A Framework of Applying Process Mining for Fraud Scheme Detection

26 Pages Posted: 30 Jun 2017

See all articles by Tiffany Chiu

Tiffany Chiu

Rutgers, The State University of New Jersey - Accounting & Information Systems

Yunsen Wang

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick; Southwestern University of Finance and Economics (SWUFE)

Miklos A. Vasarhelyi

Rutgers Business School

Date Written: June 29, 2017

Abstract

Process mining has been used for auditing and internal control risk assessment as an audit analytical tool. This paper aims at providing a framework on how process mining can be applied to identify fraud schemes and assessing the riskiness of business processes. Specifically, the proposed framework captures how the patterns in process mining can be used to detect potentially fraudulent transactions. This paper contributes to the existing literature by associating notable variants/activities with potential fraud schemes and then assigning risk levels, which could be used as an automatic tool to test the fraud risk of every transaction. In addition, process mining enables auditors with the full population of event logs that can be used as non-financial information in fraud scheme detection.

Keywords: Process Mining; Financial Statement Fraud Detection; Fraud Schemes; Event Logs

Suggested Citation

Chiu, Tiffany and Wang, Yunsen and Vasarhelyi, Miklos A., A Framework of Applying Process Mining for Fraud Scheme Detection (June 29, 2017). Available at SSRN: https://ssrn.com/abstract=2995286 or http://dx.doi.org/10.2139/ssrn.2995286

Tiffany Chiu

Rutgers, The State University of New Jersey - Accounting & Information Systems ( email )

NJ
United States

Yunsen Wang (Contact Author)

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Miklos A. Vasarhelyi

Rutgers Business School ( email )

180 University Avenue
Ackerson Hall, Room 315
Newark, NJ 07102
United States
973-353-5002 (Phone)
973-353-1283 (Fax)

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