Corporate Fraud Prevention and Detection: Revisiting the Literature

Abstract

Fraud has become a worldwide phenomenon and prime issue of concern. It dwells in all countries and affects all types of organizations irrespective of their size, profitability or industry. The primary objective of this paper is to provide an in-depth understanding of literature related to corporate fraud in order to understand why fraud occurs and how to combat it. Research studies published during the period commencing from the year 1984 to 2014 have been reviewed. The study aims to provide an in-depth discussion on significant red flags that may exist before fraud occurrence. It, also, provides a comprehensive view about fraud detection and prevention methods. Findings reveal that red flag is an important mechanism to prevent fraud. Application of single fraud detection technique will not curb the fraud effectively. Also, the top executives were found to be responsible for implementing anti-fraud policies and techniques within business organization. Further, the present study tries to discern the research gap in existing literature and explore the area of future research.

Early Warning Fraud Determinants in Banking Industries

“…Red flags are specific indicators representing potential theft occurrences and the psychology of committing fraud (Mangala & Kumari, 2015). Red flags are events and conditions indicating motivation and opportunity for potential or actual fraud occurrences.…”

“…Auditors should conduct brainstorming sessions for a better understanding of the client's business and the possible occurrence of fraud. A broad literature review has helped Mangala & Kumari, (2015) identify significant red flags in various categories of corporate fraud, as illustrated in Figure 1. Source: Mangala and Kumari (2015).…”

Auditors’ Perceptions of the Effectiveness of Fraud Prevention and Detection Methods

“…Corporate fraud literature has focused on numerous anti-fraud methods of which red flag has been the centre of attraction of most of the researchers on fraud detection and prevention such as Hillison, Pacini and Sinason (1999) and Albrecht, Albrecht, Albrecht and Zimbelman (2012). Red flags are warning signals, indicating presence of potential fraud and are an effective tool against corporate fraud (Gullkvist & Jokipii, 2013;Mangala & Kumari, 2016). Also, in the digital era, poor enforcement of country's anti-fraud law is perceived to be the important reason for increasing cybercrime (PwC, 2016).…”

“…Therefore, the role of forensic accountants should be participative rather than consultative. In developed economies, forensic accounting has got its deserving place, but in developing countries like India, it is still progressing (Mangala & Kumari, 2015). However, an appreciable effort in this regard has been done by Earnest and Young (EY) and ACFE (Western Region Chapter) by launching the ‘Forensic Trailblazer Award’ to honour the best forensic talent in India.…”

Identifikasi Kecurangan Laporan Keuangan Dengan Fraud Pentagon Studi Empiris Bumn Terdaftar Di Bursa Efek Indonesia

“…Tujuan dari penelitian ini adalah melakukan investigasi kecurangan laporan keuangan perusahaan Badan Usaha Milik Negara (BUMN) yang terdaftar di Bursa Efek Indonesia periode 2015-2017 dengan menggunakan pendekatan fraud pentagon. Teori fraud pentagon dikembangkan oleh Jonathan T. Marks 2009 dengan melakukan pengembangan fraud triangle (Mangala & Kumari, 2015). Fraud triangle terdiri dari tiga elemen resiko kecurangan yaitu tekanan (pressure), kesempatan (opportunity), dan rasionalisasi (rationalization).…”