Accounting Commons^™

An Evidential Reasoning Approach To Fraud Risk Assessment Under Dempster-Shafer Theory: A General Framework, Lei Gao, Theodore J. Mock, Rajendra P. Srivastava

School of Accountancy: Faculty and Staff Publications

This paper develops a general framework under Dempster-Shafer theory for assessing fraud risk in a financial statement audit by integrating the evidence pertaining to the presence of fraud triangle factors (incentives, attitude and opportunities), and evidence concerning both account-based and evidence-based fraud schemes. This framework extends fraud risk assessment models in prior research in three respects. 1) It integrates fraud schemes, both account schemes through which accounts are manipulated, and evidence schemes through which frauds are concealed, into a single framework. 2) It incorporates prior fraud frequency information obtained from the Accounting and Auditing Enforcement Releases issued by the Securities …