Predicting financial statement manipulation in South Africa: A comparison of the Beneish and Dechow models

Marais, Alastair; Vermaak, Claire; Shewell, Patricia

doi:10.1080/23322039.2023.2190215

Cogent Economics & Finance

2023

DOI: 10.1080/23322039.2023.2190215

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Predicting financial statement manipulation in South Africa: A comparison of the Beneish and Dechow models

Alastair Marais

Claire Vermaak

Patricia Shewell

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Cited by 4 publications

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Financial crimes in Africa and economic growth: Implications for achieving sustainable development goals (SDGs)

Arthur,

Asongu,

Darko

et al. 2024

Journal of Economic Surveys

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The current review systematically synthesizes existing literature to provide a comprehensive overview of the nature of financial crimes in Africa and their impact on economic growth. We adopted the PRISMA protocol to identify 128 papers from the Scopus database, which were analyzed using MS Excel, VOSviewer, and R‐packages (Bibliometrix). The survey reveals that financial crimes are on the rise in Africa and have gained increasing concern over the years on the part of scholars, governments, and NGOs. The survey also demonstrates that most of the financial crime in Africa emanates from illicit activities such as credit card fraud, cybercrime, mobile money fraud, financial statement fraud, Ponzi scheme, bribery and corruption, public fund mismanagement, terror financing, piracy, identity fraud, tax invasion, drug trafficking, product based‐fraud, burglary, trade‐based money laundering, sex marketing, and gambling; with the majority occurring in specific regions like Western Africa, Southern Africa, and Eastern Africa. Sociopolitical marginalization, poverty, and unemployment, weak institutional and financial regulatory systems and individual selfish interests were the major causes. Overall, the content analysis of the studies indicates that financial crimes have significant negative impacts on the economic growth of the African continent. Implications for future research and practices have been discussed.

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Financial crimes in Africa and economic growth: Implications for achieving sustainable development goals (SDGs)

Arthur,

Asongu,

Darko

et al. 2024

Journal of Economic Surveys

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Is earnings management impacted by audit fees and auditor tenure? An analysis of the Big Four audit firms in the US market

Santos-Jaén,

Martín de Almagro-Vázquez,

Valls Martínez

2023

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Research background: Audits are intended to ensure the reliability of financial statements, as this is fundamental for different stakeholders. However, both auditor tenure and audit fees could affect the earnings management of companies. In 2014, the European Union established a mandatory audit firm rotation policy. In the United States, although there is still no mandatory regulation in this regard, there has been a large public debate over the advisability of this policy. Another unresolved controversy is whether audit fees determine audit quality. Purpose of the article: The aim of this research is to study the effect of auditor tenure and audit fees on earnings management, i.e., to determine whether a longer-term relationship between the auditor and the audited company, as well as higher audit fees, reduce the audited company's earnings management, thereby making the financial statements more reliable for stakeholders and increasing the quality of the audit report. In addition, the Big Four auditing companies in the United States were analyzed in order to determine the influence of corporate culture. Methods: A sample of companies listed in the S&P 500 stock market index was employed for the analysis, covering the years 2012 to 2021, resulting in a dataset comprising 3,010 observations. To examine the research hypotheses while mitigating the potential bias from omitted variables, a linear regression analysis was conducted using panel data with fixed effects regression. To enhance the robustness of the results, winsorized variables were also employed. Findings & value added: Overall, the results confirm that the quality of financial statements improves as auditor tenure increases, and so implementing a mandatory auditor rotation may not be in a company’s best interests. The results also support the market segmentation theory, as higher audit fees are aligned with higher quality financial reporting. Furthermore, by analyzing the Big Four audit companies in the US, it is shown that the influence of audit fees and auditor tenure on earnings management also depends on the internal aspects of the particular audit firm, especially its ethical culture. In sum, US policymakers should neither set limits on audit fees nor enforce a mandatory audit firm rotation similar to that of the EU.

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Earnings Management in Baltic Listed Companies: A Study of the Consumer Good Industry

Bachtijeva,

Cibutavičiūtė,

Subačienė

2024

TEL

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Predicting financial statement manipulation in South Africa: A comparison of the Beneish and Dechow models

Cited by 4 publications

References 43 publications

Financial crimes in Africa and economic growth: Implications for achieving sustainable development goals (SDGs)

Financial crimes in Africa and economic growth: Implications for achieving sustainable development goals (SDGs)

Is earnings management impacted by audit fees and auditor tenure? An analysis of the Big Four audit firms in the US market

Earnings Management in Baltic Listed Companies: A Study of the Consumer Good Industry

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