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Article
Publication date: 5 May 2015

Kwabena Frimpong

This article aims to focus on the impact of the current austerity measures on UK public sector anti-fraud and financial crime investigative resource capacity building…

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Abstract

Purpose

This article aims to focus on the impact of the current austerity measures on UK public sector anti-fraud and financial crime investigative resource capacity building initiative developed over the years to tackle fraud against the public purse.

Design/methodology/approach

The article draws on secondary sources of data and available literature on fraud and financial crime.

Findings

Fraud is a challenge in the UK public sector but the cut-back on anti-fraud and financial crime investigative resources, given the scale of public sector fraud, the growing emphasis on accountability and the time of austerity with public money more exposed to fraud is arguably a back-door/u-turn policy on zero-tolerance approach in tackling public sector fraud and financial crime. There is the potential of this encouraging more fraud and financial crime against the public sector in the long term if measures are not taken to devise strategies for enhancing anti-fraud and financial crime investigative resource capacity.

Research limitations/implications

The research implication for this article is that it opens an avenue for future studies to examine post austerity strategies for strengthening public sector anti-fraud and financial crime investigative resource strategies to deal with emerging fraud threats to UK public sector.

Practical implications

This article acts as a reference guide for policymakers to reflect on the long-term adverse impact of the austerity on anti-fraud and financial crime investigative resource capacity and capability in tackling fraud public sector fraud.

Originality/value

The paper attempts to present an alternative lens to examining the scale of UK public sector fraud problem rather than relying on headline story of declining fraud in UK.

Details

Journal of Financial Crime, vol. 22 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

Book part
Publication date: 15 December 2011

Jinyu Zhu and Simon S. Gao

Purpose – This study investigates the nature, types, and methods of fraudulent financial reporting committed by Chinese listed companies with a view to understanding…

Abstract

Purpose – This study investigates the nature, types, and methods of fraudulent financial reporting committed by Chinese listed companies with a view to understanding corporate behavior relating to management fraud in China. Such an understanding is important for preventing frauds and achieving better financial reporting compliance.

Design/Methodology/Approach – This study adopts a descriptive research approach using the data based on 182 punishment bulletins issued by the China Securities Regulatory Commission from 2002 to 2006. The study considers three categories of frauds (i.e., false income statements, false balance sheets, and insufficient or false disclosure) and uses these categories to describe and analyze the fraud cases.

Research findings/Insights – Based on the sample of 83 cases over the 5-year period from 2002 to 2006, this study finds that all the frauds in the sample involved the manipulation, alteration, and falsification of reported financial information. Fraud schemes often contained more than one technique to misstate financial statements, typically through overstating revenues and assets, and understating liabilities and expenses. Most of the sample companies committed several frauds simultaneously. This study also reveals that most of the frauds committed by Chinese listed companies lasted more than 2 years, with the longest being 9 years, and common intervals between the initial fraud year and the announcement year of punishment were more than 3 years, with the longest being 11 years.

Theoretical/Academic implications – This study provides an empirical analysis of fraudulent financial reporting cases committed by Chinese listed companies. These cases were rarely studied in the Western literature. This study contributes to the extant literature by providing an insight into management fraud in China. Research into fraudulent financial reporting in the largest developing economy is certainly of interest as prior research into this area is mostly based on developed economies.

Practitioner/Policy implications – The implications drawn from this study could be useful for a better understanding of the management behavior of companies in developing and transitional economies. This study has a potential to assist regulators and accounting professional bodies to set guidelines facilitating corporate compliance of regulated financial reporting.

Article
Publication date: 16 May 2022

Alberto Clavería Navarrete and Amalia Carrasco Gallego

The purpose of this paper is to understand if forensic accounting techniques and tools could contribute to the deterrence of fraud in financial statements, considering the…

Abstract

Purpose

The purpose of this paper is to understand if forensic accounting techniques and tools could contribute to the deterrence of fraud in financial statements, considering the expertise of forensic accountant on ex post activities and that the traditional mechanisms to prevent this type of fraud have not been sufficient to stop the impact on companies, investors, auditors, employees and on society in general.

Design/methodology/approach

This research was carried out using a qualitative exploratory study with a phenomenological approach conducted through in-depth interviews with professional experts in the forensic field.

Findings

The findings confirm that the use of forensic accounting techniques and tools could contribute to the prevention of fraud in financial reporting not only when the risk of fraud has been materialized. Similar studies, about fraud prevention addressing the situation under a qualitative approach from the perspectives of its protagonists, have not been observed in the bibliographical review, so this research contributes to expanding the scientific research, the study and practice of forensic accounting.

Originality/value

From a business management perspective, this study contributes a paradigm shift from the traditional ex post forensic auditing activity toward an ex ante activity to improve management control systems within organizations anywhere in the world. Because this study is guided to prevent fraudulent financial statements, other fraud categories such as misappropriation or corruption could be addressed in other studies and various countries.

Details

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

Keywords

Article
Publication date: 26 February 2021

Juan Dempere and Sabir Malik

This paper aims to study the explanatory power of demographics, financial behaviors and financial literacy on instances of consumer financial fraud (CFF) among Emirati households.

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Abstract

Purpose

This paper aims to study the explanatory power of demographics, financial behaviors and financial literacy on instances of consumer financial fraud (CFF) among Emirati households.

Design/methodology/approach

This study is based on a survey applied to the United Arab Emirates’ (UAE’s) largest federal higher education institution. The authors analyzed the data using generalized linear models, specifically generalized regressions based on both the logit and the probit models. Independent sample tests were also applied to compare the different subgroups considered in this study.

Findings

The authors found that the CFF victims seem to be older with more years of post-secondary education and high monthly credit card balances. When analyzing the probability of Emirati students becoming CFF victims, the authors found that only age, instances of lack of monthly income to cover living costs, and average monthly credit card balance, all have significant and positive explanatory power on the probability of becoming a CFF victim. However, when analyzing the aggregate subsample of all Emirati respondents, only the credit card balance has a positive and significant relationship with such a probability.

Research limitations/implications

The authors used a non-probability sampling method that produced some biases, including a gender bias and an age-related bias. These biases preclude us from making valid inferences and generalizations about the Emirati population.

Originality/value

To the best of authors’ knowledge, no previous research article has studied CFF in the UAE, which constitutes this study’s original contribution.

Details

Journal of Financial Crime, vol. 28 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 5 July 2021

Nadia Smaili, Paulina Arroyo and Faridath Antoinette Issa

The purpose of this study is to investigate whether large blockholders are associated with financial statement fraud at their companies. Although a substantial body of…

Abstract

Purpose

The purpose of this study is to investigate whether large blockholders are associated with financial statement fraud at their companies. Although a substantial body of prior studies has focused on chief executive officers’ motivations to manipulate financial statements, the correlation between majority shareholders and financial statement fraud has received little attention. This paper aims to fill this gap by investigating whether the sample firms have controlling shareholders or executives (i.e. blockholders vs management) and whether financial statement fraud schemes, motivations and consequences differ between blockholder- and management-controlled firms.

Design/methodology/approach

Using a clinical approach, the authors Study 12 Canadian financial statement fraud cases uncovered by the Ontario Securities Commission between 1997 and 2020.

Findings

First, the authors find blockholder control in six cases. These findings infer that these large shareholders received private benefits at the expense of minority shareholders. The comparative analyzes suggest that fraudulent firms controlled by blockholders go bankrupt more often than those controlled by managers. The authors also find that improper disclosure is the most common fraud scheme in blockholder-controlled firms.

Originality/value

The authors conduct a deep analysis of financial statement fraud cases to examine the of blockholder control on the likelihood of financial statement fraud. This paper adds new insights to the research on financial crime by investigating whether large shareholders affect the probability of fraud and the extent to which they might do so.

Details

Journal of Financial Crime, vol. 29 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 29 April 2021

Afsaneh Lotfi, Mahdi Salehi and Mahmoud Lari Dashtbayaz

The purpose of this present study is to assess the impact of intellectual capital (IC) on fraud in listed firms' financial statements on the Tehran Stock Exchange (TSE)…

Abstract

Purpose

The purpose of this present study is to assess the impact of intellectual capital (IC) on fraud in listed firms' financial statements on the Tehran Stock Exchange (TSE). In other words, this paper seeks to figure out whether IC and its components, namely, the efficiency of human capital (HC), structural capital (SC), relational capital (RC) and customer capital (CC).

Design/methodology/approach

The logistic regression model is used for analyzing the material of this study. Research hypotheses are also examined using a sample of 187 listed firms on the TSE during 2011–2018 by employing the logistic regression pattern based on synthetic data technique. Moreover, some robustness checks are also used to ensure the correctness of the obtained results.

Findings

The findings show a negative and significant relationship between IC and its components, including the efficiency of HC, SC, RC and CC, and fraud in financial statements. This means that by investing in the IC and its components, the amount of fraud in business firms' financial statements decreases.

Originality/value

Since few studies are carried out by existing literature, this paper is among the pioneer efforts assessing IC's potential impact on fraud commitment. The findings apply to policymakers to improve the clarity of the business atmosphere of Iran.

Details

The TQM Journal, vol. 34 no. 4
Type: Research Article
ISSN: 1754-2731

Keywords

Article
Publication date: 26 July 2021

Arief Hidayatullah Khamainy, Mahrus Ali and M. Arif Setiawan

The purpose of this paper is to evaluate the effect of the new fraud diamond model in explaining financial statement fraud.

Abstract

Purpose

The purpose of this paper is to evaluate the effect of the new fraud diamond model in explaining financial statement fraud.

Design/methodology/approach

The variables used to examine the factors consist of motivation, opportunity, personal integrity and capability. This research used manufactured companies listed in the Indonesia Stock Exchange of the 2015–2019 period as the population.

Findings

There has been a positive influence between personal financial need (OSHIP), nature of the industry (RECEIVABLE) and history of sale (SG) toward financial statement fraud, while the negative effect is found only in the effective monitoring (IND).

Research limitations/implications

The new fraud diamond model theory which is used as a reference in this study is a new and under-developed theory. So the author suggests that further research on this theory be carried out to strengthen the new fraud diamond model theory and ensure whether it can be used as a reference to find out the causes of financial statement fraud. In addition, the object used in this study is limited to manufacturing companies, so the author suggests that further research combine several types of companies.

Originality/value

The research finding supports the new fraud diamond model theory in elaborating the financial statement fraud phenomenon.

Article
Publication date: 14 October 2019

Yunita Awang, Abdul Rahim Abdul Rahman and Suhaiza Ismail

This study aims to examine the influence of attitude, subjective norm and adherence to Islamic professional ethics on fraud intention in financial reporting among Muslim…

Abstract

Purpose

This study aims to examine the influence of attitude, subjective norm and adherence to Islamic professional ethics on fraud intention in financial reporting among Muslim accounting practitioners in the Malaysian banking institutions.

Design/methodology/approach

A questionnaire was used for a sample of 121 Muslim accounting practitioners who are participants in the financial reporting process of Malaysian banking institutions. The data are analysed using partial least squares structural equation modelling.

Findings

The study found that attitude and subjective norms are positively significant in influencing fraud intention in financial reporting. In other words, the more the respondents were in favour of fraud and perceived that their referent groups would approve or support the behaviour, the stronger their intentions to commit fraud. On the other hand, the result for Islamic professional ethics is insignificant, which indicates that the Muslim accounting practitioners may not be significantly influenced by the Islamic code of professional ethics on their intention towards fraud in financial reporting.

Research limitations/implications

The study adds to the scant literature investigating factors influencing Malaysian accounting practitioners’ intentions for fraud in financial reporting in the banking sector. The limitations include the use of scenario leading to the issue of social desirability bias and the use of purposive sampling technique that limits the generalizability of the results.

Practical implications

The findings provide potential avenues for Malaysian banking sector managers to enhance their recruitment and training programmes and give some insights to the public, especially the banks shareholders and depositors, into the fraud in financial reporting intention of the actual participants in the financial reporting process.

Originality/value

To the author’s knowledge, this paper is the first to examine, in the Malaysian banking setting, the influence of attitude, subjective norms and adherence to Islamic professional ethics on the fraud intention in financial reporting among accounting practitioners. There are few investigations to date on the factors of influencing or mitigating the accounting practitioners’ intention to commit fraudulent reporting.

Details

Journal of Islamic Accounting and Business Research, vol. 10 no. 5
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 1 April 2000

C. Koornhof and D. du Plessis

There is increasing international concern about the escalation of fraud and, in particular, financial statement fraud. Detecting financial statement fraud and proving such…

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Abstract

There is increasing international concern about the escalation of fraud and, in particular, financial statement fraud. Detecting financial statement fraud and proving such fraud remains an elusive goal. Red flagging is an early warning system that has been used by auditors to determine the probability of financial statement fraud. The purpose of this research project was to survey investors and lenders in South Africa on their use of red flags and to obtain their opinions on the relative importance of individual red flags. A questionnaire was sent to banks that are registered with the Registrar of Banks (representative of lenders) and to portfolio managers registered with the Financial Services Board (representative of investors). The research findings indicate that lenders and investors in South Africa appear to be aware of the benefits of red flagging as an early warning system. A structured approach (questionnaires/checklists) in using them is to be lacking at present. Respondents rated all red flags in the questionnaire as being important. No distinction was discernable among the different categories that were based on the nature of red flags.

Details

Meditari Accountancy Research, vol. 8 no. 1
Type: Research Article
ISSN: 1022-2529

Keywords

Article
Publication date: 1 January 2004

Zabihollah Rezaee

The public trust in auditors’ judgments and reputation plays an important role in substantiating audit functions as value‐added services, which lend credibility to…

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Abstract

The public trust in auditors’ judgments and reputation plays an important role in substantiating audit functions as value‐added services, which lend credibility to published financial reports. Recent numerous financial restatements by high profile companies coupled with bankruptcies of major companies caused by reported financial statement fraud have eroded public confidence in financial reports and related audit functions. Restoring the public confidence requires considerable efforts by legislators, regulators, standard‐setting bodies, the business community, and the accounting profession. This article suggests 12 ways that the accounting profession can rebuild public trust in financial reports and related audit functions.

Details

Managerial Auditing Journal, vol. 19 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

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