November 9, 2021
Worried about financial fraud within your company or between your business and customers? Of course, there are some times when fraud is unavoidable when malicious actors work the system to their advantage by bending the rules.
In this case, it might even be possible that a company commits financial fraud to benefit the owner or the business.
If a customer or employee is attempting to defraud your business, you’ll need a weapon to fight against those bad actors. For this, take a page from regulators’ playbooks: artificial intelligence.
Accounting is based largely on self-reporting until an audit is initiated, and then it is up to regulators to find the inconsistencies in the books and reported amounts.
One possible solution to this problem is to improve the model to make it more difficult for companies that make malicious attempts to circumvent the model to do so. Regulators have an additional tool to combat accounting fraud: artificial intelligence.
The market for Artificial Intelligence in Accounting Market is expected to register a CAGR of 30% between 2021 and 2026. (Mordor Intelligence)
For many organizations, forensic accounting has turned to and uses artificial intelligence (AI) as part of their risk management strategy to protect themselves from fraud and respond to the inaccuracies they face.
Fraud prevention is vital for businesses around the world. Some of the most common methods of fraud are changing or deleting information in company account systems, changes of electronic documents, and the creation of fraudulent electronic files.
Common tricks used by unscrupulous staff to defraud organisations include manipulating payment files that are sent to the bank, changing customer names, addresses, and payment information, creating fictitious sellers and approving them, refunding purchase orders, excessive hourly and labour costs, and selling sensitive information to third parties.
The use of artificial intelligence in accounting and finance can help ensure that corporate financing complies with federal, state, and municipal regulations as well as the company’s internal compliance measures, avoiding many of the problems listed above.
With AI-enabled systems that use computer vision and natural language processing, companies can review every single cost report submitted. Any account run by an AI fraud detection system can reduce fraud by up to 95 percent and reduce associated costs.
In the age of digital technology, there are many new and powerful anti-fraud tools. The abundance of data provided by electronic records, contracts, e-mails, text messages, and bank transfers has enabled officials to develop advanced approaches to detecting fraud.
In a time when the need to detect fraud is increasing due to increased dollar amounts and the increasing number of beneficiaries, evaluating and prosecution of claims in some countries is difficult because IT systems developed decades ago do not facilitate data analysis and monitoring of abnormal transactions.
However, newer systems and services are designed to combat fraud at every level of the organization through detailed, and intelligent software. Instead of relying on people to meticulously comb through records to find inconsistencies, intelligent accounting systems using AI will identify any inconsistencies and flag them for review.
Something on the expense sheet out of order? Intelligent accounting systems know your parameters and commonly used amounts and will identify that there may be something wrong with the expense.
Money coming in that can’t be reconciled with bank accounts and transactions? Your intelligent accounting system can identify that automatically and notify you that something is amiss. Instead of finding out months later or when it comes time to present data for an external or internal audit, intelligent accounting systems detect and prevent fraud as it happens.
AI and machine learning are particularly good at detecting fraud because of the amount of digital information and the ease of analysing text data. In the next few years, we will see AI become a necessary companion in the financial departments of companies around the world.