibility of prediction inaccuracy creates a massive problem for decision-
and policy-makers alike (Makridakis et al., 2009). On the one hand, acknowledging the
limitations of prediction accuracy may indicate an inability to gauge associated uncertainty
and decision accuracy. Accepting the possibility of accurate prediction, on the other hand,
would mean surrendering to shocks and illusions of control, both of which may have
catastrophic consequences.
Goodwin & Wright (2010) discuss factors that contribute to the difficulty of predicting
uncommon occurrences such as fraud. Firstly, when the data contains a huge number of
comparable occurrences (large reference class), prediction improves due to the ability to
extract relative frequency information. Whilst a large reference class is related to large
sample sizes, it is feasible to obtain a highly precise assessment of the underlying probability
distribution. It is also possible to avoid biases in judgment since a large reference class can be
assessed using statistical analysis throughout the estimation process. In contrast, constructing
a relative frequency-based probability for a rare event, for instance, financial crisis or fraud,
is hence more challenging due to its small reference class.
Secondly, a prediction model may simplify the actual system and may fail to embed the
complex interactions between the system's various distinct components. This is mostly

3 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

relevant in models of the economy, the human body and weather systems (Orrell & McSharry,
2009). Small modifications in any of the system‟s components may cause an amplified
impact due to the intricate interplay of the system‟s components. This may lead to
underestimation by the prediction model of the actual arrays of uncertainty, resulting in
probabilities that are inaccurately estimated.
Thirdly, the fundamental assumption of most prediction models is the causal relationship
between variables. Nonetheless, despite general acceptance among experts in the field, the
coherent theory of causality does not prove the reality of causation. Correlations may be
illusory or the result of unknown spurious factors (Hamilton & Rose, 1980) particularly when
involving human judgment, or they may be applicable only under specific circumstances
pertinent to the specified reference data. Nonetheless, the misconception that strong
correlation implies causality may significantly influence one's reasoning.
Finally, human judgment is often used to estimate the probability of a rare event happening,
particularly when the reference class has insufficient event cases for statistical analysis.
Tversky & Kahneman (1974) assert that individuals employ basic mental strategies or
heuristics in dealing with the complexities of probability estimation. While heuristics may
result in good estimates at times, they can also result in systematic bias in judgments.
Based on the above factors, it can be concluded that catastrophic rare fraud events can be
hardly predictable. However, efforts to develop a detection tool capable of alerting interested
parties to fraud perpetrators or financial fraud cases remain crucial in order to bring red flags
of fraudulent activities to the attention of interested parties at an early stage. The continual
attempts to develop a fraud detection model may allow for incremental improvement of
previous detection models‟ shortcomings. This may improve the accuracy of future fraud
predictions.
3. Technology Deployment in Detecting Financial Fraud
Traditional methods of fraud detection depend heavily on conventional approaches such as
auditing, which are less efficient due to the complexity of the fraud case. Data mining-based
techniques have been found to be more effective in detecting fraud due to their capacity of
identifying small anomalies in big data sets (Ngai et al., 2011). The two main types of data
mining are statistical and computational. Statistical methods are those traditional
mathematical techniques, such as Bayesian theory and regression, whereas computational
techniques refer to modern intelligence techniques, such as support vector machines and
neural networks. The way the statistical method operates is relatively inflexible compared to
the computational methods that can learn from and adapt to the problem domain (West &
Bhattacharya, 2016). The data mining concepts are applied to various fraud detection
methods used in numerous circumstances involving fraud, although they may vary in many
ways depending on the particular domain knowledge (Zhou & Kapoor, 2011).
Zhou & Kapoor (2011) highlight five common data-mining techniques used for fraud
detection reviewed in past literature, which include regression, neural networks, decision
trees, support vector machines and Bayesian networks. Studies have shown that regression is

4 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

the most commonly used statistical method to detect fraud. The specific type of regression
analysis includes logistic regression, stepwise regression, multi-criteria decision aid method
and exponential generalized beta two.
Logistic regression is one of the commonly used method to detect financial statement fraud
by predicting patterns in data with numeric or unambiguous traits (Ngai et al., 2011;
Bhattacharyya et al., 2011). Logistic regression is a statistical technique for categorizing
binary data that entails doing regression on a collection of variables using a linear model
(Ngai et al., 2011; Ravisankar et al., 2011). It employs a dependent response variable and a
set of input vectors to determine the likelihood that the outcome falls into a certain category
using the natural logarithm. Studies such as Yao et al. (2019); Dechow et al. (2011); Hribar et
al. (2014); and Hasnan et al., (2013) applied logistic and selection of the right covariates
seems to play a significant role in determining the predictive ability of the fraud detection
model.
Dechow et al. (2011) analyzed the predictability of off-balance sheet activities, market-based
measures, accruals quality and financial performance to detect financial misstatements. They
examined 451 earnings misstatement firm-years using stepwise logistic regression and
applied the backward elimination technique using the first-order approximation of the
remaining slope estimates based on the Lawless and Singhal 1978 computational logarithm.
The overall analysis outcome is a scaled probability (F-score) which reports that revenue
overstatements, expense misstatements and cost capitalization are the common types of
financial misstatements. Hasnan et al. (2013) examined 53 fraud firms and a matched 53
non-fraud firms in Malaysia between 1996–2007. By using logistic regression, results show
that financial distress, multiple directorships, audit quality, founders on the board, prior
violations are significant predictors of the likelihood of fraudulent financial reporting.
Bayes classifier is a basic statistical method which is widely applied for detecting fraud. It
operates on the classification principle by computing the posterior probability using the
Bayesian formula based on an object‟s prior probability. Specifically, the likelihood of an
item belonging to a particular class is initially determined, followed by the selection of the
class with the highest probability, being the class which the item belongs to. Xu & Zhu (2014)
applied the Bayesian classifier model on a large dataset comprising firms that were subject to
US Securities and Exchange Commission (SEC) enforcement actions for allegedly engaging
in financial misstatements between 1982 and 2005. Findings have shown that the Bayesian
method appears to be an alternative approach that effectively assesses financial misstatement
risks and provides supplementary inferences beyond those generated by the classical models
such as financial ratios and regression analysis.
A neural network also gained an increased application in the computational-based technique
category due to its relative effectiveness in detecting fraud. Neural networks are capable of
mining inter-correlated data and may be used to solve issues when some assumptions related
to regression are not true (Zhou & Kapoor, 2011). White (1989) reports that feed-forward
neural networks do not require a predefined functional form and perform a stochastic
approximation similar to nonlinear regression. Back propagation neural network is adaptable

5 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

and has become one of the most common methods for addressing prediction and
classification issues. The learning process of the back propagation is iterative in nature, with
constant minor weight adjustments made in each neural network layer to minimize systematic
error. The iterative steps of the learning process recur until the total error value falls below a
predefined threshold (Koh Low, 2004). However, neural network has its limitations in
detecting financial statement fraud, particularly when the data examined is volatile or when
the causal functionality evolves in an unpredicted manner. Based on datasets of 550
firm-years, Omar et al. (2017) compared fraud companies with matched non-fraud companies
across small market capitalization firms. The analysis of ten financial ratios using the
artificial neural network produces a higher prediction result for the financial fraud model at
94.87 percent when compared to linear regression (92.4 percent) and other relevant
techniques.
Decision tree is a supervised learning algorithm and is often employed to predict credit card,
corporate and financial fraud (Sharma & Panigrahi, 2012). It is a computational-based
prediction method which works by properly choosing traits that best segregate observations
into mutually exclusive and exhaustive subgroups. The attributes and likely outcomes are
presented in the form of a tree-like structure, whereby branches represent attributes and
leaves represent the predictions or outcomes. No prior domain knowledge is required to
develop the leaves, branches, or prediction model. The decision tree classifier mainly
determines the initial node using the top-down selection approach. In developing the
prediction model, a series of „if then‟ procedures are performed in conjunction with the
attribute selection method. Delen et al. (2013) examined the effect of financial ratios
measuring profitability, solvency, turnover, liquidity and asset structure on firm performance
using the well-known decision tree algorithms, i.e. QUEST, C5.0, CART and CHAID. The
findings indicate that the C5.0 and CHAID decision trees provided the greatest firm
performance prediction accuracy.
Support vector machine is another preferred data mining classification option due to its
highly accurate prediction ( Abbasi et al., 2012; Perols, 2011 ). It is an artificial intelligence
learning method that converts a linear problem into a higher dimensional feature space.
Support vector machine allows the solution of non-linear, complex problems such as the
detection of financial fraud via linear classification without adding in computational
complexities. There are also possibilities for real-time operation as support vector machine
training and operation require relatively low computational power. Although support vector
machines are prone to overfitting, they perform well on noisy financial fraud data (Pai et al.,
2011). A study by Cecchini et al. (2010) applied the support vector machine to samples of
fraud and non-fraud companies. Results reveal that the support vector machine accurately
identified 90.6 percent of non-fraudulent firms, and 80 percent of fraudulent firms. The
findings indicate that the support vector machine is capable of predicting fraud with relatively
high accuracy.
Random forest is another advanced classification algorithm in data mining that extends the
well-known decision tree method (Podgorelec, 2012). A random forest is made up of
numerous decision trees, each of which includes a random factor. Random forest trains by

6 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

using a subset of random selection instance, and further chooses a selection of attributes to
join the randomness. If a new instance occurs after a random forest has been created, each
tree in the random forest is voted on and classified, with the majority vote‟s classification
serving as the prediction result (Shipway et al., 2012). Random forest is superior in terms of
accuracy and ability to handle huge datasets (Breiman, 2001). It offers several advantages,
including rapid classification and training, reduced noise effects, and less susceptibility to
overfitting (Khalilia et al., 2011). Cheng et al. (2021) demonstrate that random forest is a
robust model capable of constructing the optimum financial statement fraud detection model.
An & Suh (2020) discovered that the modified random forest model outperforms other
benchmark models. Additionally, their results show that all profit-related variables appear on
the list of the most important indications of financial statement fraud.
Research has shown that many data mining-based techniques have been successful and have
developed into becoming a dominant tool in fraud detection. Prevalent applied techniques
include regression, neural networks, decision trees and Bayesian belief networks, and thus far,
no single technique can be identified as the best for fraud detection (Zhou & Kapoor, 2011).
Despite the superiority of the computational learning-based fraud detection methods, it is
argued that these techniques did not evolve in tandem with the current variants in the tactics
used to perpetrate fraud. In fact, it gets harder to detect fraudulent financial reporting when
adopting the current detection mechanisms. This may indicate that a fraudster with the
necessary resources would be able to beat and deceive the detection system (Deloitte, 2008).
Due to the nature of financial fraud being destructive and costly, more attention is called for
the research on the computational performance of fraud detection techniques for real-time
usage which is currently in scarcity (West & Bhattacharya, 2016).
4. Conclusion
Fraudulent financial reporting detection is an important topic in accounting research. This
study reviews literature on the importance, challenges, and the various statistical and
computational intelligence approaches to detecting fraudulent reporting. Despite their
differences in performance effectiveness, the literature review revealed that each technique is
capable of detecting financial fraud. Whilst a huge amount of time, effort and capital has been
invested in new anti-fraud technologies, organizations that use new tools such as artificial
intelligence discover benefit when used properly. The anti-fraud technology needs to be
supported with appropriate expertise, governance and monitoring. Relying solely on the
one-tool technology would render it incapable of addressing all fraud cases. The study by
Deloitte Forensic Centre (2008) however, revealed that, regardless of the significant effort
and time spent on detecting fraud, the rate and number of fraud detection have been greatly
reduced. Consistent with Zhou & Kapoor (2011), applying straightforward data mining
methods to detect financial statement fraud has a number of drawbacks and usage limitations.
There is a challenge in that the more executives who are engaged in financial fraud are aware
of the software and techniques available for fraud detection, the more likely they are to adapt
their fraud tactics and evade detection, particularly by currently available techniques (Zhou &
Kapoor, 2011). New innovative techniques are urgently required that are both efficient and
effective in keeping up with these adaptive or potentially newly emerging financial scams.

7 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

Future studies may explore detection techniques that could orient the program in response to
a firm‟s specific conditions. A model for detecting fraud may not provide the best prediction
when using merely historical financial statement data to identify fraud (Sharma and Panigrahi,
2012). Hence, studies may consider including the analysis of governance factors since it has
been argued that the deficiencies in corporate governance mechanisms have led to the wave
of corporate financial scandals (Fich & Shivdasani, 2007). Moreover, exogenous parameters
inclusive of internal firm-specific factors and external factors related to the economy,
industry and institutional environment would provide more accurate financial fraud
prediction and detection.
Acknowledgments
The author gratefully acknowledge the Research Management Centre, UiTM, Malaysia for
the research grant (ref: 600-IRMI 5/3 LESTARI (060/2019) and Universiti Teknologi MARA
for providing research facilities.
References
Abbasi, A., Albrecht, C., Vance, A., & Hansen, J. (2012). Metafraud: a meta-learning
framework for detecting financial fraud. MIS Quarterly: Management Information Systems,
1293-1327.
ACFE, Report to the Nations 2020 Global Study on Occupational Fraud and Abuse, Tech.
Rep. (2020) 1-57 Retrieved from
[Link]
Albrecht, W. S., Albrecht, C., & Albrecht, C. C. (2008). Current trends in fraud and its
detection. Information Security Journal: A Global Perspective, 17(1), 2-12.
American Institute of Certified Public Accountants (AICPA). (1997). Statement on Auditing
Standards No. 82, Consideration of Fraud in a Financial Statement Audit. New York, NY:
AICPA.
American Institute of Certified Public Accountants (AICPA). (1997). Statement on Auditing
Standards No. 99, Consideration of Fraud in a Financial Statement Audit. New York, NY:
AICPA.
An, B., & Suh, Y. (2020). Identifying financial statement fraud with decision rules obtained
from Modified Random Forest. Data Technologies and Applications, 54(2), 235-255.
[Link]
Andersen, S. (2004). Despite more rigorous compliance programs, corporate fraud still
thrives. Corporate Legal Times, 1-6.
Avery, R. J., Bryant, W. K., Mathios, A., Kang, H., & Bell, D. (2006). Electronic course
evaluations: Does an online delivery system influence student evaluations?. The Journal of
Economic Education, 37(1), 21-37. [Link]
Breiman, L. (2001). Random forests. Machine Learning, 45(1), 5-32.

8 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

Cecchini, M., Aytug, H., Koehler, G. J., & Pathak, P. (2010). Detecting management fraud in
public companies. Management Science, 56(7), 1146-1160.
Chen, Y. J., Liou, W. C., Chen, Y. M., & Wu, J. H. (2019, June). Fraud detection for financial
statements of business groups. International Journal of Accounting Information Systems,
32(2017), 1-23. [Link]
Cheng, C. H., Kao, Y. F., & Lin, H. P. (2021). A financial statement fraud model based on
synthesized attribute selection and a dataset with missing values and imbalanced classes.
Applied Soft Computing, 108, 107487. [Link]
Craja, P., Kim, A., & Lessmann, S. (2020, May). Deep learning for detecting financial
statement fraud. Decision Support Systems, 139, 113421.
[Link]
Dechow, P. M., Ge, W., Larson, C. R., & Sloan, R. G. (2011). Predicting material accounting
misstatements. Contemporary Accounting Research, 28(1), 17-82.
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Deloitte Forensic Center. (2008). Ten things about financial statement fraud - A review of
SEC enforcement. 2000–2008. Deloitte Financial Advisory Services LLP.
Dutta, I., Dutta, S., & Raahemi, B. (2017). Detecting financial restatements using data mining
techniques. Expert Systems with Applications, 90, 374-393.
[Link]
Fich, E. M., & Shivdasani, A. (2007). Financial fraud, director reputation, and shareholder
wealth. Journal of Financial Economics, 86(2), 306-336.
Gee, J. & Button, M. (2019). The financial cost of fraud 2019, Tech. Rep, Crowe.
Goodwin, P., & Wright, G. (2010). The limits of forecasting methods in anticipating rare
events. Technological Forecasting and Social Change, 77(3), 355-368.
Graham, J. R., Li, S., & Qiu, J. (2008). Corporate misreporting and bank loan contracting.
Journal of Financial Economics, 89(1), 44-61.
Hamilton, D. L., & Rose, T. L. (1980). Illusory correlation and the maintenance of stereotypic
beliefs. Journal of Personality and Social Psychology, 39(5), 832-845.
Hasnan, S., Rahman, R. A., & Mahenthiran, S. (2013). Management motive, weak
governance, earnings management, and fraudulent financial reporting: Malaysian evidence.
Journal of International Accounting Research, 12(1), 1-27.
Hopwood, W. S., Leiner, J. J., & Young, G. R. (2011). Forensic accounting and fraud
examination. McGraw-Hill.
Hribar, P., Kravet, T., & Wilson, R. (2014). A new measure of accounting quality. Review of
Accounting Studies, 19(1), 506-538.

9 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

K. Nguyen, K. (1995). Financial statement fraud: motives, methods, cases and detection.
Secured Lender, 51(2), 36.
Khalilia, M., Chakraborty, S., & Popescu, M. (2011). Predicting disease risks from highly
imbalanced data using random forest. BMC Medical Informatics and Decision Making, 11(1),
1-13.
Kim, Y. J., Baik, B., & Cho, S. (2016). Detecting financial misstatements with fraud intention
using multi-class cost-sensitive learning. Expert Systems with Applications, 62, 32-43.
Koh, H. C., & Low, C. K. (2004). Going concern prediction using data mining techniques.
Managerial Auditing Journal, 19(3), 462-476.
Krambia-Kapardis, M. (2002). A fraud detection model: A must for auditors. Journal of
Financial Regulation and Compliance, 10(3), 266-278.
Makridakis, S., Hogarth, R. M., & Gaba, A. (2009). Forecasting and uncertainty in the
economic and business world. International Journal of Forecasting, 25(4), 794-812.
Makridakis, S., Hogarth, R. M., & Gaba, A. (2009). Forecasting and uncertainty in the
economic and business world. International Journal of Forecasting, 25(4), 794-812.
Ngai, E. W., Hu, Y., Wong, Y. H., Chen, Y., & Sun, X. (2011). The application of data mining
techniques in financial fraud detection: A classification framework and an academic review of
literature. Decision Support Systems, 50(3), 559-569.
Omar, N., Johari, Z. A., & Smith, M. (2017). Predicting fraudulent financial reporting using
artificial neural network. Journal of Financial Crime, 24(2), 362-387.
[Link]
Orrell, D., & McSharry, P. (2009). System Economics: Overcoming the pitfalls of forecasting
models via a multidisciplinary approach. International Journal of Forecasting, 25(4),
734-743.
Pai, P. F., Hsu, M. F., & Wang, M. C. (2011). A support vector machine-based model for
detecting top management fraud. Knowledge-Based Systems, 24(2), 314-321.
Perols, J. (2011). Financial statement fraud detection: An analysis of statistical and machine
learning algorithms. Auditing: A Journal of Practice & Theory, 30(2), 19-50.
Peterson, B. K., & Buckhoff, T. A. (2004). Anti-fraud education in academia. Advances in
Accounting Education: Teaching and Curriculum Innovations, 6, 45-67.
Podgorelec, V., & Zorman, M. (2012). Decision Trees. Springer, New York.
Rezaee, Z. (2005). Causes, consequences, and deterence of financial statement fraud. Critical
Perspectives on Accounting, 16(3), 277-298.
Rezaee, Z., Crumbley, D. L., & Elmore, R. C. (2004), Forensic accounting education.
Advances in Accounting Education: Teaching and Curriculum Innovations, 6, 193-231.

10 [Link]
 International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2021, Vol. 11, No. 4

Sharma, A., & Panigrahi, P. K. (2012). A review of financial accounting fraud detection based
on data mining techniques. International Journal of Computer Applications, 39(1), 37-47.
Shipway, N. J., Barden, T. J., Huthwaite, P., & Lowe, M. J. S. (2019). Automated defect
detection for fluorescent penetrant inspection using random forest. NDT & E International,
101, 113-123.
Stolowy, H., & Breton, G. (2004). Accounts manipulation : A literature review and proposed
conceptual framework. Review of Accounting & Finance, 3(1), 5-92.
Tversky, A., & Kahneman, D. (1974). Judgement under uncertainty: Heuristics and biases.
Science, 185(4157), 1124-1131.
West, J., & Bhattacharya, M. (2016). Intelligent financial fraud detection: A comprehensive
review. Computers and Security, 57, 47-66. [Link]
Xu, F., & Zhu, Z. (2014). A Bayesian approach for predicting material accounting
misstatements. Asia-Pacific Journal of Accounting & Economics, 21(4), 349-367.
Yao, J., Pan, Y., Yang, S., Chen, Y., & Li, Y. (2019). Detecting fraudulent financial statements
for the sustainable development of the socio-economy in China: A multi-analytic approach.
Sustainability (Switzerland), 11(6). [Link]
Zhou, W., & Kapoor, G. (2011). Detecting evolutionary financial statement fraud. Decision
Support Systems, 50(3), 570-575. [Link]

Copyright Disclaimer
Copyright for this article is retained by the author(s), with first publication rights granted to
the journal.
This is an open-access article distributed under the terms and conditions of the Creative
Commons Attribution license ([Link]

11 [Link]