Managerial financial fraud is estimated in the billions of dollars annually in the United States.
Since fraud includes obfuscation, misdirection, and fabrication, this study proposes using
deception theory as a means of detecting fraud in textual portions of financial statements
(10K). A corpus of 101 fraudulent 10Ks was collected from the Securities and Exchange
Commission along with 101 matching non-fraudulent 10Ks. Natural Language Processing
techniques were applied to the corpus to generate raw counts and usage rates of hedging …