（2007）Effective Use of Integrated Decision Making：An Advanced Technology Model for Evaluating Fraud in Service-Based Computer and Technology Firms.pdfVIP

JOURNAL OF EMERGING TECHNOLOGIES IN ACCOUNTING Vol. 4 2007 pp. 123–137 Effective Use of Integrated Decision Making: An Advanced Technology Model for Evaluating Fraud in Service-Based Computer and Technology Firms Mary Jane Lenard Meredith College Ann L. Watkins The University of North Carolina at Greensboro Pervaiz Alam Kent State University ABSTRACT: Most fraud-detection models developed to date require the use of private information and focus on companies primarily in retail and manufacturing industries. In the wake of recent corporate failures, a broad spectrum of interested parties now uses publicly available information to monitor their investments. The central issue we raise in this paper is the ability of external parties to detect financial reporting fraud in service-based computer and technology organizations by using publicly available in- formation. Utilizing both financial and nonfinancial information, we develop a model that employs logical reasoning through the use of Excel and fuzzy logic. We predict fraud in these firms with 76.7 percent accuracy. Keywords: fuzzy logic; financial reporting fraud; service-based computer and tech- nology firms; SAS 99. INTRODUCTION uch of the research in the area of fraud detection has focused on the development Mof models useful to auditors. Most rely on the identification of fraud risk factors or ‘‘red flags,’’ as possible indicators of fraud (Bell and Carcello 2000; Bell et al. 1993; Eining et al. 1997; Hansen et al. 1996; Loebbecke and Willingham 1988; Loebbecke et al. 1989; Pincus 1989). These