Human Disposition and the Fraud Cycle

2013 ◽  
Vol 2 (1) ◽  
pp. 1-16 ◽  
Author(s):  
Vasant Raval
Keyword(s):  
Financial Reporting ◽  
Future Research ◽  
Fraudulent Financial Reporting ◽  
Behavioral Tendencies ◽  
Constituent Elements

Using primarily Eastern metaphysical concepts as a guide, this study presents a theory for an interpretation of the role of human disposition in fraudulent financial reporting. The theory proposed has two major components, the TRS (Tamsik-Rajsik-Sattvik) framework and the LAG (Lust-Anger-Greed) cycle. The TRS framework includes the constituent elements of a person and the resulting dominant behavioral tendencies of the person. The LAG cycle suggests how these tendencies operate in an act of fraud. The theory is thus potentially useful in the explanation of fraud as a human act. Moreover, in a predictive manner, it also has the potential to differentiate actors (of fraud) from non-actors. The study provides a series of propositions for future research.

Audit Committee Oversight of Fraud Risk: The Role of Social Ties, Professional Ties, and Governance Characteristics

2017 ◽  
Vol 31 (3) ◽  
pp. 21-38 ◽  
Author(s):  
Robert M. Wilbanks ◽  
Dana R. Hermanson ◽  
Vineeta D. Sharma
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Social Ties ◽  
Internal Audit ◽  
Future Research ◽  
Professional Experience ◽  
Fraudulent Financial Reporting ◽  
Fraud Risk ◽  
Public Company

SYNOPSIS This study examines audit committee (AC) oversight of fraudulent financial reporting (FFR) risk and management integrity, and how such oversight varies with AC social ties, professional ties, and governance characteristics. Specifically, based on a survey of 134 U.S. public company AC members, we find that AC participants with social ties (i.e., personal ties) to the CEO are negatively associated with AC actions to assess FFR risk and management integrity. Further, the AC appears to cut back on more observable FFR and MI actions when the responding AC member has a social tie to the CEO, consistent with socially connected ACs being reluctant to engage in observable monitoring actions that could jeopardize a social tie to the CEO. However, AC participants with professional ties to other independent directors and those with professional experience as corporate controllers are positively related to such actions. We also find that AC size is positively related to FFR risk assessment, while female AC participants and those serving on boards with greater independence are more likely to report engaging in AC activities to assess management integrity. Finally, when asked more broadly about who they rely on and who is responsible for assessing the risk of FFR, AC members mainly point to the external audit partner, CFO, and head of internal audit. We discuss implications and directions for future research.

scholarly journals The development of forensic accounting and the challenges in the modern environment

Revizor ◽  
2021 ◽  
Vol 24 (95-96) ◽  
pp. 77-90
Author(s):  
Snežana Knežević ◽  
Stefan Milojević ◽  
Jasmina Paunović
Keyword(s):  
Financial Reporting ◽  
Financial Analysis ◽  
Academic Research ◽  
Business Environment ◽  
Future Research ◽  
Legal Action ◽  
Fraudulent Financial Reporting ◽  
Legal Process ◽  
Forensic Accounting

The increasingly complex business environment and the growing tendency for people to take legal action have led to a demand for accountants who understand the legal process and who can conduct investigations, perform financial analysis and other accounting or auditing procedures at a level acceptable to the courts. Accordingly, some factors that influence the occurrence of fraud and the growth of literature related to forensic accounting and fraudulent financial reporting are presented. In addition, significant advances in the literature and the challenges that fraud poses to academic research and corporate practice have been identified, and a set of issues has been presented and identified as important directions for future research regarding the role of forensic accounting in detecting fraudulent financial reporting. This paper is intended to stimulate discussions and future research on identified problems, especially within national frameworks. And finally, some directions have been suggested for future research as well as for the development of the profession. The increasingly complex business environment and the growing tendency for people to take legal action have led to a demand for accountants who understand the legal process and who can conduct investigations, perform financial analysis and other accounting or auditing procedures at a level acceptable to the courts.

scholarly journals Measuring the independence of audit oversight entities: a comparative empirical analysis

2017 ◽  
Vol 30 (2) ◽  
pp. 165-184 ◽  
Author(s):  
Lukas Loehlein
Keyword(s):  
Financial Reporting ◽  
Policy Research ◽  
Essential Elements ◽  
Future Research ◽  
Public Confidence ◽  
Content Type ◽  
Legal Provisions ◽  
Accounting Scandals ◽  
Independent Audit

Purpose Independent audit oversight is a prerequisite for restoring public confidence in financial reporting and auditing after the past accounting scandals and the financial crisis. By analysing and comparing the independence of the audit oversight boards of 27 European Member States and the USA, this study aims to provide insights into the question of how independent “independent” audit oversight boards are. Design/methodology/approach Independence is measured in terms of the organisational compositions and regulatory competences of the audit oversight authorities. The data were collected through an e-mail questionnaire that was sent to all European oversight authorities, and by analysing legal provisions of various regulators. The results are analysed and visualised by a Partial Order Scalogram Analysis with Coordinates, which allows conclusions about the similarities of various systems and their relative levels of independence. Both measurements are then equally combined into one value of material independence, which is used to rank the oversight authorities. Findings Although all countries encounter similar pressures to establish profession-independent oversight systems, this study identifies how differently “independence” has been translated in regulatory outcomes. While all countries claim to possess formal independent oversight bodies, there is a visible gap between countries with comparatively strong independent oversight authorities and systems in which accounting bodies still maintain far-reaching regulatory influence. At the same time, the results question the role of the Public Company Accounting Oversight Board (PCAOB) as the globally perceived benchmark of an entirely independent regulator. Research limitations/implications This study focuses on formal independence rather than de-facto independence. Future research has, therefore, to address how these formal arrangements have evolved in regulatory practice. Practical implications Policy makers around the world perceive independent oversight as one of the essential elements of regulatory reforms aiming at restoring public confidence in the aftermath of past accounting scandals. This study enables the comparison and benchmarking of national specific regulatory designs with other forms of independent oversight. Originality/value Although the role of independent regulation is a recurring theme in accounting research, a systematic and encompassing comparison of the intertwining of audit oversight authorities and the accounting profession has not yet been provided. This study takes a first step towards providing a quantifiable measure of the formal independence of audit oversight authorities by mobilizing concepts, methods and prior findings from the field of public policy research.

The relationship between cooperative and competitive behavioral tendencies and trust in coworkers

2020 ◽  
Vol 8 (3) ◽  
pp. 345-360
Author(s):  
Ece Ömüriş ◽  
Ferda Erdem ◽  
Janset Özen Aytemur
Keyword(s):  
Mixed Methods Research ◽  
Potential Role ◽  
Employee Relations ◽  
Hierarchical Regression ◽  
Future Research ◽  
Content Type ◽  
Tourism Sector ◽  
Behavioral Tendencies ◽  
The Relationship

PurposeThis study aims to investigate the relationship between cooperative and competitive behavioral tendencies and trust of coworkers in organizations. Two main hypotheses were developed. The first hypothesis was that cooperativeness and trust in coworkers is positively correlated. The second hypothesis was that competitiveness and trust in coworkers is negatively correlated.Design/methodology/approachThe sample was 442 Turkish tourism sector employees in a labor-intensive industry. Two scales were used to measure trust in coworkers and cooperativeness/competitiveness. A hierarchical regression analysis was performed to understand how individuals' behavioral tendency affects their coworkers' trust in them.FindingsThe findings strongly supported the first hypothesis, in that cooperativeness was positively correlated with trust in coworkers. The second hypothesis was only partially supported because there was no significant relationship between competitiveness and the competency and trustworthiness dimensions of trust. Unselfishness aspect of trust, however, was negatively correlated with competitiveness.Research limitations/implicationsThe main contribution of this study is to show that employee cooperativeness and competitiveness can affect trust in coworker relations. However, the measurement of competitiveness and cooperativeness measurement had limitations due to differences in the culture-specific meanings of cooperation and competition. Future research employing mixed methods research is needed to further explain the content of the two tendencies and the relationship between the concepts.Originality/valueThe literature on trust and employee relations tends to focus more on the issue of trust between managers and subordinates while neglecting the complex and multifaceted structure of trust in employee–employer relations. However, new working forms mean that horizontal relations are increasingly important. Therefore, more research is needed to address the tendencies and structures that affect trust in coworkers. This study draws attention to the potential role of cooperative and competitive behaviors in trust in horizontal employee relations.

A Synthesis of Fraud-Related Research

2012 ◽  
Vol 32 (Supplement 1) ◽  
pp. 287-321 ◽  
Author(s):  
Gregory M. Trompeter ◽  
Tina D. Carpenter ◽  
Naman Desai ◽  
Keith L. Jones ◽  
Richard A. Riley
Keyword(s):  
Organizational Behavior ◽  
Financial Reporting ◽  
Recent Literature ◽  
Internal Controls ◽  
Future Research ◽  
Fraud Triangle ◽  
Fraudulent Financial Reporting ◽  
Academic Literature ◽  
Fraud Risk ◽  
Corporate Governance Mechanisms

SUMMARY We synthesize academic literature related to fraudulent financial reporting with dual purposes: (1) to better understand the nature and extent of the existing literature on financial reporting fraud, and (2) to highlight areas where there is need for future research. This project extends the work of Hogan et al. (2008), who completed a similar synthesis project, also sponsored by the Auditing Section of the American Accounting Association, in 2005. We synthesize the literature related to fraud by examining accounting and auditing literature post-Hogan et al. (2008) and by summarizing relevant fraud literature from outside of accounting. We review publications in accounting and related disciplines including criminology, ethics, finance, organizational behavior, psychology, and sociology. We synthesize the research around a model that illustrates the auditor's approach to fraud. The model incorporates auditors' use of the fraud triangle (i.e., management's incentive, attitude, and opportunity to commit fraud), their assessment of the existence and effectiveness of the client's anti-fraud measures (e.g., corporate governance mechanisms and internal controls), and their consideration of possible fraud schemes and concealment techniques when making an overall fraud risk assessment of the client. The model further illustrates how auditors can incorporate this assessment into an overall strategy to detect fraud by implementing appropriate fraud-detection procedures. We summarize the recent literature of each component of the model and suggest avenues for future research.

scholarly journals The role of enterprise risk management on disclosure transparency in the international financial reporting standards period

Accounting ◽  
2021 ◽  
Vol 7 (6) ◽  
pp. 1241-1250 ◽  
Author(s):  
Bisan Almasri
Keyword(s):  
Risk Management ◽  
Financial Reporting ◽  
Enterprise Risk Management ◽  
International Financial Reporting Standards ◽  
Future Research ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Enterprise Risk ◽  
Study Results

This research empirically investigates the role of the enterprise risk management system implementation level in capturing firm managerial incentives. The system plays an important role in understanding the association between international financial reporting standards and the capital market. Listed firms in the Australian market were used for the period 2000-2010 for this purpose. The study results imply that implementing higher levels of ERM by Australian firms during the mandatory IFRS adoption period does not capture firm incentives in IFRS period. Consequently, these results suggest that the implementation of ERM by Australian firms does not reduce the contractual costs between investors and management, whilst adopting IFRS does. Future research may use other techniques and/or strategies other than ERM, to capture the firm incentives, and as a result, may have economic consequences.

scholarly journals Whether Audit Committee Financial Expertise Is the Only Relevant Expertise: A Review of Audit Committee Expertise and Timeliness of Financial Reporting

2013 ◽  
Vol 7 (2) ◽  
pp. 86 ◽  
Author(s):  
Saeed Rabea Baatwah ◽  
Zalailah Salleh ◽  
Norsiah Ahmad
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Future Research ◽  
Pertinent Literature ◽  
Committee Chair ◽  
Corporate Governance Mechanisms ◽  
Financial Expertise ◽  
Recent Developments

This study reviews the literature on audit committee expertise and financial reporting timeliness. Financial reporting timeliness and audit committee expertise are two areas of research gaining the attention of a large number of stakeholders because they contribute to the reliability and the  relevancy of financial reporting. Indeed, the focus of this review is primarily on the recent developments in the pertinent literature in order to show the limitations of such research and encourage future research to overcome these limitations. By also looking at the development of the audit committee expertise literature, this study concludes that (1) like most audit committee literature, financial reporting timeliness literature continues to assume the absence of the contribution of expertise other than financial expertise, and ignore the role of audit committee chair; (2) most of this literature fails to find a significant effect because it ignores the interaction among corporate governance mechanisms. Accordingly, this study posits that ignoring the issues raised in such research by future research would lead to major mistakes in reforms relating to how the quality of financial reporting can be enhanced.

The Use of Fuzzy Logic and Expert Reasoning for Knowledge Management and Discovery of Financial Reporting Fraud

2011 ◽  
pp. 1013-1028
Author(s):  
Mary Jane Lenard ◽  
Pervaiz Alam
Keyword(s):  
Fuzzy Logic ◽  
Knowledge Management ◽  
Financial Reporting ◽  
Future Research ◽  
Fraudulent Financial Reporting ◽  
Statistical Tool ◽  
Spreadsheet Model ◽  
Emerging Trends ◽  
Risk Areas ◽  
Expert Reasoning

This chapter examines the use of fuzzy clustering and expert reasoning for the identification of firms whose financial statements are affected by fraudulent financial reporting. For this purpose, we developed a database consisting of financial and nonfinancial variables that evaluated the risk of fraud. The variables were developed using fuzzy logic, which clusters the information into various risk areas. Expert reasoning, implemented in an Excel spreadsheet model, is then used as a form of knowledge management to access the information and develop the variables continuously over the life of the company. At the conclusion of the chapter, the authors discuss emerging trends and future research opportunities. The combination of fuzzy logic, expert reasoning and a statistical tool is an innovative method to evaluate the risk of fraudulent financial reporting.

scholarly journals Analysis of Fraudulent Financial Reporting With the Role of KAP Big Four as a Moderation Variable: Crowe's Fraud's Pentagon Theory

2020 ◽  
Vol 11 (5) ◽  
pp. 180
Author(s):  
Maylia Pramono Sari ◽  
Nindya Pramasheilla ◽  
Fachrurrozie ◽  
Trisni Suryarini ◽  
Imang Dapit Pamungkas
Keyword(s):  
Financial Reporting ◽  
Financial Stability ◽  
Audit Committee ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Fraudulent Financial Reporting ◽  
Ceo Duality ◽  
Fraud Risk ◽  
Big Four

The purpose of this study is to provide empirical evidence of pentagon fraud risk factors sush as financial targets, financial stability, number of audit committee members, nature of industry, change in auditors, auditor opinion, change in director, proportion of the independent commissary, frequent number of CEO pictures, and CEO duality on fraudulent financial reporting with KAP big four as a moderating variable. The samples in this study were all state-owned companies listed on the Indonesia Stock Exchange in 2014-2018. The purposive sampling technique was used in sampling so that 55 companies were obtained. This study uses logistic regression analysis techniques with SPSS version 26. The results of the study indicate that financial stability and the auditor's opinion influence the fraudulent financial reporting. However, financial targets, number of audit committee members, nature of industry, change in auditors, change in director, proportion of the independent commissary, frequent number of CEO pictures, and CEO duality not effect on fraudulent financial reporting.

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