Forensic Accounting and AI-Driven Fraud Detection in the Digital Era

In the contemporary financial environment, the rapid digitization of business transactions andthe implementation of systems such as the Goods and Services Tax (GST) have significantlytransformed the nature of financial reporting and compliance. While these developments haveimproved transparency and efficiency, they have also created new opportunities for financialfraud. Traditional auditing methods, which are largely manual and retrospective in nature, oftenfail to detect complex and technology-driven frauds in a timely manner.In this context, forensic accounting has emerged as a specialized field that combines accounting,auditing, and investigative skills to detect and prevent financial irregularities. With the growingvolume of financial data and increasing complexity of fraud schemes, Artificial Intelligence (AI)has become an essential tool in enhancing the effectiveness of forensic accounting. AI enablesreal-time monitoring, pattern recognition, and predictive analysis, thereby strengthening frauddetection mechanisms.This chapter provides a conceptual understanding of financial fraud, forensic accounting, and theintegration of AI in fraud detection. It establishes a theoretical foundation for the study byexamining key concepts, techniques, and evolving practices in the field.