Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments

Abstract

Purpose The purpose of this paper is to explore the audit-related causes of financial scandals and advice on how emerging technologies can provide solutions thereto. Specifically, this study seeks to look at the facilitators of financial statement fraud and explain specific fintech advancements that contribute to financial information reliability for equity investments. Design/methodology/approach The study uses the case studies of Enron and Arthur Andersen to document the evidence of audit-related issues in historical financial scandals. Then, a comprehensive and interdisciplinary literature review at the intersection of business, accounting and engineering, provides a foundation to propose technology advancements that can solve identified problems in accounting and auditing. Findings The findings show that blockchain, internet of things, smart contracts and artificial intelligence solutions have different functionality and can effectively solve various financial reporting and audit-related problems. Jointly, they have a strong potential to enhance the reliability of the information in financial statements and generally change how companies operate. Practical implications The proposed and explained technology advancements should be of interest to all publicly listed companies and investors, as they can help safeguard equity investments, thus build investors’ trust towards the company. Social implications Aside from implications for capital markets participants, the study findings can materially benefit various stakeholder groups, the broader company environment and the economy. Originality/value This is the first paper that seeks solutions to financial fraud and audit-related financial scandals in technology and not in implementing yet another regulation. Given the recent technology advancements, the study findings provide insights into how the role of an external auditor might evolve in the future.

Artificial Intelligence and Blockchain Integration in Business: Trends from a Bibliometric-Content Analysis

“… Soleymani and Paquet ( 2020 ) Prevention of corporate frauds using smart contracts and advanced AI. Roszkowska ( 2020 ); Mao et al ( 2018 ) Mitigating credit risk by integrating blockchain technology and the long short term memory (LSTM) deep learning. Mao et al ( 2018 ) …”

“…In addition, the articles in this cluster explain how integrated AI and blockchain platforms can help to tackle problems such as corporate frauds and credit risk. Roszkowska ( 2020 ) discusses corporate frauds caused by the failure of the auditor to detect such frauds and argues how FinTech offers an effective solution to such issues, wherein the combined implementation of blockchain, smart contracts, and advanced AI solutions can overcome the deficiencies of financial reporting and auditing. Similarly, Mao et al ( 2018 ) highlight the problem of credit risk caused by the information asymmetry between traders and propose a credit evaluation system that is implemented by integrating blockchain technology and the long short term memory (LSTM) deep learning network.…”

“…Likewise, blockchain has gained increasing attention as a technology with a wide range of applications in various fields (Dinh & Thai, 2018 ; Liu et al, 2019a ). Blockchain, which became popular after the emergence of bitcoin in 2008 (Nakamoto, 2008 ), has remained as a disruptive technology that transforms the way we interact, trace transactions, and automate payments, among others (Roszkowska, 2020 ). Indeed, blockchain has opened the door of opportunities that enables the direct transference of value between its users in a secure and trusted manner.…”

Keyakinan Hukum Karma Memoderasi Pengaruh Hedonisme Pada Kecurangan Dalam Pelaporan Keuangan

“…Seperti yang diungkapkan Utama et al,(2018), salah satu contoh dari pressure yaitu dorongan untuk memiliki barang -barang yang bersifat materi. Kennedy (2018), Rostami & Rezaei (2021), Liu et al (2021), Roszkowska (2021), Schmidt et al (2021), dan Himmah (2013) juga menyatakan bahwa karakteristik pribadi yang individual, materialis dan kapitalis mendorong orang untuk melakukan hal yang negatif tanpa memikirkan dampak atas perbuatan tersebut, salah satunya adalah melakukan kecurangan (fraud) atau perilaku tidak etis. Berdasarkan fraud triangle theory yang dimana dapat mendeteksi kecurangan dari seorang pekerja, terdapat hukum karma yang sering dikenal oleh masyarakat, yang dimana hukum karma ini sering dijadikan landasan bagi beberapa individu dalam bertindak.…”

Blockchain Technology and Its Potential Effects on Accounting: A Systematic Literature Review

“…Pimentel and Boulianne (2020) suggest the co-work and collaboration of academics and practitioners to have a better adoption processes. Roszkowska (2020) and Kwilinski (2019) claim that in the near future BCT may have a big role in accounting; many jobs such as billing, documenting, treating, registering bookkeeping, budgeting, and reconciliation might be done by autonomous programs based on BCT. These developments also have some implications for accounting and finance professionals; BCT may change job definitions and responsibilities (Church et al, 2020).…”