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Article
Publication date: 30 September 2014

Nor Azrina Mohd Yusof and Ming Ling Lai

– This paper aims to present an integrative model in predicting corporate tax fraud.

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1636

Abstract

Purpose

This paper aims to present an integrative model in predicting corporate tax fraud.

Design/methodology/approach

This paper is grounded on three theories, namely, the theory of reasoned action, theory of planned behaviour and the “Fraud Diamond Theory”.

Findings

By integrating these three theories, this paper proposes that individual cognitive factors, fraud diamond factors and organizational factors such as normative and control factors influence managers to commit corporate tax fraud.

Practical implications

Practically, the proposed integrative model enables the government and tax authority to understand on why corporate managers engage in corporate tax fraud. It will also allow them to devise practical methods and strategies to prevent the corporate managers to engage in tax fraud.

Originality/value

This study has merit that proposed an integrative model in predicting corporate tax fraud. Research on corporate tax fraud has been the subject of limited investigation; hence, this study contributes to the tax compliance literature by proposing an integrative model to study corporate tax fraud in a Malaysian tax setting. Future studies can be conducted to test the proposed integrative model in examining the circumstances of managers’ intention to commit corporate tax fraud.

Details

Journal of Financial Crime, vol. 21 no. 4
Type: Research Article
ISSN: 1359-0790

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Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

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Book part
Publication date: 17 July 2014

Kamil Omoteso and Musa Obalola

This chapter adopts Porter’s ‘audit trinity’ approach comprising internal audit, external audit and audit committee to discuss the role auditing can play in the management…

Abstract

Purpose

This chapter adopts Porter’s ‘audit trinity’ approach comprising internal audit, external audit and audit committee to discuss the role auditing can play in the management of corporate fraud.

Design/methodology/approach

The chapter maps the historical background of and the developments in external audit as an assurance service, the internal audit function and the audit committee. Based on this, it explains the nature, types and possible causes of corporate fraud within the context of business risk with a view to establishing how auditing can help in managing such frauds.

Findings

The chapter highlights the relationships that should exist between the three audit types in order to support a sound internal control system as a tool for preventing and detecting corporate fraud.

Research limitations/implications

The chapter identifies cost, opportunity, connivance and managerial override as factors that could limit the ability of auditing to manage corporate fraud. It also suggests ways of addressing these limitations.

Practical implications

As the current upward trend in IT adoption for corporate operations continue to open new sets of corporate fraud windows, this chapter examines how an entity’s internal controls can be used to prevent and detect these growing fraud schemes.

Originality/value

The chapter’s unique strength is its adoption of a holistic approach to auditing to suggest ways of managing corporate fraud – a novelty in the corporate fraud literature. It is hoped that future research in the area will bring empirical insights to the issues raised and perspectives covered in the chapter.

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Ethics, Governance and Corporate Crime: Challenges and Consequences
Type: Book
ISBN: 978-1-78350-674-3

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Article
Publication date: 5 January 2021

Xudong Tang, Yan Gu, Ruoyu Weng and Kungcheng Ho

Confucianism underpins Chinese traditional culture and the values of the Chinese people. The purpose of this study is to examine the relationship between adherence to…

Abstract

Purpose

Confucianism underpins Chinese traditional culture and the values of the Chinese people. The purpose of this study is to examine the relationship between adherence to Confucianism and corporate irregularities.

Design/methodology/approach

The authors use the historical numbers of Jinshi (Imperial Scholars) in the Ming and Qing dynasties within 200 km of a company's location to proxy for the influence of Confucianism on the company, presenting strong evidence that Confucianism significantly reduces corporate irregularities.

Findings

The authors' findings are robust even when criticized with alternative definitions of Confucianism, sensitivity analysis and instrumental variable regression. The authors also discover that this effect is weaker in state-owned and foreign enterprises and weakened by the influence of Western culture.

Originality/value

This paper brings a new traditional-cultural perspective to the understanding of corporate irregularities and contributes to the literature on culture and finance. This paper also helps the authors understand the “China Puzzle” that is China's rapid economic development under an imperfect legal system.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 20 August 2020

Huixiang Zeng, Li Yang and Jing Shi

Internal audit executives instruct the internal audit department to supervise corporate business management activities, evaluate internal controls and risks and provide…

Abstract

Purpose

Internal audit executives instruct the internal audit department to supervise corporate business management activities, evaluate internal controls and risks and provide recommendations for operating. Therefore, this paper aims to confirm whether and how the supervisory ability of the chief internal audit executive enhances the internal audit department’s function to prevent corporate fraud. Based on the results, this paper further researches the role of the supervisory board position in this relationship.

Design/methodology/approach

This paper examines 922 small and medium-sized listed enterprises in China from 2010 to 2017 and empirically investigates the influence of the internal audit executive’s supervisory ability (IAESA) on the occurrence of corporate fraud.

Findings

The results reveal that the IAESA is significantly negatively correlated with the occurrence of corporate fraud. This suppression effect is more pronounced when the internal audit executive is also the company’s supervisor. However, if the internal audit executive is the chairman of the board of supervisors, the suppression effect no longer exists. This paper therefore confirms that the IAESA curbs corporate fraud via the improvement of the internal corporate control level.

Research limitations/implications

Because the sample data was limited by the information disclosure level of the included companies, the sample size was relatively small as compared with those of other studies.

Practical implications

This study not only expands the research perspective in the field of internal audit functions but also provides a decision-making reference for the prevention of corporate fraud.

Social implications

This paper extends an approach that might be able to curb corporate fraud.

Originality/value

A comprehensive index was developed using data envelope analysis to quantify the supervisory ability of internal audit executives. Based on this, this research confirms that the internal audit department performs a “firewall function” to prevent corporate fraud.

Details

International Journal of Accounting & Information Management, vol. 29 no. 1
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 6 June 2016

Sawsan Saadi Halbouni, Nada Obeid and Abeer Garbou

This paper aims to investigate the role of corporate governance and information technology in fraud prevention and detection within the United Arab Emirates (UAE).

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5374

Abstract

Purpose

This paper aims to investigate the role of corporate governance and information technology in fraud prevention and detection within the United Arab Emirates (UAE).

Design/methodology/approach

This study uses a survey of financial accountants and internal and external auditors to assess their perceptions of the effectiveness of IT and corporate governance as measured in terms of the audit committee’s effectiveness, internal audit functions, external audit functions, culture of honesty and employee training programmes in preventing and detecting fraud in the UAE.

Findings

The results indicate that corporate governance has a moderate role in preventing and detecting fraud in the UAE and that IT has the same role as traditional fraud prevention and detection techniques. The results also show no significant difference between internal and external auditors in their use of technological and traditional techniques during the course of audits.

Research limitations/implications

The findings suggest that the senior management and boards of directors must better understand the importance of their oversight function. The finding that a culture of honesty has a low positive impact on fraud prevention and detection in the UAE indicates that chief executive officers and boards of directors must make more efforts to set the “tone at the top” to improve the corporate environment in terms of integrity and ethics, among other factors. Furthermore, as IT and traditional techniques provide the same function, senior management and boards of directors must be alerted to the importance of developing systematic approaches to fraud investigation that involve greater reliance on technological approaches.

Practical implications

The moderate role of corporate governance suggests that senior management and boards of directors must better understand the importance of their oversight function to meet their obligations and fiduciary responsibilities to stakeholders. Furthermore, greater adoption of IT to detect and prevent fraud contributes to developing a systematic approach to fraud investigation, capable of identifying unusual activity using effective software.

Originality/value

This study contributes to the literature on the role of corporate governance and IT in preventing and detecting fraud, particularly for Middle Eastern countries and other emerging nations. The study may provide insights to academics and practitioners in the UAE and their international counterparts.

Details

Managerial Auditing Journal, vol. 31 no. 6/7
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 28 June 2013

Tariq H. Ismail and Zakia Abdelmoniem

This paper aims to investigate the extent to which companies in one of the Islamic culture countries, Egypt, are complying with the Islamic implementation of the…

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1401

Abstract

Purpose

This paper aims to investigate the extent to which companies in one of the Islamic culture countries, Egypt, are complying with the Islamic implementation of the Anglo‐Saxon model of corporate governance and testing the impact, if any, of such compliance on mitigating of stock option fraud incentives.

Design/methodology/approach

A logistic regression model is used to examine the effects of board of directors, audit committee, ownership structure and other firm characteristics on the likelihood of stock option fraud. The analysis is based on the data for stock option grants obtained during the period from 2006 to 2009.

Findings

The results suggest that the rate of compliance with the Islamic implementation of the Anglo‐Saxon model of corporate governance in Egyptian public‐held companies is low. Weak corporate governance allows executives to exercise greater influence over the board of directors and audit committee decisions. Furthermore, a low level of disclosure, duality of CEO, high percentage of insiders in board of directors, auditor turnover, and management ownership are among the factors that increase the likelihood of stock option fraud in the Egyptian setting.

Research limitations/implications

The results are constrained by the proxies used to define stock option fraud. Additionally, the limited number of companies with stock option grants in Egypt might affect the results.

Originality/value

This paper provides insights into exposing stock option fraud by Egyptian public‐held companies and sheds light on the effective role of corporate governance mechanisms to mitigate this phenomenon. This would help policy setters to enhance compliance with the Anglo‐Saxon model of corporate governance and develop a comprehensive Shari'ah model of corporate governance that reduces stock option fraud.

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Article
Publication date: 5 January 2015

P. K. Gupta and Sanjeev Gupta

The purpose of this paper is to examine the nature and perception of corporate frauds in India and their consequences in the business and economic systems, and it…

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3318

Abstract

Purpose

The purpose of this paper is to examine the nature and perception of corporate frauds in India and their consequences in the business and economic systems, and it highlights the emerging issues so that existing legal and regulatory obligations can be redefined and structured.

Design/methodology/approach

An exploratory research was conducted through a combined mode of literature review; case studies; structured questionnaires from 346 sample companies; and 43 interviews with the corporate professionals, management, investors, government offices and authorities having wide experience.

Findings

It was found that the regulatory system is weak, and there is dire need to redefine the role of auditors. Coordination among different regulatory authorities is poor, and after every scam, there is a blame game. Reporting of fraud and publication of fraud prevention policy are missing. Banks and financial institutions are ineffective on due diligence, and there is a lack of professionalism on the board and other executive levels in companies.

Research limitations/implications

This study assumes that fraud could be mitigated by proactive and conscious action by auditors, and corporate executives are willing to avoid perpetrating financial fraud despite pressures from investors, government securities regulators and exogenous market fluctuations. The authors relied on the honesty of the respondents during the sample collection and recorded semi-structured interviews. A minimum level of five years’ work experience relative to preventing, detecting or investigating fraud has been considered a valid determinant in selecting the purposive sample.

Practical implications

The study suggests mandatory publication of fraud prevention policy; constitution of special purpose corporate offence wing; recognition to companies for improved corporate governance; true adoption of International Financial Reporting Standards; due diligence by banks and financial institutions; compulsory appointment of professionals by shareholders and fixation of responsibility on independent professionals; intellectualisation of audit committee; and more powers to the regulators, especially Securities and Exchange Board of India.

Social implications

Prevention of corporate frauds reduces anxiety, improves corporate image and builds up confidence of the investors, which is essential for resource channelling in financial markets.

Originality/value

The research work is based on a thorough analysis of regulatory framework and fraud case studies and primary data collected from companies, banks and other government and developmental institutions.

Details

Journal of Financial Crime, vol. 22 no. 1
Type: Research Article
ISSN: 1359-0790

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Book part
Publication date: 10 February 2020

Gokce Sinem Erbuga

In recent years, there has been considerable interest in corporate governance literature as a result of massive corporate scandals. In today’s world, almost all companies…

Abstract

In recent years, there has been considerable interest in corporate governance literature as a result of massive corporate scandals. In today’s world, almost all companies are exposed to the danger of fraud. Much work on the business risk of corporate fraud has been carried out; however, researchers still have tough discussions on the most effective methods to adopt to tackle fraud. In accordance with previous studies, it is possible to say that companies which obey the corporate governance codes to the letter can minimize the risk of fraud. The importance of this chapter lies in that it helps to explain the evidence that although the deterrent measures company can undertake may well, to a certain extent, work out the problem of fraud, they are way far from eliminating corporate crimes in establishing “corporate governance.” The latter is the key term that defines the public responsibility of corporates binding themselves to the rule of law. Corporate governance has been discussed as one of the effective ways of calling the attention of large firms to social problems and urging them to take necessary actions. The reason that companies cannot eliminate fraud is strictly linked to the evidences of critical organization studies that question the epistemic assumptions of mainstream strand of the same field. Some studies show that the subject is not rational decision-making, neither does it follow the interest, nor is it a pure homo economicus so that rationality is effective in deterring corporate frauds to a certain extent.

Details

Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Article
Publication date: 1 July 2021

Emelia A. Girau, Imbarine Bujang, Agnes Paulus Jidwin and Jamaliah Said

This study aims to examine the relationship between corporate governance and the likelihood of corporate fraud in Malaysia.

Abstract

Purpose

This study aims to examine the relationship between corporate governance and the likelihood of corporate fraud in Malaysia.

Design/methodology/approach

The sample of fraudulent companies in this study is the public listed companies that were charged with furnishing false statements to the Securities Commission of Malaysia and Bursa Malaysia Securities Berhad and was listed in the Malaysian Securities Commission Enforcement Release from the year 2000 to 2016. The non-fraudulent companies, which are the control companies in this study, were selected from public listed companies listed in Bursa Malaysia, based on their similarity to the fraudulent companies in terms of time, size and industry type. The panel probit regression analysis was used to examine the relationship between corporate governance characteristics and the occurrence of corporate fraud.

Findings

The findings of this study suggest that board size and executive directors’ compensation are the corporate governance characteristics that can effectively combat corporate fraud incidences in Malaysia. The corporate governance features, namely the board of directors’ independence, frequency of board meetings, CEO duality, CEO’s age, and share ownership owned by directors and CEO, do not significantly influence corporate fraud incidences in Malaysia.

Originality/value

Although previous studies provide inconsistent findings on the association between board size and corporate fraud incidences, this study contributes to the existing literature by providing empirical evidence that smaller board sizes provide more effective monitoring functions to minimize corporate fraud incidences in the Malaysian context. The empirical evidence also supports the agency theory proposition where managers with high compensation will act in the best interest of shareholders and less likely to focus on their interests, thus deterring them from committing fraudulent acts.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

Keywords

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