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Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments

Paulina Roszkowska (Hult International Business School, London, UK; Cass Business School, University of London, London, UK and Collegium of Economic Analysis, SGH Warsaw School of Economics, Warsaw, Poland)

Journal of Accounting & Organizational Change

ISSN: 1832-5912

Article publication date: 12 September 2020

Issue publication date: 5 April 2021

2366

Abstract

Purpose

The purpose of this paper is to explore the audit-related causes of financial scandals and advice on how emerging technologies can provide solutions thereto. Specifically, this study seeks to look at the facilitators of financial statement fraud and explain specific fintech advancements that contribute to financial information reliability for equity investments.

Design/methodology/approach

The study uses the case studies of Enron and Arthur Andersen to document the evidence of audit-related issues in historical financial scandals. Then, a comprehensive and interdisciplinary literature review at the intersection of business, accounting and engineering, provides a foundation to propose technology advancements that can solve identified problems in accounting and auditing.

Findings

The findings show that blockchain, internet of things, smart contracts and artificial intelligence solutions have different functionality and can effectively solve various financial reporting and audit-related problems. Jointly, they have a strong potential to enhance the reliability of the information in financial statements and generally change how companies operate.

Practical implications

The proposed and explained technology advancements should be of interest to all publicly listed companies and investors, as they can help safeguard equity investments, thus build investors’ trust towards the company.

Social implications

Aside from implications for capital markets participants, the study findings can materially benefit various stakeholder groups, the broader company environment and the economy.

Originality/value

This is the first paper that seeks solutions to financial fraud and audit-related financial scandals in technology and not in implementing yet another regulation. Given the recent technology advancements, the study findings provide insights into how the role of an external auditor might evolve in the future.

Keywords

Acknowledgements

This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.

The author greatly appreciate inspiring thoughts of Gregory La Blanc and helpful discussions and comments of Umesh Kumar and Tim Martens. The author is also grateful to the MBA, EMBA and MIB students of the Hult International Business School and the master students of the Warsaw School of Economics for interesting discussions on the use of modern technologies in accounting and auditing.

Citation

Roszkowska, P. (2021), "Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments", Journal of Accounting & Organizational Change, Vol. 17 No. 2, pp. 164-196. https://doi.org/10.1108/JAOC-09-2019-0098

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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