Anomaly Detection in Double-entry Bookkeeping Data by Federated Learning System with Non-model Sharing Approach

• URL: http://arxiv.org/abs/2501.12723v1
• Date: Wed, 22 Jan 2025 08:53:12 GMT
• Title: Anomaly Detection in Double-entry Bookkeeping Data by Federated Learning System with Non-model Sharing Approach
• Authors: Sota Mashiko, Yuji Kawamata, Tomoru Nakayama, Tetsuya Sakurai, Yukihiko Okada,
• Abstract summary: Anomaly detection is crucial in financial auditing and effective detection often requires obtaining large volumes of data from multiple organizations. In this study, we propose a novel framework employing Data Collaboration (DC) analysis to streamline model training into a single communication round. Our findings represent a significant advance in artificial intelligence-driven auditing and underscore the potential of FL methods in high-security domains.
• Score: 3.827294988616478
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• Abstract: Anomaly detection is crucial in financial auditing and effective detection often requires obtaining large volumes of data from multiple organizations. However, confidentiality concerns hinder data sharing among audit firms. Although the federated learning (FL)-based approach, FedAvg, has been proposed to address this challenge, its use of mutiple communication rounds increases its overhead, limiting its practicality. In this study, we propose a novel framework employing Data Collaboration (DC) analysis -- a non-model share-type FL method -- to streamline model training into a single communication round. Our method first encodes journal entry data via dimensionality reduction to obtain secure intermediate representations, then transforms them into collaboration representations for building an autoencoder that detects anomalies. We evaluate our approach on a synthetic dataset and real journal entry data from multiple organizations. The results show that our method not only outperforms single-organization baselines but also exceeds FedAvg in non-i.i.d. experiments on real journal entry data that closely mirror real-world conditions. By preserving data confidentiality and reducing iterative communication, this study addresses a key auditing challenge -- ensuring data confidentiality while integrating knowledge from multiple audit firms. Our findings represent a significant advance in artificial intelligence-driven auditing and underscore the potential of FL methods in high-security domains.

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