Fraud Audit Research Articles

APPLYING MACHINE LEARNING TO AUDIT DATA: ENHANCING FRAUD DETECTION, RISK ASSESSMENT AND AUDIT EFFICIENCY

Machine learning (ML) is used globally as a tool for predictive analysis. Within auditing, the use of audit data helps to uncover fraud indicators, identify risk areas and implement predictive models for continuous audit monitoring. Researchers are using various machine learning methods to analyze large and complex audit data to facilitate prediction. In this study, an online UCI dataset of 776 lines and 27 features is used. Out of these 27 features, 13 are eliminated due to their low impact on the target dataset or due to the ‘important feature selection’ algorithm. In this analysis, I used supervised learning methods, namely K-Nearest Neighbors, Logistic Regression, Random Forest, Support Vector Machine, Decision Tree, Linear Discriminant Analysis, Gaussian Naive Bayes, Extra Tree Algorithm, Gradient Boosting Algorithm, Ada Boosting Algorithm and XGBoost Algorithms. The experimental results highlight the power of eight neighbor KNN and evaluate its effectiveness, sensitivity, precision, accuracy and F1 score in comparison with other methods such as Naive Bayes, SVM (Linear Kernel), Decision Tree Classifier and Random Forest Classifier.

Determinant Factors of Auditor’s Ability to Detect Fraud: Auditor Proffesional Scepticism as Moderation

With the moderating effect of auditor professional distrust in mind, this study attempts to investigate the relationship between three key factors fraud audit training, auditor competence, and auditor experience and the auditor's capacity to identify fraud. This study utilized data collected from 117 auditors who work in Public Accounting Firms located in the center of Java, Indonesia. This study used the Partial Least Squares (PLS) method to address the research hypothesis. The study's findings demonstrate that an auditor's expertise and training in fraud auditing have a direct, beneficial impact on their capacity to spot fraud. Nevertheless, the auditor's expertise has been demonstrated to have no impact on their capacity to identify fraud. The results of this study also managed to demonstrate how an auditor's professional skepticism enhances the impact of their expertise, experience, and fraud audit training on their capacity to identify fraud.

Effect of Financial Forensic and Fraud Auditing on Fraud Management in Selected Federal Government Ministries in Nigeria

Despite the solidification of forensic accounting in government parastatals, the objectives are not attained at the expected level. This study examined the effect of financial forensic and fraud auditing on fraud management in selected Federal Government Ministries in Nigeria. The study adopted a descriptive survey research design. The population for this study consists 1550 staff in the Office of Auditor General for the Federation. Three hundred and forty-nine (349) questionnaire were administered, primary data was collected using 5-point Likert scale structured questionnaire for the study. Partial Least Square Structural Equation Modeling (PLS-SEM) was employed to model the regression analysis. The study found that financial forensic and fraud auditing have positive and significant effect on fraud management. Based on the findings, the study concluded that the greater the intensity of financial forensic and fraud auditing the better the fraud management in Federal Government Ministries in Nigeria. It is recommended that Federal Government Ministries in Nigeria should invest in building and enhancing their financial forensic capabilities. This can be achieved by providing training and resources to personnel involved in fraud management, such as forensic accountants, investigators, and auditors. Also, the study recommends that Federal Government Ministries in Nigeria should focus on building and strengthening their fraud audit capabilities. This can be achieved by providing specialized training to auditors and investigators involved in fraud management. Keywords: Financial forensic; Fraud auditing; Fraud management

Bibliometric Framing of Research Trends Regarding Public Sector Auditing to Fight Corruption and Prevent Fraud

Combating corruption is an important objective of the United Nations Sustainable Development Group, with the aim of helping public institutions to act in the interest of citizens. To ensure this objective is met, the spending of public money is controlled by the supreme audit institutions of each country. The objective of this paper is to identify trends in and approaches to the field of auditing in the public sector to combat corruption and prevent fraud. To achieve the proposed objective, a bibliometric analysis of papers published in the journals indexed in Web of Science Clarivate Analytics for the period 2003–2022 was carried out; selection criteria was based on instances of the keywords “public audit fraud”, “supreme institution”, and “fraud” appearing in a sample of 528 articles. The results showed that there was a research interest in this field, with the trend being more pronounced since 2017. The main topics addressed were those related to the performance audit and the fight against corruption, and the most relevant studies were conducted on samples from Nordic European countries. Thus, it is confirmed that the external audit in public sector is an important factor in combating the phenomenon of corruption in the public sector, both by detecting fraud and by offering recommendations aimed at making the activity of this sector more efficient.

The Effect of Whistleblowing and Professional Skepticism on Fraud Detection Fraud and Fraud Audit Training as a Moderating

Fraud detection was examined through a survey. Specifically, this research investigated the impact of whistleblowing and professional skepticism on fraud detection by using moderating variable fraud audit training. All of the respondents were auditors working for the Supreme Audit Institution Representative of Papua Province in Indonesia. Using a census sampling method. The data collection technique used an instrument through a questionnaire. A total of 40 auditors participated in this study. The application of moderated regression analysis (MRA) approach for data analysis. This study yields three key findings. Firstly, whistleblowing exerts a notable influence on fraud detection. Secondly, professional skepticism demonstrates a significant impact on fraud detection. Thirdly, the study reveals that fraud audit training does not act as a moderator in the relationship between professional skepticism and fraud detection. The implications of this results for internal and external audits of government enhance professional skepticism through fraud audit training and using whistleblowing information.

Avoiding Audit Failures - A Case Study of Xintai Financial

In recent years, financial fraud cases have been on the rise, with a combination of subjective reasons within companies and audit failures caused by negligence on the part of accounting firms. This paper examines the case of audit failure at Xintai Financial to understand how companies engage in financial fraud through illegal means, manipulate financial statements, and highlights the shortcomings of Beijing Xinghua Accounting Firm in their work, which contributed to the success of Xintai Financials financial fraud. In conclusion, three insights are drawn to provide lessons for the future on how to prevent audit fraud effectively.

Effect of Internal Audit on The Prevention of Fraud

This study aims to determine the effect of internal audits on fraud prevention. The formulations in this study are has the internal audit at the Selaawi Garut Unit Bank (BRI) adequately, does internal audit affect the prevention of fraud in the bank (BRI) Selaawi Garut Unit. The research method in this study is to use quantitative methods. The object of research is internal audit and fraud prevention. The dependent variable is Fraud Prevention, while the independent variable is Internal Audit. The research population is all employees who work at Bank BRI Unit Selaawi Garut, as many as 31 people. Samples were taken randomly from as many as 31 people. Data analysis used simple linear regression. The results showed that Internal Audit affected Fraud Prevention. Furthermore, the internal audit department personnel must enhance the caliber of their analytical procedures in the context of fraud auditing, preliminary surveys, program audits, and auditor team selection. This finding will enable future researchers to replicate the study by incorporating additional variables.

The auditing game: the dark side of the private provision of a public good

AbstractThe aim of auditing is to protect active and potential investors from accounting fraud. Nevertheless, as many auditing scandals have demonstrated, auditing has a dark side. Correct auditing is a public good provided by private auditing firms, but these firms are paid by the enterprise being audited. Therefore, audit firms may be dubbed as agents of two principals, the audited firm and the public. Reputation theory conjectures that auditors are disincentivized from performing shallow and fraudulent auditing because of reputational concerns and associated reputational costs. However, empirical evidence does not support this claim. While it may be irrational for a large audit firm (such as Arthur Andersen LLP) to sacrifice its reputational capital for a single client by doing superficial audits (such as WorldCom), it may be quite rational for the auditing firm’s engagement partners to do so. The result might be a conspiracy against the public and investors. Because of an inelastic supply of experienced auditors and a highly concentrated market of big auditing firms, reputational losses due to auditing scandals for the audit firms’ local partners and staff seem to be rather small. With a game theoretic model, we argue here that neither higher transparency nor higher fines for auditing failures may prevent such conspiracies. Therefore, legal regulations and court rulings can only change the expected fines for audit fraud, but they cannot solve the general problems arising from the symbiotic relationship between auditors and their client firms. As auditing firms may use the so-called expectation gap to protect themselves against legal claims of wrongdoing, avenues more suitable to deterring conspiracies by auditors and their client firms might include whistleblowing, short-selling investors and investigative journalism.

The quest for legitimacy: The European Court of Auditors’ work on fraud

AbstractThis research aims to contribute to the debate on fraud on public funds and the work that public auditors perform on this important topic, providing a useful analysis for government officials concerned about accountability, good governance, and transparency. This article presents a retrospective analysis of the European Court of Auditors’ (ECA) role in combating and preventing fraud. Using innovative research tools such as the Valence Aware Dictionary and sEntiment Reasoner lexicon and other quantitative and qualitative research methods, evidence is found that ECA fraud audits reach a more negative tone in their conclusions than in the rest of the audits and that their audit recommendations on fraud are accepted to a lesser degree than the rest. Although in recent years the ECA has taken a more active role regarding fraud and stirring the public debate on this topic, its work is still hampered by its non‐jurisdictional statute. The results obtained contribute to the literature on fraud in the public sector by bringing empirical evidence on public sector fraud audit with data of an under‐researched and unique Supreme Audit Institution. This article opens up new avenues for future research and has practical implications for practitioners by offering them insights on their role on the issue, thus helping them to address some areas more prone to be affected by fraud.

LITERATURE REVIEW: FRAUD AUDITING IN INDONESIA

Financial statement fraud or corruption is one of the most common types of fraud committed by company executives. Pressure, opportunity, rationalization, arrogance, and the ability to commit fraud are all factors that contribute to financial statement fraud. The role of the auditor is critical in detecting signs of fraud in financial reports. Therefore, the researchers wish to conduct a literature review on audit fraud, focusing on the role of auditing in identifying fraudulent corporate financial statements in Indonesia. Auditors play a crucial role in detecting fraud in a financial report, according to the findings of this study, which the researchers hope will provide future researchers with insight and references for research in the field of fraud auditing and inform the public of this fact.

Identification of the Ability of External Auditors to Detect Audit Fraud

Purpose: To find out the determinants of Detect Audit Fraud. Theoretical framework: Professional skepticism, auditors' ability and detect fraud. This topic was adopted from several theoretical studies and previous research which was incorporated into a single factor influencing external auditors to detect to audit fraud. Design/methodology/approach: This study used a quantitative approach with an explanatory design using a survey method. The sample in this study were auditors who were members of KAP with a total sample of 61 samples. This study uses a 5-point Likert scale to collect research data. Findings: The results of the study show that 1) The independent variables Professional skepticism and auditors' abilities have a positive and significant effect on external auditors detecting to audit fraud with a large effect of 71.6%, while the remaining 29.4% are other factors not included in this model; 2) Professional skepticism and auditors' abilities have a positive and significant effect on external auditors detecting to audit fraud; 3) The auditors' ability variable has no effect on external auditors detecting to audit fraud. Research, Practical & Social Implications: We recommend a future research agenda related to external auditor detect to audit fraud as a result of analytical skills and audit delay to become an integral role model. Originality/value: Most of the previous studies only used variables partially and no one has broken down KAPs by region. However, a thorough and complete description of these factors along with the specifications of an auditor who has specific experience is the target of the importance of our research.

Pemberdayaan Pusat Knowledge Sharing Untuk Meningkatkan Keahlian Investigasi Kecurangan Bagi Auditor Internal

The role of identifying and investigating fraud for organizations and technological developments complicate organizational dynamics and require the competence and expertise of internal auditors to detect fraud within organizations. The purpose of this research is to obtain empirical evidence about the effect of auditors' risk assessment skills, understanding of industry characteristics and knowledge sharing on internal auditors' fraud investigation abilities. The research methodology in this study is quantitative, the population in this study is part of the internal audit of a leading consumer goods company in Indonesia using census techniques with a total of 60 people. Data collection was carried out using a questionnaire. The results of this study, all variables affect the ability of internal audit fraud investigations. This study implies the importance of enhancing the skills of internal auditors by strengthening internal discussions within organizations as “knowledge-sharing centers” to enhance the fraud investigation capabilities of internal auditors.

Kontroversi Bulog Pada Era Orde Baru

To handle staple food and food security in the Unitary State of the Republic of Indonesia Bulog is one of those who carry out this task. In the development of the Bulog case, which has been studied throughout its history, Bulog has had many controversies. Most of these cases were KKN (Corruption, Collusion, and Nepotism). This article summarizes several cases of Bulog, including; The Bulog case with PT. Goro Batara Sakti, the Buloggate Bulog case, the Widjanarko Bulog case, the rice import case from Vietnam, and the export case to Africa. The people desire to eradicate corruption from its roots because corruption has burdened the budget. This also often happens at the regional to central levels. Internal and External Bureau of Logistics conducted a study to make Bulog a public company. Its basis, 2003 the revision of the legal basis for Perum Bulog was based on PP RI No. 61. several things can be a factor in reducing KKN practices at Bulog, including; increasing the revolution in the form of gradual reorganization, further increasing control and revising existing systems and procedures within the department so that it can control many benefits compared to things that are not like KKN. By revolutionizing our educational site in character education, so that the culture in Indonesia, which has been ingrained in the KKN culture, becomes more honest and open to the future, Indonesian people will have good ethics and dignity. To monitor Bulog's performance, audit fraud risk management is needed, which is non-financial and financial, so that it can regulate the controls and functions in Bulog's operations as a BUMN in Indonesia.

PENGARUH BUDAYA ORGANISASI, PENGENDALIAN INTERNAL, PROACTIVE FRAUD AUDIT DAN WHISTLEBLOWING SYSTEM TERHADAP PENCEGAHAN FRAUD DALAM PENGELOLAAN DANA BOS

This study aims to examine the effect of organizational culture, internal control, proactive fraud audit, and whistleblowing system on fraud prevention in BOS fund management. This research was conducted using descriptive and verification methods. The population is all vocational high schools in Kuningan Regency as many as 45 vocational high schools. The sampling technique in this study was carried out with the type of probability sampling, namely simple random sampling. The sample used in this study were 31 vocational high schools in Kuningan Regency with 124 respondents Data collection techniques using a questionnaire with data analysis tools in the form of multiple linear regression analysis. The results of this study indicate that organizational culture, internal control, proactive fraud audit and whistleblowing system have a simultaneous and significant effect on fraud prevention in BOS fund management, organizational culture has a significant positive effect on fraud prevention in BOS fund management, internal control has a significant positive effect on prevention fraud in BOS fund management, proactive fraud audit has a significant positive effect on preventing fraud in BOS fund management, and the whistleblowing system has a significant positive effect on fraud prevention in BOS fund management Keywords: Organizational Culture, Internal Control, Proactive Fraud Audit, Whistleblowing System and Fraud Prevention in BOS Fund Management.

Role of fintech in financial reporting and audit fraud prevention and safeguarding equity investment

The aim of this paper is to discover the audit-related causes of financial scandals and suggest how emerging technologies can offer solutions thereto. Specifically, this paper seeks to look at the facilitators of financial statements fraud and explain unique Fintech advancements that will make a contribution in financial information reliability in case of equity investments. The study makes use of the case studies of financial frauds to document the evidence of audit-associated issues in historical financial scandals. A complete and interdisciplinary literature evaluation at the intersection of business, accounting, and engineering, gives a basis to endorse technology advancements that can solve diagnosed issues in accounting and auditing. The findings of the study depicts that Blockchain, Internet of Things, Smart Contracts and Artificial Intelligence solutions have distinct functionality and can effectively clear up numerous financial reporting and audit-associated problems. Jointly, they have got a sturdy capability to enhance the reliability of the information in financial statements and commonly exchange how companies operate. This implied that the proposed and defined technology advancements must be of interest to all publicly listed companies and investors, as they can assist in safeguarding equity investments, as a result construct buyers’ will have trust towards the enterprise. Aside from implications for capital markets individuals, the findings of the study can materially benefit diverse stakeholder groups, the broader enterprise surroundings, and the financial system. Given the latest generation advancements in technology, the findings of the study provide insights into how the position of an external auditor would possibly evolve in the future.

Pengaruh Beban Kerja, Skeptisme Profesional, dan Pengalaman Auditor dalam Mendeteksi Kecurangan dengan Pelatihan Audit Kecurangan sebagai Variabel Moderasi

The purpose of this study is to see how workload, professional skepticism, and audit experience affect the auditor's ability to detect fraud, with fraud audit training as a moderating variable. This research was conducted at a Public Accounting Firm (KAP) in the Jakarta area. This study uses primary data obtained directly through a questionnaire. Multiple linear regression was used as the analytical method. The results showed that Professional Skepticism and Audit Experience had a significant effect on the Auditor's Ability to Detect Fraud, but Workload had no significant effect. Workload, Professional Skepticism, and Audit Experience all have a significant impact on the auditor's ability to detect fraud simultaneously. Fraud Audit Training also proved ineffective in moderating the relationship between Professional Skepticism and Auditor Ability to Detect Fraud, but proved effective in moderating the relationship between Workload and Audit Experience on Auditor Ability to Detect Fraud..

Factors Affecting Audit Independence: A Case Study Based on the Failure of Typical Financial Fraud Audits

Audit independence constrains the work of auditors and provides certain guarantees for the quality of audit execution. Audit independence is affected by various factors, such as the development of non-audit services, the completeness of audit procedures, and the auditors' competence. This paper takes the typical audit failure cases such as the Enron incident, the Zhenlong audit failure, and the financial fraud audit of Kangmei Pharmaceutical as examples, and conducts a case analysis on the influence of different factors on audit independence in these audit failure cases. The conclusion shows that strengthening audit independence should be done by improving the service quality of firms, the professional competence of certified public accountants, the engagement mechanism and external supervision.

Prediction Orientation: The Role of Good School Governance and Internal Control Systems in Moderating the Influence Between Proactive Fraud Audits on Fraud Prevention

The study aims to test predictive models about the effect of proactive fraud audits on fraud prevention moderated by internal control systems and good school governance. The research was conducted with the object of employees managing school operational assistance (BOS) funds at Wonogiri High School Indonesia. Method of data collection by purposive sampling. Data retrieval techniques with questionnaires. Data analysis with SEM-PLS. The results found that 1) Proactive Fraud Audit negatively affects fraud prevention, 2) Internal control systems moderate negative influences on the connectedness between proactive fraud audit to fraud prevention, 3) Good school governance moderates positive influence on the connectedness between proactive fraud audit to fraud prevention. The findings of this study provide practical benefits for schools to minimize fraud efforts in bos fund management

Determinants of Technological Innovation Adoption and Banking Operations of Selected Deposit Money Banks in Nigeria

Banks are one the most important financial institutions that contribute efficiently to the growth of any economy. The banking institutions have contributed significantly to the effectiveness of the entire financial system as they offer an efficient institutional mechanism through which resources can be mobilized and directed from less essential uses to more productive investment; yet, there have been challenges confronting deposit money banks in Nigeria in form of governance process control, risk management, compliance and consulting, financial reporting and fraud audit. Therefore, the study examined the determinants of technological innovation adoptions and their effects on banking operations of deposit money banks in Lagos, Nigeria.The research designs adopted for this study was survey research design. The target population used for this study was employees of the selected deposit money banks in Lagos State, Nigeria. The sample size for the study is 397 and simple random sampling technique was adopted for the study. The research instrument was questionnaire which was validated by the supervisor and the reliability was 0.843. The data for the study was analyzed using simple regression analysis.The study showed that technological innovations have significant effects on banking operations in selected deposit money banks in Lagos State, Nigeria. The finding also revealed that ease of use has significant effect on operational efficiency of deposit money banks in Lagos, Nigeria with Adj R2 = 0.698; F-Statistic (df = 4, 432) = 190.224 and p-value = 0.000. The study revealed that compatibility has significant effect on operational structure of deposit money banks in Lagos, Nigeria with Adj R2 = 0. 556; F-Statistics (df = 4, 432). = 499.656 and p-value = 0.000.The study concludes that investment in technology will bring an improvement in the operations of deposit money banks in Nigeria. It is however recommended that the government through CBN should provide adequate security measures towards the various e-banking products in Nigeria. This will aid in reducing the rate of fraud and forgery in the banking industry and encourage investors which in turn will increase the banks’ cash inflow cum use of available fund for granting of credit facilities.

Independence and Competence on Audit Fraud Detection: Role of Professional Skepticism as Moderating

We conducted this study to analyze and examine the effect of competence auditor independence on fraud detection. This study also analyzes the effect of competence auditor independence on fraud detection if moderated by professional skepticism. This study involved 59 auditors working at the Inspectorate of South Sulawesi Province. This sample selection uses the census method because the population is less than 100 people. We use primary data by providing questionnaires/statement sheets to respondents. The data analysis method uses the Smart PLS approach. The results showed that competence and auditor independence variables positively and significantly affected fraud detection. The auditor competence variable has a negative and significant effect on fraud detection if moderated by professional skepticism. The auditor competence variable positively and significantly affects fraud detection if moderated by professional skepticism.