Analyzing financial statements is a crucial aspect of data-driven fraud detection, as it enables analysts to assess the overall coherence and reliability of reported financial performance (Chen, 2016; Albrecht et al., 2006). Methods include ratio analysis, trend analysis, and cross-sectional benchmarking are frequently employed to evaluate the alignment of financial data with historical performance, operational conditions, and industry benchmarks. These approaches facilitate the identification of trends that may remain obscured at the individual transaction level.

Financial statement analysis enables analysts to identify anomalous correlations between accounts, such as disproportionate revenue growth without comparable increases in cash flows or receivables (Gupta and Mehta, 2024; Hidayah and Saptarini, 2019). Unusual growth trends, unexpected enhancements in margins, or abnormal reductions in expenses may indicate earnings management or deliberate manipulation of financial outcomes. Comparisons with industry competitors enhance this study by underscoring divergences from standard business conduct.

Financial statement analysis offers a macro-level viewpoint that enhances transaction-level examination. Transaction analysis concentrates on specific operational operations, whereas financial statement analysis assesses the aggregate results of those activities. Collectively, these methodologies establish a more thorough framework for detecting and evaluating suspected financial reporting fraud.

References:

  • Albrecht WS, Albrecht CO, Albrecht CC, et al. (2006) Fraud examination: Thomson South-Western New York, NY.
  • Chen S. (2016) Detection of fraudulent financial statements using the hybrid data mining approach. Springerplus 5: 89.
  • Gupta S and Mehta SK. (2024) Data mining-based financial statement fraud detection: Systematic literature review and meta-analysis to estimate data sample mapping of fraudulent companies against non-fraudulent companies. Global Business Review 25: 1290-1313.
  • Hidayah E and Saptarini GD. (2019) Pentagon fraud analysis in detecting potential financial statement fraud of banking companies in Indonesia. Proceeding Uii-Icabe: 89-102.