Search results

1 – 10 of over 2000
Article
Publication date: 5 March 2024

Sana Ramzan and Mark Lokanan

This study aims to objectively synthesize the volume of accounting literature on financial statement fraud (FSF) using a systematic literature review research method (SLRRM). This…

Abstract

Purpose

This study aims to objectively synthesize the volume of accounting literature on financial statement fraud (FSF) using a systematic literature review research method (SLRRM). This paper analyzes the vast FSF literature based on inclusion and exclusion criteria. These criteria filter articles that are present in the accounting fraud domain and are published in peer-reviewed quality journals based on Australian Business Deans Council (ABDC) journal ranking. Lastly, a reverse search, analyzing the articles' abstracts, further narrows the search to 88 peer-reviewed articles. After examining these 88 articles, the results imply that the current literature is shifting from traditional statistical approaches towards computational methods, specifically machine learning (ML), for predicting and detecting FSF. This evolution of the literature is influenced by the impact of micro and macro variables on FSF and the inadequacy of audit procedures to detect red flags of fraud. The findings also concluded that A* peer-reviewed journals accepted articles that showed a complete picture of performance measures of computational techniques in their results. Therefore, this paper contributes to the literature by providing insights to researchers about why ML articles on fraud do not make it to top accounting journals and which computational techniques are the best algorithms for predicting and detecting FSF.

Design/methodology/approach

This paper chronicles the cluster of narratives surrounding the inadequacy of current accounting and auditing practices in preventing and detecting Financial Statement Fraud. The primary objective of this study is to objectively synthesize the volume of accounting literature on financial statement fraud. More specifically, this study will conduct a systematic literature review (SLR) to examine the evolution of financial statement fraud research and the emergence of new computational techniques to detect fraud in the accounting and finance literature.

Findings

The storyline of this study illustrates how the literature has evolved from conventional fraud detection mechanisms to computational techniques such as artificial intelligence (AI) and machine learning (ML). The findings also concluded that A* peer-reviewed journals accepted articles that showed a complete picture of performance measures of computational techniques in their results. Therefore, this paper contributes to the literature by providing insights to researchers about why ML articles on fraud do not make it to top accounting journals and which computational techniques are the best algorithms for predicting and detecting FSF.

Originality/value

This paper contributes to the literature by providing insights to researchers about why the evolution of accounting fraud literature from traditional statistical methods to machine learning algorithms in fraud detection and prediction.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Open Access
Article
Publication date: 30 November 2023

Domenico Campa, Alberto Quagli and Paola Ramassa

This study reviews and discusses the accounting literature that analyzes the role of auditors and enforcers in the context of fraud.

1540

Abstract

Purpose

This study reviews and discusses the accounting literature that analyzes the role of auditors and enforcers in the context of fraud.

Design/methodology/approach

This literature review includes both qualitative and quantitative studies, based on the idea that the findings from different research paradigms can shed light on the complex interactions between different financial reporting controls. The authors use a mixed-methods research synthesis and select 64 accounting journal articles to analyze the main proxies for fraud, the stages of the fraud process under investigation and the roles played by auditors and enforcers.

Findings

The study highlights heterogeneity with respect to the terms and concepts used to capture the fraud phenomenon, a fragmentation in terms of the measures used in quantitative studies and a low level of detail in the fraud analysis. The review also shows a limited number of case studies and a lack of focus on the interaction and interplay between enforcers and auditors.

Research limitations/implications

This study outlines directions for future accounting research on fraud.

Practical implications

The analysis underscores the need for the academic community, policymakers and practitioners to work together to prevent the destructive economic and social consequences of fraud in an increasingly complex and interconnected environment.

Originality/value

This study differs from previous literature reviews that focus on a single monitoring mechanism or deal with fraud in a broadly manner by discussing how the accounting literature addresses the roles and the complex interplay between enforcers and auditors in the context of accounting fraud.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 1 February 1998

Rocco R. Vanasco

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and detect…

27053

Abstract

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and detect fraud, domestically and abroad. Specifically, it focuses on the role played by the US Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the Institute of Internal Auditors (IIA), the Institute of Management Accountants (IMA), the Association of Certified Fraud Examiners (ACFE), the US Government Accounting Office (GAO), and other national and foreign professional associations, in promulgating auditing standards and procedures to prevent fraud in financial statements and other white‐collar crimes. It also examines several fraud cases and the impact of management and employee fraud on the various business sectors such as insurance, banking, health care, and manufacturing, as well as the role of management, the boards of directors, the audit committees, auditors, and fraud examiners and their liability in the fraud prevention and investigation.

Details

Managerial Auditing Journal, vol. 13 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 10 March 2018

Gladys Lee and Xinning Xiao

Whistleblowers have been credited for uncovering financial scandals in companies globally, including Enron, Olympus Corporation, and WorldCom. Despite increasing support and…

1207

Abstract

Whistleblowers have been credited for uncovering financial scandals in companies globally, including Enron, Olympus Corporation, and WorldCom. Despite increasing support and incentives for whistleblowing, there generally remains reluctance to blow the whistle. Thus, the purpose of this study is to review: (1) the determinants of internal and external whistleblowing on accounting-related misconduct, (2) U.S. whistleblowing legislation on accounting-related misconduct and related research, and (3) the effects of whistleblowing on firms and whistleblowers. Within each area, suggestions for future research are offered.

Details

Journal of Accounting Literature, vol. 41 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 2 May 2017

Normah Omar, Zulaikha ‘Amirah Johari and Malcolm Smith

This paper aims to explore the effectiveness of an artificial neural network (ANN) in predicting fraudulent financial reporting in small market capitalization companies in…

3531

Abstract

Purpose

This paper aims to explore the effectiveness of an artificial neural network (ANN) in predicting fraudulent financial reporting in small market capitalization companies in Malaysia.

Design/methodology/approach

Based on the concepts of ANN, a mathematical model was developed to compare non-fraud and fraud companies selected from among small market capitalization companies in Malaysia; the fraud companies had already been charged by the Securities Commission for falsification of financial statements. Ten financial ratios are used as fraud risk indicators to predict fraudulent financial reporting using ANN.

Findings

The findings indicate that the proposed ANN methodology outperforms other statistical techniques widely used for predicting fraudulent financial reporting.

Originality/value

The study is one of few to adopt the ANN approach for the prediction of financial reporting fraud.

Details

Journal of Financial Crime, vol. 24 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 22 April 2009

Lisa A. Owens‐Jackson, Diana Robinson and Sandra Waller Shelton

In an effort to restore investor confidence in the wake of recent financial reporting scandals, the Sarbanes‐Oxley Act of 2002 mandates that audit committees be fully independent…

1794

Abstract

In an effort to restore investor confidence in the wake of recent financial reporting scandals, the Sarbanes‐Oxley Act of 2002 mandates that audit committees be fully independent and have at least one financial expert. The SEC adopted rules implementing these Sarbanes‐Oxley provisions. This paper contributes to the literature on the association between audit committee characteristics recommended by SOX and the likelihood of fraud in two ways. First, we focus on audit committee composition and the extent of the underlying nature of the firm (e.g., firm size, growth) and the contracting environment (e.g., managerial ownership, leverage) of the firm on the likelihood of fraud. In particular, we find that the likelihood of fraudulent financial reporting is negatively related to audit committee independence, number of audit committee meetings and managerial ownership and positively related to firm size and firm growth opportunities. Second, we separately examine firms with totally independent audit committees and fraudulent financial reporting. This sample is interesting because these are firms that had good corporate governance and yet still had fraudulent financial reporting. By separately examining firms with totally independent audit committees, we find that the likelihood of fraudulent financial reporting given a totally independent audit committee is inversely related to the level of managerial ownership and the number of audit committee meetings.

Details

American Journal of Business, vol. 24 no. 1
Type: Research Article
ISSN: 1935-5181

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 corporate…

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: 4 November 2020

Ahmed Aboud and Barry Robinson

This paper aims to explore the effectiveness of fraud prevention and detection techniques, including data analytics, machine learning and data mining, and to understand how…

2760

Abstract

Purpose

This paper aims to explore the effectiveness of fraud prevention and detection techniques, including data analytics, machine learning and data mining, and to understand how widespread the use of data analytics is across different sectors and to identify and understand the potential barriers to implementing these techniques to detect and prevent fraud.

Design/methodology/approach

A survey was administered to 73 Irish businesses to determine to what extent traditional approach, data mining or text mining are being used to prevent or detect fraudulent financial reporting, and to determine the perception level of their effectiveness.

Findings

The study suggests that whilst data analytics is widely used by businesses in Ireland there is an under-utilisation of data analytics as an effective tool in the fight against fraud. The study suggests there are barriers that may be preventing companies from implementing advanced data analytics to detect financial statement fraud and identifies how those barriers may be overcome.

Originality/value

In contrast to the majority of literature on big data analytics and auditing, which lacks empirical insight into the diffusion, effectiveness and obstacles of data analytics, this explanatory study contributes by providing useful insights from the field on big data analytics. While the extant auditing literature generally addresses the avenues of big data utilisation in auditing domain, our study explores particularly the use big data analytics as a fraud prevention and detection techniques.

Details

Accounting Research Journal, vol. 35 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 7 August 2017

Yi Wei, Jianguo Chen and Carolyn Wirth

This paper aims to investigate the links between accounting values in Chinese listed companies’ balance sheets and the exposure of their fraudulent activities.

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Abstract

Purpose

This paper aims to investigate the links between accounting values in Chinese listed companies’ balance sheets and the exposure of their fraudulent activities.

Design/methodology/approach

Every balance sheet account is proposed to be a potential vehicle to manipulate financial statements.

Findings

Other receivables, inventories, prepaid expenses, employee benefits payables and long-term payables are important indicators of fraudulent financial statements. These results confirm that asset account manipulation is frequently carried out and cast doubt on earlier conclusions by researchers that inflation of liabilities is the most common source of financial statement manipulation.

Originality/value

Previous practices of solely scaling balance sheet values by assets are revealed to produce spurious relationships, while scaling by both assets and sales effectively detects fraudulent financial statements and provides a useful fraud prediction tool for Chinese auditors, regulators and investors.

Details

Pacific Accounting Review, vol. 29 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Book part
Publication date: 10 February 2020

Hakan Ozcelik

Accounting-based financial scandals caused by fraudulent financial reports negatively affect the financial markets and cause loss of confidence in investors. Financial reporting…

Abstract

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.

Details

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

Keywords

1 – 10 of over 2000