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Auditors' perspectives on financial fraud in Pakistan – audacity and the need for legitimacy

Muhammad Rashid (University of Peshawar, Peshawar, Pakistan)
Naimat U. Khan (University of Peshawar, Peshawar, Pakistan)
Umair Riaz (Aston Business School, Aston University, Birmingham, UK)
Bruce Burton (School of Business, University of Dundee, Dundee, UK)

Journal of Accounting in Emerging Economies

ISSN: 2042-1168

Article publication date: 20 April 2022

Issue publication date: 17 January 2023




Financial shenanigans are the omissions or actions undertaken with the purpose of misrepresenting an organisation's financial statements. Many examples now exist of such behaviour emerging in the context of a desire to deceive the users of financial reports. In this context, research has illustrated how investors can find themselves impacted by such behaviour, with incorrect decision-making around investment decisions being a major issue. However, auditors' perspectives, of obvious importance in such scenarios, given these individuals' role in attesting to the veracity of financial disclosures, have not been investigated. The aim of this study is to address this gap by seeking the experiences of auditors in the developing nation of Pakistan, an environment in which the significant impact of financial improprieties is well-documented.


Interviews with 50 Pakistani-based auditors were conducted to gather perceptions about the nature and prevalence of financial shenanigans. The questions posed were structured to address issues relating to both the drivers of and methods used to operationalise financial malfeasance.


The views expressed by the participants suggest that this type of malpractice is common, with a variety of forms employed and a level of audacity and shamelessness is striking. The results indicate the absence of the three institutional pillars conventionally associated with motivating organisational attempts to legitimise behaviour and maintain social contracts. When considered alongside recent findings that the audit profession in Pakistan may not always play an effective monitoring role, we argue that the evidence suggests the existence of motivations for legitimising strategies are not yet fully understood.

Research limitations/implications

This contention helps address recent calls for investigation of issues around legitimising tendencies where theoretical understanding is incomplete. A full understanding of the embedded practices will provide capital providers with the opportunity to make more informed decisions regarding their investments in Pakistani firms by highlighting the financial shenanigans involved, including the sheer audacity apparently associated with the observed behaviour.


Earnings management and auditing have not been studied widely in Pakistan despite the abundant and persistent nature of corporate scandals across the nation for many decades. Whilst implementation (and enforcement) of some accounting and auditing standards have taken place recently, the financial collapses continue, and understanding regarding the on-going fraud is urgently needed. The extent and shameless nature of the perceived behaviour are striking, suggesting that those closest to financial reporting in Pakistan see fraudulent financial reporting as being close to, if not yet fully representative of, normal practice.



The authors would like to acknowledge cooperation extended by the participants of this study. Usual disclaimer applies.


Rashid, M., Khan, N.U., Riaz, U. and Burton, B. (2023), "Auditors' perspectives on financial fraud in Pakistan – audacity and the need for legitimacy", Journal of Accounting in Emerging Economies, Vol. 13 No. 1, pp. 167-194.



Emerald Publishing Limited

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