A REVIEW ON DATA MINING METHODS USED IN INTERNAL AUDIT AND EXTERNAL AUDIT
In this study, data mining methods used in audit activities are explained. Based on
the results of the research on data mining, common data mining methods have been
determined and the usability of these methods in audit activities is examined. In addition,
the analyzed data mining methods were discussed in terms of fraud detection and the cost
created by fraud. The study also evaluates which data mining method or methods are
more appropriate to prevent these costs. This study focuses on DM techniques, especially
artificial neural networks (ANN), logistic regression (LR), decision trees (DT), support
vector machines (SVM), genetic algorithms (GA), and text mining (TM).
___
- Ağdeniz, Ş. and Yıldız, B. (2018). Muhasebede analiz yöntemi olarak metin madenciliği.
Muhasebe Bilim Dünyası Dergisi, 20(2), 286-315.
- AICPA. (1999). Top 10 technologies – plus 5 for tomorrow. Journal of Accountancy,
187(5), 16-17.
- Albizri, A., Appelbaum, D. and Rizzotto, N. (2019). Evaluation of financial statements
fraud detection research: A multi-disciplinary analysis. International Journal of
Disclosure and Governance, 16(4), 206-241.
- Alden, M., Bryan, D., Lessley, B. and Tripathy,A. (2012). Detection of financialstatement
fraud using evolutionary algorithms. Journal of Emerging Technologies in
Accounting, 9(1), 71-94.
- Amani, F. and Fadlalla, A. (2017). Data mining applications in accounting: A review of
the literature and organizing framework. International Journal of Accounting
Information Systems, 24, 32-58.
- An, A. (2009). Classification methods. In: J. Wang, (Ed.), Encyclopedia of Data
Warehousing and Mining (196-201). Hershey: IGI Global.
- Ata, A. and Seyrek, İ. (2009). The use of data mining techniques in detecting fraudulent
financial statements: An application on manufacturing firms. Suleyman Demirel
University Journal of Faculty of Economics & Administrative Sciences, 14(2),
157-170.
- Awodele, O., Akinjobi, J. and Akinsola, J.E.T. (2017). A framework for web based
detection of journal entries frauds using data mining algorithm. International
Journal of Computer Trends and Technology, 51(1), 1-9.
- Bauder, R., Khoshgoftaar, T. and Seliya, N. (2017). A survey on the state of healthcare
upcoding fraud analysis and detection, Health Services and Outcomes Research
Methodology, 17(1), 31-55.
- Bhattacharya, S., Xu, D. and Kumar, K. (2011). An ANN-based auditor decision support
system using Benford's law. Decision Support Systems, 50(3), 576-584.
- Bhattacharyya, S., Jha, S., Tharakunnel, K. and Westland, C. (2011). Data mining for
credit card fraud: A comparative study. Decision Support Systems, 50(3), 602-
613.
- Busta, B. and Weinberg, R. (1998). Using Benford’s law and neural networks as a review
procedure. Managerial Auditing Journal, 13(6), 356-366.
- Camps-Valls G., Martínez-Ramón M., Rojo-Álvarez, J. L. (2009). Applications of kernel
methods. In: J. Wang, (Ed.), Encyclopedia of Data Warehousing and Mining (51-
57). Hershey: IGI Global.
- Cerchiello, P. (2009). Data mining and the text categorization framework. In: J. Wang,
(Ed.), Encyclopedia of Data Warehousing and Mining (394-399). Hershey: IGI
Global.
- Chen, W. S. and Du, Y. K. (2009). Using neural networks and data mining techniques for
the financial distress prediction model. Expert Systems with Applications, 36(2),
4075-4086.
- Chen, Y. J., Liou, W. C., Chen, Y. M. and Wu, J. H. (2019). Fraud detection for financial
statements of business groups. International Journal of Accounting Information
Systems, 32, 1-23.
- Chrysostomou, K., Lee, M., Chen, S. and Liu, X. (2009). Wrapper feature selection. In:
J. Wang, (Ed.), Encyclopedia of Data Warehousing and Mining (2103-2108).
Hershey: IGI Global.
- DallaValle,L.(2009).Dataminingforinternationalization.In:J.Wang,(Ed.),Encyclopedia
of Data Warehousing and Mining (424-430). Hershey: IGI Global.
- Debreceny, R. and Gray, G. (2011). Data mining of electronic mail and auditing: a research
agenda. Journal of Information Systems, 25(2), 195-226.
- Dominik, A., Walczak, Z. and Wojciechowski, J. (2009). In: J. Wang, (Ed.), Encyclopedia
of Data Warehousing and Mining (202-207). Hershey: IGI Global.
- Dutta, I., Dutta, S. and Raahemii, B. (2017). Detecting financial restatements using data
mining techniques. Expert Systems with Applications, 90, 374-393.
- Feroz, E. H., Kwon, T. M., Pastena, V. and Park, K. (2000). The efficacy of red flags in
predicting the sec's targets: An artificial neural networks approach. Intelligent
Systems in Accounting, Finance & Management, 9(3), 145-157.
- Gaganis, C. (2009). Classification techniques for the identification of falsified financial
statements: a comparative analysis. Intelligent Systems in Accounting, Finance
& Management: International Journal, 16(3), 207-229.
- Gepp, A., Linnenluecke, M., O’Neill, T. and Smith, T. (2018). Big data techniques in
auditing research and practice: Current trends and future opportunities. Journal
of Accounting Literature, 40, 102-115.
- Goel, S. and Gangolly, J. (2012). Beyond the numbers: Mining the annual reports for
hidden cues indicative of financial statement fraud. Intelligent Systems in
Accounting, Finance and Management, 19(2), 75-89.
- Goldberg, D. E.(1989). Genetic algorithms in search, optimization, and machine learning.
Reading, USA: Addison-Wesley.
- González, P. C. and Velásquez, J. (2013). Characterization and detection of taxpayers with
false invoices using data mining techniques. Expert Systems with Applications,
40(5), 1427-1436.
- Gray, G. and Debreceny, R. (2014). A taxonomy to guide research on the application
of data mining to fraud detection in financial statement audits. International
Journal of Accounting Information Systems, 15(4), 357-380.
- Green, B. P. and Choi, J. H. (1997). Assessing the risk management fraud through neural
network technology. Auditing A Journal of Practice & Theory, 16(1), 14-28.
- Gupta, R. and Gill, N. S. (2012). Financial statement fraud detection using text mining.
International Journal of Advanced Computer Science and Applications, 3(12),
189-191.
- Hajek, P. and Henriques, R. (2017). Mining corporate annual reports for intelligent
detection of financial statement fraud-A comparative study of machine learning
methods. Knowledge-Based Systems, 128, 139-152.
- Han, J. and Kamber, M. (2006). Data mining: Concepts and techniques. Morgan
Kaufmann Publishers, USA: San Francisco.
- Hassani, H., Huang, X., Silva, E. and Ghodsi, M. (2016). A review of data mining
applications in crime. Statistical Analysis and Data Mining: The ASA Data
Science Journal, 9(3), 139-154.
- Holton, C. (2009). Identifying disgruntled employee systems fraud risk through text
mining: A simple solution for a multi-billion dollar problem. Decision Support
Systems, 46(4), 853-864.
- Hsu, W. (2009). Evolutionary computation and genetic algorithms. In: J. Wang, (Ed.),
Encyclopedia of Data Warehousing and Mining (817-821). Hershey: IGI
Global.
- Jans, M., Lybaert, N. and Vanhoof, K. (2010). Internal fraud risk reduction: Results
of a data mining case study. International Journal of Accounting Information
Systems, 11(1), 17-41.
- Jans, M., Van Der W., Jan M., Lybaert, N. and Vanhoof, K. (2011). A business process
mining application for internal transaction fraud mitigation. Expert Systems with
Applications, 38(10), 13351-13359.
- Keyvanpour, M. R., Javideh, M. and Ebrahimi, M. R. (2011). Detecting and investigating
crime by means of data mining: A general crime matching framework. Procedia
Computer Science, 3, 872-880.
- Kim, Y. and Vasarhelyi, M. (2012). A model to detect potentially fraudulent/abnormal
wires of an insurance company: An unsupervised rule-based approach. Journal
of Emerging Technologies in Accounting, 9(1), 95-110.
- Kirkos, E., Spathis, C. and Manolopoulos, Y. (2007). Data mining techniques for the
detection of fraudulent financial statements. Expert systems with applications,
32(4), 995-1003.
- Kirkos, E., Spathis, C. and Manolopoulos, Y. (2008). Support vector machines, decision
trees and neural networks for auditor selection. Journal of Computational
Methods in Sciences and Engineering, 8(3), 213-224.
- Koh, H. C. and Low, C. K. (2004). Going concern prediction using data mining techniques.
Managerial Auditing Journal, 19(3), 462-476.
- Krambia-Kapardis, M., Christodoulou, C. andAgathocleous, M. (2010). Neural networks:
The panacea in fraud detection? Managerial Auditing Journal, 25(7), 659-678.
- Kurban, O. C., Niyaz, Ö. and Yıldırım, T. (2016). Neural network based wrist vein
identification using ordinary camera. In 2016 International Symposium on
Innovations in Intelligent Systems and Applications (INISTA), Sinaia, Romania,
1-4.
- Lewis, R. and Ras, Z. (2009). Facial recognition. In: J. Wang, (Ed.), Encyclopedia of Data
Warehousing and Mining (857-862). Hershey: IGI Global.
- Li, H., Sun, J. and Wu, J. (2010). Predicting business failure using classification and
regression tree: An empirical comparison with popular classical statistical
methods and top classificationminingmethods.Expert Systems with Applications,
37(8), 5895-5904.
- Lin, C. C., Chiu, A. A., Huang, S. Y. and Yen, D. (2015). Detecting the financial statement
fraud: The analysis of the differences between data mining techniques and
experts' judgments. Knowledge-Based Systems, 89, 459-470.
- Lin, S. C. and Lehto, M. (2009). A bayesian based machine learning application to task
analysis. In: J. Wang, (Ed.), Encyclopedia of Data Warehousing and Mining
(133-139). Hershey: IGI Global.
- Liou, F. M. (2008). Fraudulent financial reporting detection and businessfailure prediction
models: A comparison. Managerial Auditing Journal, 23(7), 650-662.
- Ngai, W. T. E., Hu, Y., Wong, Y. H., Chen, Y. and 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.
- Peji ́c Bach, M., Krstic, Ž., Seljan, S. and Turulja, L. (2019). Text mining for big data
analysis in financial sector: A literature review. Sustainability, 11(5), 1-27.
- Ravisankar, P., Ravi V., Rao, G. R. and Bose, I. (2011). Detection of financial statement
fraud and feature selection using data mining techniques. Decision Support
Systems, 50(2), 491-500.
- Rivero, D., Rabuñal, J., Dorado, J. and Pazos, A. (2009). Evolutionary development of
ANNs for data mining. In: J. Wang, (Ed.), Encyclopedia of Data Warehousing
and Mining (829-835). Hershey: IGI Global.
- Saxena, A., Kothari, M. and Pandey, N. (2009). Evolutionary approach to dimensionality
reduction. In: J. Wang, (Ed.), Encyclopedia of Data Warehousing and Mining
(810-816). Hershey: IGI Global.
- Siciliano, R. and Conversano, C. (2009). Decision tree induction. In: J. Wang, (Ed.),
Encyclopedia of Data Warehousing and Mining (624-630). Hershey: IGI
Global.
- Sun, J. and Li, H. (2008). Data mining method for listed companies' financial distress
prediction. Knowledge-Based Systems, 21(1), 1-5.
- Welch, O., Reeves, T. and Welch, S. (1998). Using a genetic algorithm-based classifier
system for modeling auditor decision behavior in a fraud setting. International
Journal of Intelligent Systems in Accounting, Finance and Management, 7(3),
173-186.
- West,J. andBhattacharya,M.(2016).Intelligent financial fraud detection:Acomprehensive
review. Computers & Security, 57, 47-66.
- Xiao, M., Xiaoli, H. and Gaojin, L. (2010). Research on application of data mining
technology in financial decision support system. In 2010 3rd International
Conference on Information Management, Innovation Management and Industrial
Engineering, 4, 381-384.
- Yigitbasioglu, O. and Velcu, O. (2012). A review of dashboards in performance
management: Implications for design and research. International Journal of
Accounting Information Systems, 13(1), 41-59.
- Yildiz, B. and Yezegel, A. (2010). Fundamental analysis with artificial neural network.
The International Journal of Business and Finance Research, 4(1), 149-158.
- Yom-Tov, E. (2003). An introduction to pattern classification decision tree induction.
In: O. Bousquet, U. Von Luxburg and G. Rätsch, (Ed.), Advanced Lectures on
Machine Learning (1-20). Berlin, Heidelberg: Springer.
- Yu, Z., Guang, Y. and Zi-qi, J. (2013). Violations detection of listed companies based
on decision tree and K-nearest neighbor. In 2013 International Conference on
Management Science and Engineering 20th Annual Conference Proceedings,
1671-1676.
- Zhou, W. and Kapoor, G. (2011). Detecting evolutionary financial statement fraud.
Decision Support Systems, 50(3), 570-575.
- Zhu, D. (2009). Analytical competition for managing customer relations. In: J. Wang,
(Ed.), Encyclopedia of Data Warehousing and Mining (25-30). Hershey: IGI
Global.