Fraudulent financial reporting, corporate governance and ethics: 1987‐2007

Abstract

Purpose -The purpose of this paper is to review, critique, and integrate certain trends, events, and research streams involving earnings management, fraudulent financial reporting, corporate governance and ethics. Design/methodology/approach -The paper provides a brief history of relevant events and trends in financial reporting for the period 1987-2007. Within this historical context, financial reporting and earnings quality are discussed from the academic and practitioner points of view. The influence of corporate governance and the role of ethics and behavior are introduced as part of an integrated discussion of academic and practitioner viewpoints of earnings management and fraudulent financial reporting. The last section of the paper provides final observations and recommendations for future research. Findings -The paper concludes that academic research in earnings management and fraudulent financial reporting has become increasingly narrow in addressing important issues and problems in practice.Research limitations/implications -The paper is limited in its depth of analysis in each individual research stream due to the breadth of research and time period that are addressed. The implications for future research are enhanced by the integration of several streams of research relevant to earnings management and fraudulent financial reporting. Practical implications -The paper may be useful to regulators and policy makers to better understand the significance and relevance of academic research. Originality/value -The paper introduces and integrates ethics and behavior as important aspects for understanding earnings management and fraudulent financial reporting.

Ética profissional e estudantes de contabilidade: análise das variáveis intervenientes

“…The quality of financial information is mainly affected by the auditors' idiosyncrasies and corporate governance (KALBERS, 2009). In addition, monetary restatement of accounting information may trigger material and monetary errors / fraud in the financial statements and a possible failure to interpret accounting principles.…”

“…In addition, monetary restatement of accounting information may trigger material and monetary errors / fraud in the financial statements and a possible failure to interpret accounting principles. In this sense, some attitudes may be considered unethical, rather than fraud or illegal acts (KALBERS, 2009).Furthermore, the impact of fraud / error in relation to financial reporting is not restricted to the limits of direct users (creditors and investors) and can affect the global economy, depending on the intensity of the fact (ROCKNESS and ROCKNESS, 2010).…”

Power and Likelihood of Financial Statement Fraud: Evidence from Indonesia

“…The condition as above leads to one of critical issues that has emerged in the current studies of corporate governance: the declining of its marginal utility. [9], [10] argue that the extensive use of the agency theory may be lacking to frame the effectiveness of governance structure, particularly in the accounting/auditing field. Although the agent-principle perspective leads to the distribution of BOD power over the manager, it limits the participation of management as the other key role on the governance process.…”

Impact of the Accounting Information System on Corporate Governance: Evidence from Turkish Non-Listed Companies

“…For example, bookkeeping refers to the recording function; financial reporting refers to the external reporting function; standards refer to the framework for the accounting practices; and finally, the efficacy of the budgeting system addresses the planning and controlling function. In prior studies, the role of financial reporting in corporate governance was prominently investigated (Naumann, 2000;Bushman & Smith, 2001;Sloan, 2001;Bushman et al, 2004;Kalbers, 2009); however, we cannot say the same thing for management accounting practices. Thus, we aim at filling this gap by operationalizing the budgeting system as one of the primary management accounting tools.…”