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Accounting-based financial scandals caused by fraudulent financial reports negatively affect the financial markets and cause loss of confidence in investors. Financial reporting quality needs to be improved in order to build and maintain trust in financial markets. To increase the quality of financial reports, fraudulent financial reporting risks should be defined. At this point, regulators, practitioners, and researchers are in constant search.

There are improved approaches to the detection of financial reporting frauds in the literature. Many studies have been conducted on the “Fraud Triangle Theory” and the “Fraud Diamond Theory” approaches. The Fraud Triangle Theory argues that while fraudulent action is taking place in defining the elements of press, rationalization, and opportunity, the Fraud Diamond Theory approach argues that in order to achieve these three elements, the capability to carry out a fraud in individuals must be improved.

In this study, it is aimed to investigate the effect of Fraud Diamond elements on fraudulent financial reports. For the scope of the research, data of 26 companies from Manufacturing Industry enterprises operating in BORSA ISTANBUL between 2013 and 2017 were used. Financial reports of the companies are divided into two groups: (1) Fraudulent Financial Reports and (2) Non-Fraud Financial Reports. The hypotheses developed within the scope of the research were tested using the Logistic Regression analysis in IBM SPSS Statistic 20 program.

As a result of the study, it has been determined that there is a negative correlation between borrowing level, asset profitability, independent audit firm, auditor exchanges and institutionalization level, and fraudulent financial reports. It was understood that the change in assets and the size of the audit committee did not have any effect on the fraudulent financial reports.

Extant theory tends to treat Organizational Culture (OC) and fraud-related values as static, characterizing culture as synonymous with potential ethical values − but devoting less attention to how the culture and values arose and where they are headed. Buffer/conduit theory proposes that accountants learn to use a taxonomy containing three dynamic layers: collective fraud orientation, a buffer/conduit layer, and individual fraud orientation. The middle layer contains OC-related internal controls that buffer the orientation layers from spreading fraud-encouraging values, and serve as conduits transmitting fraud-deterring values − or, when controls do not function as intended, transmitting fraud-encouraging values. A factor analysis of 11 indicators of this three-layer taxonomy suggests that older generations of accounting practitioners apply the taxonomy, but millennials do not. Predisposition to commit fraud is especially salient to internally focused millennials, who uniquely perceive recruitment and training as compensating mechanisms and as collective buffers.

The contemporary social capital discourse is ‘probably less than twenty or so years old’ (Castiglione, 2008, p. 1), and its meaning remains elusive and contested (Castiglione, Van Deth, & Wolleb, 2008, pp. 2–21). However, this section develops the view that the returns of social capital can be understood in terms of two sets of intangible assets. First, intangible assets concerned with identity intangibles such as credibility, goodwill and reputation, and second, in terms of intangible assets to do with knowledge management. This section also contends that social capital is context dependent and in its economic context is framed by background assumptions taken from Coleman's rationalist theoretical treatment (1988, 1990). Furthermore, the relevance of the socio-economic perspective is discussed in terms of fraudster's exploitation of the socially embedded nature of all economic activity, including that of the market.

The Bureau of Economics in the Federal Trade Commission has a three-part role in the Agency and the strength of its functions changed over time depending on the preferences and ideology of the FTC’s leaders, developments in the field of economics, and the tenor of the times. The over-riding current role is to provide well considered, unbiased economic advice regarding antitrust and consumer protection law enforcement cases to the legal staff and the Commission. The second role, which long ago was primary, is to provide reports on investigations of various industries to the public and public officials. This role was more recently called research or “policy R&D”. A third role is to advocate for competition and markets both domestically and internationally. As a practical matter, the provision of economic advice to the FTC and to the legal staff has required that the economists wear “two hats,” helping the legal staff investigate cases and provide evidence to support law enforcement cases while also providing advice to the legal bureaus and to the Commission on which cases to pursue (thus providing “a second set of eyes” to evaluate cases). There is sometimes a tension in those functions because building a case is not the same as evaluating a case. Economists and the Bureau of Economics have provided such services to the FTC for over 100 years proving that a sub-organization can survive while playing roles that sometimes conflict. Such a life is not, however, always easy or fun.