What is fraudulent accounting?Explains fraud cases, causes, prevention measures, and investigation responses
2023/8/23
What is information leakage investigation?Explanation of research methods, case studies, and how to select a research company
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AI (artificial intelligence) detection is an effective way to prevent fraudulent accounting within a company.In this article, we will also explain the definition and risks of accounting fraud, preventive measures to prevent it, the effectiveness of detection by AI, and effective countermeasures if it occurs.
What is fraudulent accounting
It also explains the definition of accounting fraud, the risks it poses to companies, and how to prevent and detect it.
Definition and Overview of Fraudulent Accounting
Accounting fraud is the intentional falsification of financial information created by a company.It refers to the act of misrepresenting the financial situation by recording fictitious sales and expenses, or concealing information necessary to properly grasp the financial situation.
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Risks and Damages Caused by Fraudulent Accounting to Companies
Fraudulent accounting may result in criminal and civil liability.Criminal liability may include charges of fraud and illegal distribution.In terms of civil liability, there is also the possibility that a third party that caused damage, such as a bank that was forced to make a loan against a false financial situation or a shareholder whose stock price has plummeted, can claim damages.
If you declare less tax due to mistakes or misunderstandings, you will be charged with underreporting additional tax. However, if tax evasion is recognized due to malicious deception such as fraudulent accounting, double additional tax with a higher tax rate will be imposed. Masu.
Not only the economic loss, but also social credibility as a company that committed illegal acts has been lost and competitiveness has declined.It can also develop into a situation that threatens the very existence of companies, such as being unable to receive loans from banks.
How to prevent fraudulent accounting
To prevent fraudulent accounting, it is important to strengthen the internal monitoring system.Rather than concentrating authority on one person in charge, we will establish a system in which roles are divided and transactions and contract details are mutually checked.
Compliance training and internal reporting systems for managers and employees are also effective.Making each individual aware that accounting fraud is a criminal offense and may be punished under the criminal law, and having a contact point where they can consult and report with peace of mind will lead to a deterrent effect.
How to detect fraudulent accounting
The use of AI is effective in quickly detecting fraudulent accounting.It is not easy to detect hidden fraud in intentionally falsified financial information. By saving labor and improving efficiency with AI, it will be possible to detect and discover problems at an early stage.
Detection of fraudulent accounting by AI
We will explain the mechanism for detecting fraudulent accounting by AI machine learning, its effectiveness, and the benefits that can be obtained.
What is machine learning in AI?
In machine learning, machines, or computers, read a lot of data and find patterns and rules in the data.If you give the computer new data, it will be able to classify and make predictions based on the patterns it finds.Machine learning is used in various fields because it can automatically process large amounts of data more than manual work or programming.
How to detect fraudulent accounting using AI
By letting AI machine-learn past fraud data and setting it to issue a warning when it is similar to past fraud cases, it is possible to detect the inappropriate part as a sign of fraud.
Effectiveness of fraudulent accounting detection by AI
Finding suspicious points in a company's financial information, which consists of a large amount of complex materials and data such as spreadsheet software, is a difficult task even for experts.By using AI with high processing power that surpasses humans, it prevents oversight and leads to early detection.
Advantages of using AI to detect fraudulent accounting
AI machine learning has a wider range of support than human rule setting, and even if the latest methods appear, AI may be able to learn and respond.Not only can it detect many frauds, but it also learns on its own and improves its accuracy and ability to respond.In addition, by having people check and respond to fraud discovered by AI, it is possible to reduce the cost and time spent on monitoring.
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Forensic investigation required to investigate fraudulent accounting
If the fraudulent accounting still occurs, it is necessary to conduct a forensic investigation by a specialized investigative company.
What is a Forensic Investigation?
A forensic investigation that collects and analyzes information related to a case and reveals evidence of crime or fraud.Investigating the cause will allow us to formulate measures to prevent recurrence, and by clarifying where responsibility lies, we will be able to prepare in the event that it develops into a lawsuit.
The Need for Digital Forensics
Digital forensics is a branch of forensic science that involves collecting and analyzing data stored on digital devices to uncover evidence of crime or fraud.If fraudulent accounting is suspected, you must find evidence of hidden transactions and money movements.Evidence of fraud is not limited to documents, but electronic data such as e-mails and chats is often used, so digital forensic investigations that analyze such data are effective.
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Points for choosing a forensic investigation company in fraudulent accounting
When choosing a research company, the tools and technical capabilities used by the research company, and past research results are also important points.The results of the survey will vary depending on the equipment of the survey company and the skill level of the engineers.In particular, data recovery requires specialized tools and advanced technical skills. The use of AI is also an important point.Companies with a large number of investigation results have accumulated high technical capabilities and know-how on data recovery, so they will be able to select the appropriate method for each case and respond at a reasonable cost.In particular, whether or not there is a track record of requests from listed companies, the police, government agencies, etc. is an important point in judging reliability.
Initiatives for analysis and forensic investigations using AI
Utilization of AI (artificial intelligence) is essential in modern digital forensics, which handles enormous amounts of data.Whether the research company can utilize AI is one of the selection points.Utilizing AI, which is good at analyzing large amounts of data, not only improves the efficiency of investigations, but also improves the accuracy of investigations by allowing experts to concentrate their resources.
In the detection of accounting fraud, we can not only detect fraudulent numerical data hidden in accounting data with the power of AI, but also analyze some signals related to the occurrence of accounting fraud and capture the process of fraud. A survey company would be preferable.
Cost of request and how to determine it
Forensic investigations require a high level of expertise.When a forensic investigation is requested from a vendor, the cost of data processing and search, analysis and analysis (review) of whether it can be used as evidence, data hosting, etc. are included in the breakdown of the cost, but usually the review process accounts for the majority of the cost. occupy.The final amount varies greatly depending on the scope and contents of the investigation, and ranges from tens of thousands of yen to several million yen.
The use of AI in surveys has also been widely recognized recently, and significant cost benefits can be obtained by using AI to dramatically improve the efficiency of surveys.When collecting quotations, be sure to ask for the total cost including AI and reviews, and compare not only the unit price but also the overall cost.
FRONTEO, which can investigate corporate fraudulent accounting with high accuracy and efficiency with self-developed AI
FRONTEO boasts an extensive track record in fraud investigations, and its strengths are its ability to quickly respond to incidents and its ability to propose and investigate solutions.
Recent forensic investigations handle huge amounts of digital data, so the use of AI (artificial intelligence) is essential, but FRONTEO makes full use of its own AI engine to quickly process large amounts of data.We have also introduced in-house developed software to handle various cases, realizing rapid and cost-effective forensic investigations.
Utilizing the knowledge gained from the overwhelming number of cases, we are fully equipped to respond to highly difficult investigations and respond quickly in the event of an emergency.We will strive to minimize damage and prevent recurrence.
FRONTEO's AI captures the "process to fraud" for detecting fraudulent accounting
Speaking of fraudulent accounting detected by AI, it is common to specifically detect accounting figures, that is, abnormalities in financial indicators and the risk of fraud.However, if accounting figures are falsified, there must be a path to fraud, such as exchanges between related parties.
The fraud detection system equipped with FRONTEO's AI "KIBIT" analyzes the chats and email messages of the parties concerned and captures the process of fraud.It is just as important not to overlook the signs of fraud, that is, communication that is associated with fraud, the process leading to fraud, and the development of fraud trends, as much as it is to catch the fraud that appears in the figures of a company's financial statements. . FRONTEO is an advanced AI that can discover the process leading to fraudulent accounting in non-numerical aspects, and provides effective investigations that not only detect fraud but also prevent recurrence.
