The design and validation of a knowledge-based system for the auditor’s report

Corporations are required by law to produce annual reports on their financial statements. The financial reports are accompanied by the auditor’s report, which is an independent auditor’s opinion on the fairness of the financial statements. To formulate their opinions, auditors use a “personal-judgement” approach. The core research activity described in this paper is constructing, implementing, and validating a knowledge-based system, called the “Auditor’s Report EXpert” (AREX), that is capable of formulating the opinion on financial statements, as expressed in the auditor’s report. Therefore, the main research question is: can AREX perform the auditor’s opinion similarly as can be expected from a qualified auditor? And if so; how should AREX be constructed and validated? The knowledge used by AREX is acquired from the literature, and from experienced auditors through questionnaires and in-depth interviews. After implementation, the knowledge base is presented to experts for review. The AREX performance is validated by test cases and actual auditing cases. The results of the validation indicate that AREX is successful in performing the task of formulating the auditor’s opinion.

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