Issues in Bayes Nets and Influence Diagrams: With Applications in Accounting and Auditing

Recently substantial research in artificial intelligence (AI) has focused on Bayes nets and the closely related influence diagrams. However, there has been little work in the accounting and auditing communi­ ties in this area of AI research. Bayes nets and influence diagrams have some advantages over deterministic AI approaches. These approaches employ probabilities to model decision making. Probabilities are a powerful approach for solving non..deterministic problems. In addition, Bayes nets and influence diagrams offer at least two advantages over other probabilistic approaches, such as expert sys­ tems. First, rather than heuristic and approximate solutions, both Bayes nets and influence diagrams provide normative solutions that are consistent with probability theory. Second, unlike expert systems, influence diagrams allow the user the ability to compute the cost of information. Thus, there are important reasons to study the use of Bayes nets and influence diagrams in accounting and auditing.