The effect of applying COSO-ERM model on reducing fraudulent financial reporting of commercial banks in Jordan

Abstract

This study aims to test the effect of applying the model of the Committee Sponsoring Organizations for enterprise risk management (COSO-ERM) on reducing fraudulent financial reporting in commercial banks operating in Jordan. Furthermore, the study identifies the role of each board of directors, audit committee, executive management, human resource management, and internal audit as one of the corporate governance mechanisms in enhancing the effectiveness of internal control systems. The study revealed an impact of applying the Committee of Sponsoring Organizations model for enterprise risk management (COSO-ERM) on preventing fraudulent financial reporting, where it reached influence around 77.8% on the dependent variable (fraudulent financial reporting). The study also found that each of internal control, event identification, risk assessment and response, and control activities variables affects dependent variable (fraudulent financial reporting) in commercial banks operating in Jordan.

Examining government officials’ perceived risk management and internal control in combating fraud in the public sector

“…Organisations must recognise that establishing objectives constitutes a primary concern for management, as it ensures alignment with the subsequent implementation of strategic planning. However, Rahman and Al-Dhaimesh [21] found that objective setting does affect reducing fraudulent financial reporting. Therefore, the research hypothesis developed is:…”

“…In the context of fraud prevention, the control environment plays a significant role in local government as a critical determinant for enhancing fraud prevention measures [11,22]. At the same time, the internal environment does affect reducing fraudulent financial reporting [21]. Therefore, the research hypothesis developed is:…”

“…In the research done by Tarjo, et al [11], risk assessment in local government significantly impacts the prevention of fraud. In fraudulent financial reporting, Rahman and Al-Dhaimesh [21] conducted a study that revealed the significance of risk assessment and response variables in mitigating false financial reporting within commercial banks. Therefore, the research hypotheses developed are:…”

Risk Management practices and potential fraudulent financial reporting: evidence from Malaysia

“…Rahman and Al-Dhaimesh (2018) investigated the impact of risk management based on COSO (Committee of Sponsoring Organizations of the Treadway Commission) framework which consists of five components of internal controls in bank in Damascus, Jordan and their result revealed that risk management can reduce internal control risks and hence reduce fraudulent financial reporting. Based on their study, among the components of risk management that significantly affect fraudulent financial reporting are internal environment variable, events identification, risk assessment, response variable and control activities.…”

Enterprise Risk Management Dalam Mencegah Dan Mendeteksi Kecurangan Di Parlemen Indonesia

“…Manajemen risiko perusahaan juga merupakan alat untuk mencegah penipuan (Ayagre et al, 2014;Rahman & Al Dhaimesh, 2018;Venter, 2007). Umumnya penelitian sebelumnya berfokus pada perusahaan keuangan yaitu asuransi (Hoyt & Liebenberg, 2011;McShane et al, 2011;Nguyen & Vo, 2020) Melalui penerapan manajemen risiko auditor internal dapat berperan dalam membantu manajemen dengan melakukan deteksi dan investigasi kecurangan di saat yang sama menentukan apakah organisasi memiliki kontrol internal yang memadai.…”