Auditor’s Perception on the Level of Usage and Importance of Fraud Detection and Prevention through Software-Based Methods: Evidence from Sri Lanka

The increasing number of fraudsters and the challenges of fraud recognition and mitigation have made it crucial for businesses to adopt modern fraud identification and prevention systems. Traditional methods are no longer sufficient, and modern fraudulent actions require sophisticated tactics for prevention and detection. Organisations must now employ software-based fraud detection and avoidance procedures to detect and prevent fraud in real time. This study aims to determine the usage and significance of software-based fraud prevention and identification approaches from the perspectives of auditors in Sri Lanka, a developing country during an economic crisis. Further, this study investigates the challenges faced by Sri Lankan businesses in integrating Information Technology (IT) in this area. A quantitative research approach was used, and primary data was gathered using a self-administered questionnaire. The study's sample included 104 internal and external auditors. Major findings from this study include that software-based fraud prevention techniques like firewalls, password protection, and virus scanning are the most popular and highly effective, while sophisticated techniques like genetic algorithms, K nearest neighbours, and random forests have the opposite effect. The study reveals that Sri Lankan businesses face challenges in fraud detection and prevention due to lack of knowledge, training, and evolving fraud patterns. The findings also reveal significant differences in perceptions between male and female auditors regarding the usage and importance of fraud prevention and detection tools, as well as specific challenges associated with their implementation. The findings aim to promote software-based methods among policymakers and practitioners to overcome implementation challenges.