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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.

1918

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

Keywords

Article
Publication date: 26 May 2022

Rasha Kassem

This paper aims to highlight the role and impact of corporate governance in combating fraud by drawing on insights from the literature, identify gaps in the literature and suggest…

1657

Abstract

Purpose

This paper aims to highlight the role and impact of corporate governance in combating fraud by drawing on insights from the literature, identify gaps in the literature and suggest new directions for future research.

Design/methodology/approach

The paper is based on a comprehensive general literature review using multiple search engines and databases.

Findings

This paper finds that effective corporate governance can help reduce fraud risk, prevent fraud and detect fraud, particularly corporate fraud, insider fraud and asset diversion. Some companies use corporate governance mechanisms to bolster their reputation following fraud detection. Ineffective corporate governance increases fraud risk, provides the opportunity for perpetrating fraud and reduces the likelihood of fraud detection. The paper sheds light on several governance mechanisms that could help in mitigating fraud risk, as reported in the literature. The paper categorises these governance mechanisms into four broad governance aspects, including board leadership and the role of ethics; (b) board characteristics, composition and structure; ownership structure; accountability. The paper proposes a guide summarising these broad fundamental governance aspects, including specific anti-fraud controls and examples of how organisations could enhance ethical cultures and the tone at the top.

Originality/value

To the best of the author’s knowledge, this is the first paper to elucidate the role of corporate governance in countering fraud and develop guidance in this area. The proposed guidance could be helpful to businesses leaders, policymakers, researchers and academics alike.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

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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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

Keywords

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 Anglo‐Saxon model…

1524

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.

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 highlights the…

4254

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

Keywords

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 Confucianism…

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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. 17 no. 6
Type: Research Article
ISSN: 1746-8809

Keywords

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…

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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

Keywords

Article
Publication date: 18 May 2012

Mary Jane Lenard, Karin A. Petruska, Pervaiz Alam and Bing Yu

The purpose of this paper is to compare the effect of corporate governance variables and fraud litigation on audit fees both before and after the implementation of the…

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Abstract

Purpose

The purpose of this paper is to compare the effect of corporate governance variables and fraud litigation on audit fees both before and after the implementation of the Sarbanes‐Oxley (SOX) Act in 2002.

Design/methodology/approach

The paper utilizes a sample of firms that had litigation proceedings filed against them for fraudulent financial reporting, and compare these firms to a sample of non‐fraud firms in the pre‐and post‐SOX period. First, the authors examine indicators of audit fees using the Simunic model. Next, the authors develop a logistic regression model with corporate governance variables and other financial control variables in order to identify the characteristics of firms that are accused of fraud in the pre‐and post‐SOX period.

Findings

The paper identifies specific components of corporate governance that are positively related to audit fees and which subsequently aid in classifying companies subject to fraud litigation. The most successful logistic regression model for 2005 (post‐SOX) is 64.4 per cent accurate in distinguishing firms litigated for fraud, while the most successful model for 2001 (pre‐SOX) is 61.4 per cent accurate in distinguishing such firms.

Originality/value

The research design and findings assist in providing additional evidence about the association between the effectiveness of the corporate governance structure and the external auditor in assessing the risk of fraud.

Details

Managerial Auditing Journal, vol. 27 no. 5
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 21 March 2022

Ach Maulidi

This study aims to examine the effect of gender board diversity on corporate fraud. Particularly, it is to gain empirical evidence whether firms with more female corporate leaders…

1071

Abstract

Purpose

This study aims to examine the effect of gender board diversity on corporate fraud. Particularly, it is to gain empirical evidence whether firms with more female corporate leaders are more (less) likely to engage in corporate fraud.

Design/methodology/approach

The authors use data of fraud firms from Accounting and Auditing Enforcement Releases. As a focus of the study, the authors take the fraud sample observations from the last 10 years, from 2011 to 2021. The idea is that the number of firms sectioned due to corporate fraud reached a peak in such periods.

Findings

In the context of non-state-owned enterprise environments, the authors find female corporate leaders are less likely to engage in corporate fraud. However, among firms with a state-owned background, the authors’ empirical evidence shows that the roles of female corporate leaders remain under-represented in the boardrooms. As reported, the presence of female corporate leaders does not bring a significant impact on enhancing group ethical decision-making and governance quality. This situation does appear when political connections between firms and governments or politicians are prevalent.

Research limitations/implications

This study has practical and theoretical implications. Given the increased pressure on companies around the globe to have more females in their boardrooms, this study provides insight into the effect of female corporate leaders on the prevalence of corporate fraud. As such, this study offers critical consideration for policymakers and regulators. Moreover, an analysis of whether and when the gender board diversity is associated with the firm’ propensity to perpetrate corporate fraud, particularly from the US corporate fraud, is sorely lacking. This study contributes to such gaps.

Originality/value

This study provides insightful discussion about the topical issue of whether, and under what circumstances, female corporate leaders influence (or do not influence) corporate fraud.

Details

Journal of Financial Crime, vol. 30 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 1 July 2006

Niall F. Coburn

The aim of the research is to explain the requirements for conducting a corporate investigation and to indicate that corporations must have effective corporate governance and…

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Abstract

Purpose

The aim of the research is to explain the requirements for conducting a corporate investigation and to indicate that corporations must have effective corporate governance and compliance structures that are flexible and innovative to combat new and emerging frauds.

Design/methodology/approach

The methodology is to give a brief overview of the major past and current frauds, explain the nature of corporate crime and how a corporation should go about conducting an effective corporate investigation. The paper gives some warnings about new and emerging frauds and emphasizes lessons have to be learned from large corporate failures, such as Enron and Parmalat.

Findings

If corporations are not vigilant and do not have innovative and adequate corporate compliance structures, they open themselves to weaknesses that can effectively cause their own demise.

Practical implications

The paper gives direction on how to conduct an effective corporate investigation and the relevant steps that should be considered if an investigation is undertaken.

Originality/value

Practical oversight of conducting financial crime investigations and warning corporations to be vigilant and ensure that there are appropriate corporate compliance structures in place to deal with emerging frauds or other financial crime.

Details

Journal of Financial Crime, vol. 13 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

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