Corporate Fraud Handbook

Wells, Joseph T.

doi:10.1002/9781119351962

Cited by 46 publications

(53 citation statements)

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“…Given this, Murcia, Borba, and Schiehll (2008) highlight fraud as one of the consequences of this asymmetry, and it may be linked to misconduct, involving illicit practices and bad faith, as well as being difficult to identify, due to the timing of those who carry it out, with a view to achieving their personal interests, regardless of the damage that such actions will cause to third parties. Wells (2011) states that when fraud involves financial reporting, the causes are related to several factors at the same time, one of the most significant being the pressure on management to achieve better results, where executives can manipulate financial records for the primary purpose of hiding the firm's real performance, thereby maintaining their position, control, and income as reflected in wages, bonuses, and equities. Cunha, Silva, and Fernandes (2013) note that scandals involving financial reporting by reputable companies are common, such as the cases of WorldCom, Enron, Xerox, Delphi Corporation, Global Crossing, and Adelphia, among others.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Corporate Governance on the Mitigation of Fraudulent Financial Reporting

Martins¹,

Júnior²

2020

RBGN

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Purpose-This study analyzes the influence of the corporate governance structure in terms of mitigating the likelihood of fraudulent financial reporting (FFR) by firms in Brazil. Design/methodology/approach-For this, we analyze the data of 314 publicly traded companies to estimate the likelihood of bankruptcy and the possibility of earnings manipulation, for subsequent identification of. Findings-Our results show that in 5.5% of cases there is an indication that FFR is likely, bankruptcy is predicted in 16.9% of cases, and the likelihood of earnings manipulation is identified in 17.7%. The corporate governance structure of the firms influences FFR mitigation, either directly or indirectly by reducing the chances of bankruptcy or earnings manipulation. We note that board-related governance practices are more effective against predicted bankruptcy, and auditrelated practices are more related to reducing earnings manipulation. Originality/value-The main contributions of this study lie in it identifying the probabilities of reporting fraud, bankruptcy, and earnings manipulation for companies in Brazil, as well as it verifying that corporate governance has been effective in mitigating these problems, either directly or indirectly. Thus, this information is useful for investors and regulators in this market.

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Section: Introductionmentioning

confidence: 99%

The Influence of Corporate Governance on the Mitigation of Fraudulent Financial Reporting

Martins¹,

Júnior²

2020

RBGN

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“…One example is solvability analysis. Through EDA, auditors can capture data of long-term loan, interest payment, and loan disbursement to make an assumption regarding to management accuracy in sales target setting and efficiency in loan expenditure [33]. Based on those circumstances, auditors may employ descriptive modelling to assess auditee's solvability risk.…”

Section: Resultsmentioning

confidence: 99%

“…Statistically, classification and regression analysis can be used as far as all quantitative variables are measured in the field. For example, the auditors might search for abnormal distribution of operating expenses, they might consider to examine fixed assets' chart of accounts [33]. When users find positive correlation and linearity between fixed assets and operating expenses, then auditors must consider the risk of fraudulent expenditure of property capitalization [36].…”

Section: Resultsmentioning

confidence: 99%

“…Such pressures might be inevitable, but the auditing time-frame is expected to be narrowed through implementation of efficient risk assessment and sampling. Another perspective is in accordance with principle of independency [23], unbiased information [33], and clear methodology [52], including the implementation of audit with a degree of professional skepticism [27], all techniques are dependable for audit's disclosure requirement, measurable analysis, and empirical consideration which can be justified as the high-est degree of professional judgment and valued with objective measurement .…”

Section: Resultsmentioning

confidence: 99%

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Data Mining: a Three-Step of Real-Time Audit Paradigm

Widhoyoko¹,

Sasmoko²,

Biantara³

et al. 2018

IJET

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One problem in business is the aspect of reporting through the process of financial audit. The problem with conventional audit is highlighted in this research through literature review of Statement of Auditing Standards (SAS) regarding to the issues of (1) risk assessment, (2) sampling methods, and (3) going concern analysis. This research further describes all these issues in the light of efficient audit process. The method used is exploratory, engaging comprehensive literature review from the perspectives of forensic accounting and information system. The output is to build a three-step financial audit paradigm embedding (1) exploratory data analysis and descriptive modelling in risk assessment, (2) predictive and association analysis in sampling, and (3) grounded professional judgement in going concern analysis.

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“…To triangulate the evidence from the indirect approach, the investigators should use the asset method and the expenditures to verify the suspect's and company's finances (Comisky, 1981). This approach is based on the theory that the funds available to a person during a period of time are either applied to increase his/her net worth (i.e., assets less liabilities) or spent on personal living expenses (e.g., food, rent, vehicle operating expenses) (Block, 1969;Comisky, 1981;Comer, 2003;Wells, 2013). Accordingly, the total of the increase in a person's net worth over any given period, plus the total of his or her living expenses, will equal the total income received.…”

Section: Indirect Approach (Net Worth Method)mentioning

confidence: 99%

A fraud investigation plan for a false accounting and theft case

Lokanan

2019

JFC

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Purpose The purpose of this paper is to formulate and propose a fraud investigation plan that forensic accountants can use to investigate financial frauds. In particular, the paper sets out the structure and rationale of the fraud investigation plan that both forensic accountants and fraud examiners can use in their investigation of false accounting and theft charges. Design/methodology/approach The paper uses the material facts from the Polly Peck International fraud as a prototype case upon which to build an investigation plan and detail potential areas of investigation to establish evidence for a criminal trial. Findings The findings revealed that the case can be used to provide insights on evidence gathering techniques and test particular models of fraud detection. The concealment and conversion evidence gathering techniques provide fodder on how to gather and triangulate both direct and circumstantial evidence that can be used to avoid mistrials in courts. Practical implications The case is of interest to practitioners and forensic and fraud examination students who would like to build on their existing knowledge and obtain insights into the steps to follow to conduct an investigation and gather evidence to build a case. The paper makes specific recommendations to enhance the effectiveness and efficiency of investigations. Originality/value The paper is among one of the few to propose a fraud investigation plan designed to investigate cases involving false accounting and theft charges. More importantly, the paper uses a real case to illustrate how to examine documentation/data and how such documentation will be analysed in a trial.

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Corporate Fraud Handbook

Cited by 46 publications

References 0 publications

The Influence of Corporate Governance on the Mitigation of Fraudulent Financial Reporting

The Influence of Corporate Governance on the Mitigation of Fraudulent Financial Reporting

Data Mining: a Three-Step of Real-Time Audit Paradigm

A fraud investigation plan for a false accounting and theft case

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