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▪ and obtaining other useful audit related information3.Artificial intelligence
(AI) Role on auditing

▪ used to monitor financial transactions automatically.
▪ can boost the identification process of fraud by forming models focused on

sophisticated machine learning (ML).

Eighth: Using fraud prediction models

Many statistical models can be used to verify probability of committing fraud
in different firms as follows:

First: Altman Z-model

The Altman Z-score is a statistical model is a formula for determining
whether a company, is headed for bankruptcy. Which is considered one of the
main incentives for fraudulent financial statements, hence represents firms
with high probability of financial statements manipulation and fraudulent
financial statements formula takes into account profitability, leverage,
liquidity, solvency, and activity ratios.

Altman Z-Score = 1.2 X1 + 1.4X2 + 3.3 X3 + 0.6 X4 + 1.0 X5

Where:
• X1 = working capital / total assets
• X2 = retained earnings / total assets
• X3 = earnings before interest and tax / total assets
• X4 = market value of equity / total liabilities
• X5= sales / total assets

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‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬