Fraudsters Beware: Unleashing the Power of Metaverse Technology to Uncover Financial Fraud

AbstractAbstractThis study seeks to investigate the potential of utilizing the metaverse environment to enhance the ability of financial analysts in detecting financial fraud. A preregistered randomized controlled experiment was conducted, which involved two control groups of participants discussing financial statements onsite and via video conference, and an experimental group utilizing a metaverse environment. The results revealed that the experimental group's performance in terms of the accuracy of fraud detection surpassed that of the two controlled groups. This outcome may be attributed to the enhanced usage of data visualization and more proactive participation of female participants. This study provides valuable insights into the potential benefits of employing metaverse technology in corporate finance and informs future collaboration strategies for financial analysts in fraud detection.Keywords: MetaverseFinancial analystsFraud detectioncorporate governance Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationFundingThis work was supported by the China Scholarship Council. Notes on contributorsCheng XuCheng Xu is an Assistant Professor at Xi'an Jiaotong-Liverpool University, specializes in the intersection of advanced digital technologies and business. His research, published in numerous international journals, explores the implications of AI, blockchain, big data, and the metaverse on business and finance.Xueji LiangXueji Liang is an Associate Professor at the International Business School of Suzhou, Xi'an Jiaotong-Liverpool University. She holds a PhD in strategic management from the NUS Business School, National University of Singapore. Her research interests include applications of digital and Artificial Intelligence technologies in management, corporate governance and international business.Yanqi SunYanqi Sun is an Assistant Professor in Accounting and Finance at the Beijing Institute of Petrochemical Technology in China. He received a PhD from Waikato Management School, University of Waikato. He has published many papers in ABDC-A or SSCI Q1 journals.Xudong HeXudong He is a PhD student in Finance at Essex Business School, Univeristy of Essex, United Kingdom, with interests in corporate finance and digital finance.Notes1 The MPAcc is an advanced accounting programme in graduate-level. The programs also mandatorily require students to complete ethics-related courses or modules that cover topics such as corporate governance, fraud detection and prevention, and the legal and ethical responsibilities of accountants. These components help students develop a comprehensive understanding of the ethical challenges they may encounter in their professional careers (Fu et al., 2011 Fu, H., Tan, H.-T., & Zhang, J. (2011). Effect of auditor negotiation experience and client negotiating style on auditors' judgments in an auditor-client negotiation context. A Journal of Practice & Theory, 30(3), 225–237. https://doi.org/10.2308/ajpt-10114[Crossref], [Web of Science ®] , [Google Scholar]; Sun et al., 2015 Sun, Y., Tan, H.-T., & Zhang, J. (2015). Effect of concession‐timing strategies in auditor–client negotiations: It matters who is using them. Contemporary Accounting Research, 32(4), 1489–1506. https://doi.org/10.1111/1911-3846.12139[Crossref], [Web of Science ®] , [Google Scholar]).2 Please see Appendix C for details on unreasonable financial indexes.3 We consider MPAcc students are well suited as they have qualified intelligence and necessary financial skills: Mousavi et al. (2022 Mousavi, M., Zimon, G., Salehi, M., & Stępnicka, N. (2022). The effect of corporate governance structure on fraud and money laundering. Risks, 10(9), 176. https://doi.org/10.3390/risks10090176[Crossref], [Web of Science ®] , [Google Scholar]) emphasize the importance of financial skills in fraud detections. Salehi et al. (2023 Salehi, M., Ali Mohammed Al-Msafir, H., Homayoun, S., & Zimon, G. (2023). The effect of social and intellectual capital on fraud and money laundering in Iraq. Journal of Money Laundering Control, 26(2), 227–252. https://doi.org/10.1108/JMLC-12-2021-0142[Crossref], [Web of Science ®] , [Google Scholar]) emphasize the importance of intellectual capital in fraud detections. Salehi et al. (2023 Salehi, M., Ali Mohammed Al-Msafir, H., Homayoun, S., & Zimon, G. (2023). The effect of social and intellectual capital on fraud and money laundering in Iraq. Journal of Money Laundering Control, 26(2), 227–252. https://doi.org/10.1108/JMLC-12-2021-0142[Crossref], [Web of Science ®] , [Google Scholar]) emphasize the importance of employing professionals in fraud detections.4 In China, CPA stands for "Certified Public Accountant," which is a professional designation granted to individuals who have met specific educational, examination, and experience requirements in the field of accounting. The CPA qualification is highly regarded and recognized in China, as well as internationally (Kliegman, 2005 Kliegman, E. J. (2005). CPAs in China: Fascinating similarities and differences. The CPA Journal, 75(8), 6. https://www.proquest.com/scholarly-journals/cpas-china-fascinating-similarities-differences/docview/212286801/se-2. [Google Scholar]).5 Following the rigorous studies (Massey, 1951 Massey, F. J. Jr. (1951). The Kolmogorov-Smirnov test for goodness of fit. Journal of the American Statistical Association, 46(253), 68–78. https://doi.org/10.1080/01621459.1951.10500769[Taylor & Francis Online], [Web of Science ®] , [Google Scholar]), we run the Kolmogorov-Smirnov test and the p-value is 0.986 > 0.5. Hence, the dataset is considered as normally distributed. Our manipulation checks in Section 3.5 also suggest the sample size of 360 students in lab experiment is effective.