B5 EKOSKIVAARA Pmaanantai
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_______________________________________________________ Eija Koskivaara Artificial Neural Networks for Analytical Review in Auditing ______________________________________________________ Sarja / Series Ae-7:2004 (pdf) A-7:2004 (nid.) ISBN: 951-564-185-3 (pdf) 951-564-184-5 (nid.) ISSN: 1459-4870 (pdf) 0357-4652 (nid.) ACKNOWLEDGEMENTS Orienteering in the research world is challenging and sometimes lonely. For me this journey has been fun as well as educational. I have received a lot of support from various people and organisations. My supervisor, Professor Barbro Back has supported me in numerous ways. Her interests in my research and recommendations have been of critical importance to me. Furthermore, I acknowledge all the valuable advice on society of science and the encouragement she gave me, not only as a supervisor but also as a real friend. Rector, Professor Tapio Reponen has offered me a lot of tacit and explicit knowledge to find the right way whenever I got lost. It was an honour for me that he accepted the invitation to act as an esteemed custodian in the public examination of my thesis. I sincerely thank the official examiners of this study, Professor Teija Laitinen and Professor Ari Visa, for their time and excellent comments that helped me a lot. I specially want to thank the Director of Rutgers Accounting Research Center, Professor Miklos Vasarhelyi, who accepted the invitation to act as an esteemed opponent of my thesis. I thank the researchers and administrative staff of Information System Science at the Turku School of Economics and Business Administration for creating a positive and helpful working environment. Special thanks go to the Head of the Department of Management, Professor Hannu Salmela and Professor Reima Suomi for their continuous support to my research work and to Secretary Birgit Haanmäki for taking care of many practical things. The libraries of Turku School of Economics and Business Administration and Åbo Akademi deserve thanks for excellent service. I have the privilege to have many good advisors around me. Professor Christer Carlsson was very kind to let me take part in the postgraduate seminars of the Institute for Advanced Management Systems Research. Christer has the special ability to see both a single tree and the whole forest simultaneously in the information systems research. Professor Kaisa Sere´s enthusiastic grip especially at the beginning of my study was essential. The Turku Centre for Computer Science (TUCS) has financed my doctoral studies. I thank all the professors, colleagues, administrative staff, and friends at TUCS for their efforts to create a financially safe and inspiring research environment. In addition, the Foundation for Commerce Education in Turku, the Finnish Konkordia Fund, and the Turku School of Economics and Business Administration believed that my study was worth financial support, which was also mentally important to me. I thank the people at the Data Mining and Knowledge Management Laboratory. Collaboration with Iulian Nastac, Ph.D., has deepened my understanding of the ANNs. Special thanks are reserved to my roommates. My first roommate, late Eva Wilppu, Lic.Sc., shared the ups and downs of the research process at the beginning of the study. I miss the intellectual discussions with Eva, and the moments when we almost laughed our heads off. Eva has a special place in my scientific heaven. With my second roommate Jonna Järveläinen, M.Sc., I had stimulating discussions in e.g. reasoning. I like to thank all the organisations that have participated in this study. Mayor Armas Lahoniitty, Chief Audit Executive Terttu Para, Audit Executive Ritva Rindell, Audit Executive Esko Herrala, Planning Officer Pekka Paatonen, Head of Audit, Authorised Public Accountant Pekka Pajamo, and Financial Adviser Heikki Rautalin helped me to find and use different kinds of interesting data to build and evaluate the artefact. I thank Marko Gröönroos, B.Sc., for programming the final ANNA-system, and my cousin Pasi Lehtonen, M.Sc., for programming a data sorter for me when I was drowning in the data. Senior Lecturer Satu-Päivi Kantola merits thanks for guiding me through the statistical jungle. Many thanks go to Eeva Lilley, MA, for the language checking. During these years I have participated in many interesting workshops, conferences, and courses in, e.g. Angers, Bergen, and Cork. This has given me a lot of inspiration that was needed to conduct this research. I started my orienteering career by accident thirty years ago, and I have enjoyed the special spirit of this sport of ”cunning running”. It is easy to learn how to orienteer, but the challenges the sport provides are endless. To achieve the world championship requires lots of work. Needless to say, research is similar. Orienteering and orienteers have provided me with a safety network that every researcher needs for sharing the ups and downs of the research work – as well as for all those unforgettable moments inside and outside work. I thank my orienteering friends around the world. Special thanks are reserved to my orienteering soul-mate Sanna Nymaln. I am proud to have had the privilege of growing up in the spirit of the orienteering world. I thank my friends outside the world of orienteering for being around. Ladies who have created a research career in the pressure of work and family have provided me with the knowledge I have needed to materialise this research. Other mothers have shown me how to cope amidst it all. “Girls of the Ring” have kept my feet firmly on the ground. I feel lucky to share a friendship with all of you. I owe my thanks to my late grandmother, Saima Varjonen, who always encouraged me to get a good life and education. My parents, farmers Pirjo and Niilo Koskivaara, have shown me the “learning by working” method, which is also a good method in science. My parents and my parents-in-law, Elvi and Olavi Heinonen, have unselfishly offered their time to me and my family helping us in numerous ways. Nothing could be more important for the smooth flow of my research than knowing that my children were in the best possible hands when I was in the grip of the research. I hope that I can give similar care to my own children. My brother Jouni and his family, especially his wife Tiina, have offered their home and farm as a real research field to our children. Ever since I entered into this thesis the fertile discussions with my dear husband, Olli Heinonen, MD, Ph.D., have been very valuable. From him I have also got the sound confidence that I can do whatever I want in life. Besides, he has also offered me numerous lunches to keep the research going. Our lovely children, Eero and Elina have given me a lot of sunshine and happiness. There is nothing in my life to be compared with the importance of their existence. May 7th 2004 Eija Koskivaara … East is east, west is west, and now you ask me, what is best. … The answer is yes or no, depending on the interpretation. Albert Einstein, in Scientific American, April 1950. TABLE OF CONTENTS 1 INTRODUCTION .................................................................................. 13 1.1 Gathering audit evidence................................................................ 14 1.2 Overview on analytical review in auditing .................................... 15 1.2.1 Analytical review techniques.............................................. 16 1.2.2 Research trends in advanced quantitative techniques ......... 18 1.3 ANN business applications in research and practice ..................... 20 1.4 Information technology in auditing................................................ 21 1.5 Aim of the study............................................................................. 23 1.6 Overview of the thesis.................................................................... 23 2 RESEARCH APPROACH..................................................................... 27 2.1 Approaches of designing artefacts ................................................. 27 2.2 Constructive research approach ..................................................... 28 2.3 Design science research approach.................................................. 31 2.4 Systems development research approach....................................... 33 2.5 Development cycle research approach........................................... 35 2.6 Evolutionary research approach..................................................... 37 3 AUDITING AND ANALYTICAL REVIEW........................................ 39 3.1 Audit phases with analytical review............................................... 39 3.2 Analytical review........................................................................... 41 3.2.1 Analytical procedures.......................................................... 43 3.3 Continuous auditing....................................................................... 45 4 ARTIFICIAL NEURAL NETWORKS.................................................. 49 4.1 History and definition of the ANN................................................. 49 4.2 A neuron, activation functions, and layers..................................... 50 4.3 Learning paradigms........................................................................ 53 4.4 Learning algorithm......................................................................... 55 4.4.1 Backpropagation algorithm................................................. 56 4.4.2 Resilient backpropagation algorithm.................................. 58 4.4.3 Self-organising