The Impact of Audit Automation on Detection of Financial Statement Irregularities and Fraud Risks

Posted: Jun 24, 2023

• Cleo Kim
• Finley Patterson
• Nash Warren

Abstract

The rapid evolution of financial technology has precipitated a paradigm shift in audit practices, compelling a re-examination of traditional approaches to detecting financial statement irregularities and fraud risks. Contemporary audit environments are characterized by increasing data volumes, complex transaction structures, and sophisticated fraud schemes that challenge conventional manual audit procedures. This research addresses the critical intersection of audit automation technologies and fraud detection efficacy, building upon the foundational work of Ahmad, Nadeem, and Saeed (2019) in fraud risk management while extending the discourse into the realm of integrated technological solutions. The transformation from periodic sampling-based audits to continuous, comprehensive monitoring represents one of the most significant developments in the audit profession in recent decades. Financial statement fraud continues to pose substantial threats to market integrity and investor confidence, with the Association of Certified Fraud Examiners reporting that organizations lose approximately 5% of revenue to fraud annually. The primary research questions guiding this investigation are: How do integrated audit automation technologies impact the detection accuracy of financial statement irregularities compared to traditional audit methods? What specific aspects of fraud risk assessment are most significantly enhanced through automation? What implementation challenges emerge