scholarly journals Demystifying the Gimmicks of Financial Shenanigans: A Conceptual Study

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Debabrata Sharma ◽  
Sanjeeb Kumar Dey
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Financial Information ◽  
Financial Fraud ◽  
Misleading Information ◽  
Creative Accounting ◽  
Long Time ◽  
Financial Scandals ◽  
The Common ◽  
Conceptual Study

Financial reporting is the best and most vital way of communicating financial information of the business to all the stakeholders. It is also the most subtle way to commit financial fraud and scandals. Corporates are using financial statements and financial reporting not to educate the stakeholders about its performance but to deceive them by supplying misleading information. Corporate financial scandals have been around since the age of corporations and investors themselves. For a long time, dishonest management has been preying on unsuspecting investors by using financial shenanigans. While most companies report their results and figures honestly to investors, a significant number of companies use accounting or financial reporting tricks to hide the truth. Those tricks are known as financial shenanigans. These techniques are used by management to mislead investors about a company’s financial performance or economic health. Corporate financial shenanigans get away in the shadows of creative accounting. So, it is indispensable for all stakeholders particularly the common man to have some idea about the financial shenanigans. This research paper focuses on understanding the concept of financial shenanigans along with its types.

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

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Paulina Roszkowska
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Financial Statement ◽  
Financial Fraud ◽  
Financial Statement Fraud ◽  
Content Type ◽  
Financial Scandals ◽  
External Auditor ◽  
Equity Investments

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.

Corporate Governance as a Tool for Fraud Mitigation

2021 ◽  
pp. 1-15
Author(s):  
Antonia Maravelaki ◽  
Constantin Zopounidis ◽  
Christos Lemonakis ◽  
Ioannis Passas
Keyword(s):  
Corporate Governance ◽  
Accounting Standards ◽  
Financial Statements ◽  
Financial Fraud ◽  
Accounting Systems ◽  
Misleading Information ◽  
The Public ◽  
Creative Accounting ◽  
Profit Manipulation ◽  
Fraud Mitigation

Financial fraud through the falsification of financial statements is an evident problem. The restatement is enormous, and there have been developed many approaches to confront it. Profits manipulation has reached alarming proportions worldwide. The tendency of management to present a misleading image based on accounting weaknesses and gaps, to present accounting results as it wishes and not as it should according to the accounting standards, is essentially a key feature of profit manipulation. The executives' motives to falsify financial results and creative accounting practices have concerned researchers and their efforts to identify the necessary changes and improvements in accounting systems to protect the stakeholders and the public from misleading information.

scholarly journals Reliability of Financial Information from the Perspective of Benford’s Law

Entropy ◽  
2021 ◽  
Vol 23 (5) ◽  
pp. 557
Author(s):  
Ionel Jianu ◽  
Iulia Jianu
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Financial Statements ◽  
Financial Information ◽  
Benford’S Law ◽  
Professional Judgment ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Benford's Law ◽  
Before And After

This study investigates the conformity to Benford’s Law of the information disclosed in financial statements. Using the first digit test of Benford’s Law, the study analyses the reliability of financial information provided by listed companies on an emerging capital market before and after the implementation of International Financial Reporting Standards (IFRS). The results of the study confirm the increase of reliability on the information disclosed in the financial statements after IFRS implementation. The study contributes to the existing literature by bringing new insights into the types of financial information that do not comply with Benford’s Law such as the amounts determined by estimates or by applying professional judgment.

scholarly journals Testing the Beneish Model Relevance in Case of Entities with Confirmed Reputational Risk

2019 ◽  
Vol 13 (1) ◽  
pp. 43-48
Author(s):  
Ioan-Ovidiu Spătăcean
Keyword(s):  
Financial Reporting ◽  
Public Interest ◽  
Financial Services ◽  
Financial Statements ◽  
Listed Companies ◽  
Financial Fraud ◽  
Financial Services Industry ◽  
Supervisory Authority ◽  
Reputational Risk ◽  
Quantitative Characteristics

AbstractThe Beneish model is a useful tool for assessing the potentially fraudulent behaviour of an entity that could resort to misstated financial reporting by manipulating earnings. Tarjo ---amp--- Herawati (2015) concluded that “the M-score of the Beneish model was generally able to detect financial fraud”, following a study on 35 listed companies that were confronted with allegations of fraud in the period 2001-2014, by accessing the sanctions database applied to companies of public interest (issuers) published by the Financial Supervisory Authority. Also, Ahmet Ozcan (2018) stated that the Beneish model “brings effective value in the analysis of the quantitative characteristics of falsified financial statements”, a conclusion based on a concentrated research on a sample of 174 firms over the period 2005-2017. However, the construction of this model was not oriented for the financial services industry, therefore the studies referred to above do not include any investment firms. Our research aims to assess the relevance of the use of the Beneish model to entities involved in scandals on fraudulent or suspected distorted financial reporting operations (Romcab, 2017 and Harinvest, 2013) in order to Test the Beneish model’s validation capability. On the basis of the conclusions obtained, it can be accepted that the applicability of the model is validated for the entities examined.

scholarly journals Relevance of financial reporting quality - Theory and practice in Vietnamese enterprises

2017 ◽  
Vol 1 (Q2) ◽  
pp. 119-128
Author(s):  
Thuan Quoc Pham
Keyword(s):  
Conceptual Framework ◽  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Professional Associations ◽  
Financial Statements ◽  
Theory And Practice ◽  
Financial Information ◽  
Financial Reporting Quality

Financial reporting quality is one the most interesting topics which draw a great deal of attention to researchers and scientists in the field of accounting (Céline Michailesco, 2010). In the review of research on financial information from 1980 to 2016, Pham (2016) found that characteristics of useful financial information are relatively diverse with as many as 15 attributes being identified. In addition, he also found that all research in any period has employed the characteristics published by professional associations such as American Institute of Accountants, Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB as theoretical basis. Research on the quality of financial information is diverse yet have many things in common, above all is the Relevance characteristic which considered to be the basic qualitative component of the quality of financial information in financial statements. Conceptual Framework officially issued by FASB & IASB in 2010 (FASB & IASB 2010) has further confirmed Relevance is the basic quality component of financial information. Compared with previous announcements, there has been a considerable change in the criteria and attributes used to evaluate the appropriateness of Relevance characteristic of financial information in financial statements. This study aims at confirming the importance of the Relevance component in evaluating the quality of financial information, clarifyingg the characteristics of Relevance measurement before and after Conceptual Framework 2010 and constructing relevant scales as well as measuring the qualitative characteristic of Relevance among enterprises in Vietnam.

scholarly journals Die staat van toegevoegde waarde as komponent van finansiele verslaggewing in die RSA

1991 ◽  
Vol 22 (3) ◽  
pp. 53-62
Author(s):  
A. P. Du Plessis ◽  
D. S. Joubert
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Value Added ◽  
Financial Statements ◽  
Financial Information ◽  
Financial Reports ◽  
A Value ◽  
Information Contents

The value added statement as component of financial reporting in the RSA The value added statement was developed due to a need for more understandable financial information for the uninformed user of financial statements. Although not required by the Companies Act, since 1977 numerous South African companies have included a value added statement in their financial reports. The question can, however, be asked whether the inclusion of a statement of value added in financial reports will not put financial information at the disposal of a larger group of existing and potential users of financial statements. In such a case the inclusion of the statement should be made compulsory and the contents be standardized. During a study of the reasons for the publication and the presentation of the information of this statement by South African companies, it was found that companies probably publish this statement for the annual competitions for financial statements. The information contents of the statement is therefore disregarded.

scholarly journals Manipulation of Financial Statements Through the Use of Creative Accounting. Case of Romanian Companies

2020 ◽  
Vol 30 (3) ◽  
pp. 90-107
Author(s):  
Ioana-Lavinia Safta ◽  
Monica Violeta Achim ◽  
Sorin Nicolae Borlea
Keyword(s):  
Decision Making ◽  
Stock Exchange ◽  
Financial Statements ◽  
Financial Information ◽  
Decision Making Process ◽  
Creative Accounting ◽  
Red Flag

AbstractThe manipulation of the information presented through financial statements could represent a significant red flag for suspected fraud. In our paper, we investigated the extent to which the Romanian companies resort to manipulation of information data presented through the reported annual financial statements. For this purpose, we used a group consisting of 62 non-financial companies listed on the Bucharest Stock Exchange for the analyzed period 2017-2018. The results of our study show that a majority percentage of the Romanian companies (approx. 84%) resort to manipulation of information provided through financial statements. Following the analysis carried out by activity fields, the results show that the companies activating in the fields of tourism, constructions, trade and transport resort to the manipulation of financial statements in the percent of 100%, followed by the companies activating in the field of production (86%) and services (50%). Our results are extremely useful to the users of financial information who must acknowledge the risks that they are exposed to in their decision-making process.

scholarly journals The Framework for Audits of the Financial Statements of the Group of Enterprises by ISA 600 Requirements

2019 ◽  
pp. 54-66
Author(s):  
V. P. PANTELEIEV
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Regulatory Framework ◽  
Financial Information ◽  
Consolidated Financial Statements ◽  
Consolidation Process ◽  
Quality Audit ◽  
Professional Activities ◽  
Audit Strategy ◽  
Audit Standards

Compliance with relevant regulations is the basis of the professional activities of auditors. Users of financial statements require the auditor to conduct quality audit. The auditor’s opinion on the reliability of the financial statements of the group is based on the application of appropriate audit approaches, based both on audit practice and audit standards, and insist on compliance with recognized audit requirements. The aim of the article is to highlight the content of the main rules for an independent auditor to audit the financial statements of a group using the requirements of the modern regulatory framework, in particular International Standard of Auditing (ISA) 600. The essence of the main rules of an independent auditor conducting an audit of a group’s financial statements using the requirements of the modern regulatory framework, in particular ISA 600, is disclosed. The need for regulation of an audit of a group’s consolidated financial statements is formulated, the content and important provisions of the requirements of a professional standard ISA 600 “Special Considerations – Audits of group financial statements (including the work of component auditors)”. Interpretation of the requirements of ISA 600 for acceptance and continuation of the assignment, the role of the auditor’s assessment of distortions during the audit, audit activities to prevent, detect and combat fraud in the group, the obligation to use the component of the level of distortion by the auditor is given. The author’s vision of the special provisions of the audits of the financial statements of the group is indicated, the sequence of advancing audit procedures in the implementation of the special provisions of the audits, including the work of the component auditors, and the directions for further research are shown.  Conclusions. The responsibility of the auditor and the component auditor is envisaged, and atypical relevant measures are required in response to challenges; the auditor deals with complex structures, the information of the component auditors must be taken into account. ISA 600 is connected with other audit standards, it regulates a number of requirements with the aim of conducting a quality audit of the group financial statements: from the responsibility of the auditor, accepting and continuing the assignment, developing a general audit strategy and plan, understanding of the component auditor, communicating information to the group’s management personnel and those who endowed with high authority at the group level, etc. documentation. The peremptory question of ISA 600 is determining whether he should act as an auditor of the group financial statements, that is, reasonably refuse or accept the assignment; and if accepted and continued, the task if he acts as an auditor of the group financial statements: communication of clear information to the component auditors on the volume and time of their work with financial information relating to the components and the actual results obtained by them; obtaining sufficient audit evidence in sufficient amounts on the financial information of the components and the consolidation process to express an opinion that the group’s financial statements have been prepared in all material respects in accordance with the applicable financial reporting framework.

scholarly journals The Message Conveyed By IFRS-Compliant Information: A South African Perspective

2013 ◽  
Vol 12 (9) ◽  
pp. 1041
Author(s):  
Pieter Van der Zwan ◽  
Nico Van der Merwe
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Professional Education ◽  
Financial Statements ◽  
Primary Objective ◽  
Financial Information ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Accounting Practitioners ◽  
African Perspective

South African companies must prepare financial statements in accordance with International Financial Reporting Standards (IFRS) or other reporting standards modelled on IFRS. Literature suggests that the complexity of IFRS, which stems from detailed rules-based principles in these standards, may harm the ability of users of financial statements to understand financial information in a meaningful way. The primary objective of this study was to evaluate whether selected users and preparers of financial statements in South Africa interpret selected IFRS-compliant information prepared in accordance with rules-based principles in the manner intended by the standard-setters. The results of the study, which are based on data gathered by administering a questionnaire that contained selected IFRS-compliant note disclosures to accounting practitioners, accountancy students, and non-accountants in business, suggest that the participants of the study did not understand such IFRS-compliant information as intended by the standard-setters. Additional disclosure, the adoption of a simplified accounting framework for Small and Medium-sized Entities (SMEs) and the use of an output-based continuing professional education (CPE) system are identified as areas that warrant further research to overcome the threats posed by rules-based principles in IFRS.

scholarly journals Regulatory agencies and creative accounting practices in Nigeria

2020 ◽  
Vol 18 (3) ◽  
pp. 465-478
Author(s):  
Paul Olojede ◽  
Francis Iyoha ◽  
Ben-Caleb Egbide ◽  
Olayinka Erin
Keyword(s):  
Financial Reporting ◽  
Sampling Technique ◽  
Financial Statements ◽  
Ordinary Least Squares ◽  
External Control ◽  
Regulatory Agencies ◽  
Control Mechanisms ◽  
Creative Accounting ◽  
Multi Stage ◽  
The Impact

Regulation and regulatory agencies are to serve as external control mechanisms to ensure that the financial statements provide a fair view of the company’s operating performance and financial position, free of any unethical practice and suitable for all stakeholders’ needs. Despite the increasing importance of regulatory agencies in enforcing compliance with the standards and laws, it occupies a limited space in accounting research. This study, therefore, investigated the impact of regulatory agencies on creative accounting practices. The study used descriptive and survey research design to achieve its aim. It employed a multi-stage sampling technique, also questionnaires were distributed among 405 respondents consisting of preparers of accounts, users of accounts, and regulators. Out of the number distributed, the respondents returned 241 copies, and all of them were found suitable. The study used Ordinary Least Squares (OLS) to analyze the data and test the hypothesis. The empirical findings showed that the regulatory agencies jointly show a significant impact on creative accounting practices, but the level of contribution to the overall impact by each regulatory agency varies. The study concludes that Nigeria’s regulatory agencies are weak and inefficient in enforcing compliance with the relevant rules. The study recommends that the institutional capacity of the regulatory agencies should be strengthened by enforcing compliance with financial reporting rules and regulation. Most of these agencies should develop capacity in the areas of manpower, information technology infrastructures, and funding. Acknowledgment The authors acknowledge Covenant University who has solely provided the platform for this research and has also fully sponsored the research cluster search for data across the country.

Sign in / Sign up

Export Citation Format

Share Document