Whistleblower rewards, false reports, and corporate fraud

It is often claimed that rewards for whistleblowers lead to fraudulent reports, but for several US programs this has not been a major problem. We model the interaction between rewards for whistleblowers, sanctions against fraudulent reporting, judicial errors, and standards of proof in the court case on a whistleblower’s allegations and the possible follow-up for fraudulent allegations. Balancing whistleblower rewards, sanctions against fraudulent reports, and courts’ standards of proof is essential for these policies to succeed. When the risk of retaliation is severe, larger rewards are needed and so are tougher sanctions against fraudulent reports. The precision of the legal system must be sufficiently high, hence these programs are not viable in weak institution environments, where protection is imperfect and court precision low, or where sanctions against false reporting are mild.

The greenwashing triangle: adapting tools from fraud to improve CSR reporting

Purpose The purpose of this paper is to show a significant overlap in the models accounting research uses for fraud and the models other research disciplines use for greenwashing, and show how researchers and policymakers interested in the application of effective sustainability policy can draw from fraud accounting literature to better understand, and therefore, combat greenwashing. This is illustrated by showing multi-actor information-asymmetry models from other branches of accounting literature and synthesizing them with the fraud triangle model to suggest new avenues for reducing greenwashing and strengthening corporate social responsibility (CSR). Design/methodology/approach This paper reviews the current literature surrounding the greenwashing aspect of corporate camouflage compares the legal and technical definitions of fraud and synthesizes a new variant fraud triangle that more usefully describes greenwashing. Findings This paper is able to show that other areas of accounting research in North America have already tackled similar systems of multiple actors in an information-asymmetric environment and that a recurring trait is the emergence of a more robust reporting system. CSR reporting is currently in the process of emerging and could develop more swiftly by copying extant fraud-fighting tools. This is particularly salient given the increasing amount of liability legal regimes are giving to both sustainability activities and sustainability reporting from firms, as evidenced in both guidelines and scandals over the past decade. Research limitations/implications Sustainability reporting is not unique in comprising a large number of interrelated entities with non-financial information asymmetry between actors. Previous researchers have encountered similar situations in government accounting and public administration and developed network models to study these relationships as a result. In government accounting, this led to the development both of better diagnostic tools for further research and better models for local governments to use to prevent fraud and malfeasance. This paper suggests that using such research methods in the area of CSR will allow for the development of similarly-useful tools and models. Practical implications Visualizing greenwashing as a form of fraud allows policymakers to use tools from the fraud-fighting literature to improve CSR reporting and produce a more robust regime in the future. As governments increasingly seek to respond effectively to material misstatements with an intent to deceive in sustainability reports, understanding the underlying information asymmetry as it is found in other private-public interfaces is critical. Similarly, researchers can analyze CSR reporting through the lens of fraud researchers to gain novel insights into how information asymmetry in CSR reporting works. Social implications Greenwashing is not traditionally seen as a form of fraudulent reporting, even though it often meets the same technical test used to determine fraudulent reporting. The realization that the two are structurally similar allows the authors to better understand how CSR reporting works and how CSR reporting can be falsified. By understanding the latter, governments, firms and non-governmental organizations (NGOs) can develop tools to prevent CSR reporting from being falsified. Originality/value This paper suggests a new suite of tools with which to study greenwashing, and with which to fight greenwashing in a sustainability accounting context.

PENGARUH FRAUD TRIANGLE SEBAGAI PREDIKTOR KECURANGAN PELAPORAN KEUANGAN

The purpose of this study is to examine Influence of external pressure, effective monitoring, and rationalitation to financial fraudulent reporting. The sample used in this study is real estate, property, and building construction companies listed on the Indonesia Stock Exchange (BEI) in the period 2016-2017. By using purposive sampling method, it is obtained as many as 57 real-estate, property, and building construction companies as the study sample. The method of analysis used in this study is logistic regression. In this research also include the overall fit model test, hosmer and lemeshow’s test, goodness of fit test, and classification matrix. Results of this study indicate that the effective monitoring and rationalitation are not significant to financial fraudulent reporting, while external pressure is significant to financial fraudulent reporting.

Fraudulent Reporting Perpetuated by CEO’s Team: Unveiling the Sayam ‘Modus Operandi’

Fraudulent reporting practices can have very significant consequences for organizations and all stakeholders, as well as, for public confidence in the capital and security markets. In fact, comprehensive, accurate and reliable financial reporting is the bedrock upon which our markets are based. Keen to project a ‘rosy’ picture of the Satyam Computer Services Limited to investors, employees and analysts, Mr. Raju (CEO & Chairman) and his team members ‘fudged’ the account books for 5 years so that it appeared to be a far bigger enterprise, with high profits and fast growth rate, than it actually was. The Satyam fraud has shattered the dreams of different categories of investors, shocked the government and regulators alike, and led to questioning of the accounting practices of statutory auditors and corporate governance norms in India. This is an exploratory and qualitative study based on secondary sources of information. An attempt has been made here to provide an explanation for various intriguing questions about Satyam scam. After thorough investigations by the CBI and SEBI, they have unveiled the methodology by which Satyam fraud was engineered. Finally, we recommend “Fraudulent reporting practices should be considered as a serious crime, and accounting bodies, law courts and other regulatory authorities in India need to adopt very strict punitive measures to stop such unethical practices.”

The need for financial statements to disclose true business performance to stakeholders

This desk top study reviewed relevant literature in order to determine the extent to which Financial Statements disclose true business performance to stakeholders. Literature reviewed established that management fraudulent reporting, relevance of reports and reliability of information are to be taken into account when assessing level of reliance that can be placed on financial statements on disclosing business performance. It also emerged that cost and benefits of disclosing financial information, relevance of financial statements and significance of stakeholder groups are some of the factors to be considered when carrying out a cost benefit analysis on the importance of financial statements. The study concludes that management fraudulent reporting, relevance of reports, reliability of information and source of information are to be taken into account when assessing level of reliance that can be placed on financial statements to determine their ability to disclose business performance.

Effect Ownership, Accountant Public Office, and Financial Distress to the Public Company Financial Fraudulent Reporting in Indonesia

This study empirically examine the influence of ownership, accountant public office and the financial distress on fraudulent financial reporting. The variables studied were foreign ownership, family ownership, accountant public office and the financial distress of public companies in Indonesia in 2009 to 2012. The research was conducted by quantitative methods using secondary data. Secondary data comes from a list of cases Bapepam-LK and the annual reports listed companies on the Stock Exchange. This population of study was company listed on the Stock Exchange, and then the samples were taken by purposive sampling criteria the company's corporate criteria sanctioned Bapepam-LK and the sanctions contained elements of fraud, including the non-financial corporate sector and have the data required in this study. At the end, the total sample of 64 companies that the company. This study uses logistic regression statistical tools as the dependent variable is a dummy variable (non-metric), while the independent variable is a variable mixture of metric and non-metric. The results show that the family ownership significantly affect financial reporting fraud but in the opposite direction because of the negative impact. Foreign ownership of a significant negative effect on fraudulent financial reporting. This indicates the greater ownership by the family, the lower the level of financial of fraudulent reporting accountant public office has no effect on fraudulent financial reporting. This occurs because both KAP Big Four and Small Firm have the same standards in Generally Accepted Accounting Principles (GAAP) in carrying out their duties as auditor. Financial distress negatively affects fraudulent financial reporting.

How Auditor Legal Liability Influences the Detection and Frequency of Fraudulent Financial Reporting

SUMMARY In today's legal environment, auditors who fail to detect fraud face potentially extreme liabilities because of the possibility of biased juries and other factors that can result in extreme legal liabilities for auditors. This paper summarizes a recent study (“The Impact of Audit Penalty Distributions on the Detection and Frequency of Fraudulent Reporting”; Burton et al. [2011]), which used an experimental economics research method to investigate how the legal liability for failing to detect fraud influences auditors' efforts to detect financial reporting fraud and auditees' commission of such fraud. The experiments show that a penalty system that is not subject to extreme legal liabilities for the auditor, but has the same expected value (i.e., average penalties) as a system that is subject to extreme liabilities, increases auditors' effort to detect fraud and decreases fraudulent reporting by auditees.