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Auditing journal entries using extreme value theory
Hanken School of Economics, Helsinki, Finland.
2013 (English)In: ECIS 2013 - Proceedings of the 21st European Conference on Information Systems, Association for Information Systems, 2013Conference paper, Published paper (Refereed)
Abstract [en]

While a wealth of statutory and auditing pronouncements attest to the importance of the auditing of journal entries for preventing and detecting material misstatements to financial statements, existing literature has so far paid inadequate attention to this line of research. To explore this line of research further, this paper proposes a bipartite model that is based on extreme value theory and Bayesian analysis of Poisson distributions. The paper assesses the veracity of the model via a series of experiments on a dataset that contains the journal entries of an international shipping company for fiscal years 2006 and 2007. Empirical results suggest the model can detect journal entries that have a low probability of occurring and a monetary amount large enough to cause financial statements to be materially misstated. Further investigations reveal that the model can assist auditors to form expectations about the journal entries thus detected as well as update their expectations based on new data. The findings indicate that the model can be applied for the auditing of journal entries, and thus supplement existing procedures.

Place, publisher, year, edition, pages
Association for Information Systems, 2013.
Keywords [en]
Auditing, Bayesian analysis, Extreme value theory, Journal entries, Hardware, Financial statements, Fiscal years, International shippings, Low probability, Information systems
National Category
Computer Sciences Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-39023Scopus ID: 2-s2.0-84905842124OAI: oai:DiVA.org:hj-39023DiVA, id: diva2:1191800
Conference
21st European Conference on Information Systems, ECIS 2013, 5 June 2013 through 8 June 2013, Utrecht
Available from: 2018-03-20 Created: 2018-03-20 Last updated: 2018-03-20Bibliographically approved

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Argyrou, Argyris

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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf