Detection of Anomalies in Large Scale Accounting Data using Deep Autoencoder Networks

Learning to detect fraud in large-scale accounting data is one of the long-standing challenges in financial statement audits or forensic investigations. Nowadays, the majority of applied techniques refer to handcrafted rules derived from known fraud scenarios. While fairly successful, these rules exhibit the drawback that fraudsters gradually adapt and find ways to circumvent them. In addition, these rigid rules often fail to generalize beyond known fraud scenarios. To overcome this challenge we propose a novel method of detecting anomalous journal entries using deep autoencoder networks. We demonstrate that the trained networks’ reconstruction error regularized by the individual attribute probabilities of a journal entry can be interpreted as a highly adaptive anomaly assessment. Our empirical study, based on two datasets of real-world journal entries, demonstrates the effectiveness of the approach and outperforms several baseline anomaly detection methods. Resulting in a fraction of less than 0.15% (0.7%) of detected anomalous entries while achieving a high detection precision of 19.71% (9.26%). Initial feedback received by accountants underpinned the quality of our approach capturing highly relevant anomalies in the data. We envision this method as an important supplement to the forensic examiners’ toolbox.