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.

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.

scholarly journals Research on the accounting quality of public listed companies at the Budapest Stock Exchange

2018 ◽  
Vol 2018 (99 (155)) ◽  
pp. 165-186
Author(s):  
Gábor Tóth ◽  
Zsuzsanna Széles
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Evaluation Model ◽  
Evaluation Process ◽  
Financial Statements ◽  
Listed Companies ◽  
Accounting Quality ◽  
Consolidated Financial Statements ◽  
Private Companies ◽  
Accounting Principles

The operation of a financial reporting system is very expensive. In all areas where costs arise, it is important to examine whether the benefits exceed the costs or not. The objectives of financial reporting in Hungary are specified by Act C of 2000 on Accounting (HLA). In this paper, we will show these objectives and the defined accounting principles, as well. With the help of previous research, we have reviewed how accounting quality is measured. The aim of this research is to examine the difference in accounting quality between the publicly listed and private companies in Hungary and develop an evaluation process that takes due account of the complexity of the topic. To this end, we studied the separate (non-consolidated) financial statements of 63 Hungarian com- panies during the period of 1998-2016. Forty-seven percent of the statements were disclosed by public companies and fifty-three percent were disclosed by private companies. The examined financial statements were prepared in accordance with the HLA. To evaluate the data, we examined accruals, timely loss recognition, the vola- tility of earnings, cash flow and earnings management towards target. To summarize the results, we developed an evaluation model which is based on the basic accounting principles and the above-mentioned methods. We found that publicly listed companies have higher accounting quality compared to private companies.

scholarly journals Fraud Examination of the Enron Corp Company

2021 ◽  
pp. 15-24
Author(s):  
Mahmoud Mofid Abdul Karim
Keyword(s):  
Financial Statements ◽  
Listed Companies ◽  
Research Paper ◽  
Financial Ratios ◽  
Financial Fraud ◽  
Financial Report ◽  
Data Source ◽  
Analytical Tools

Abstract This research paper takes into consideration the tools that are availed by Modified Altman, Chanos, Beneish, among others, to evaluate Enron Corp yearly 10k financial report as filed with SEC for the years beginning 1997 to 2001 mainly to identify the financial fraud that the company committed and how it could have been prevented before it escalated beyond control. The reported base its pri-mary data source on the SEC Edgar Database, which has information on financial statements for all publicly listed companies. After successfully applying analytical tools such as Altman's Bankruptcy Predictor, Fraud Statement Index, and Analyt-ical tools, this research paper concludes that the company's fraud could have been detected early on between the years 1999- 2000 period (Lucas & Koerwer, 2004). Keywords: Bankruptcy, Financial ratios, Fraud, Beneish model.

scholarly journals The comparability of IFRS statements of cash flows in Poland. The influence of national regulations

2019 ◽  
Vol 2019 (101 (157)) ◽  
pp. 149-166
Author(s):  
Edyta Łazarowicz
Keyword(s):  
Literature Review ◽  
Research Methods ◽  
Financial Reporting ◽  
Financial Statements ◽  
Listed Companies ◽  
Cash Flows ◽  
Future Research ◽  
National Accounting ◽  
Accounting Rules ◽  
Statement Of Cash Flows

This paper analyses the comparability of the structure and content of IFRS consolidated statements of cash flows within Polish listed companies and the influence of national accounting rules on these statements. Two research methods have been used: a literature review and an analysis of the content of financial statements. It has been found that there are small differences in the structure and content of IFRS consolidated statements of cash flows in Poland. The results indicate that the options in IAS 7 and the lack of an obligatory format of the IFRS statement of cash flows do not significantly reduce the comparability of these statements in Polish practice. Moreover, it has been observed that Polish listed companies follow national regulations only in some aspects for which IAS 7 provides options or has no regulations at all. The findings of this study may be relevant for standard setters, in particular, the current IASB Primary Financial Statements project, for users of financial reporting, and for academics for future research.

scholarly journals First time adoption of IFRS 15 “Revenue from contracts with customers“: the case of Lithuanian listed companies

2020 ◽  
Vol 21 ◽  
pp. 2
Author(s):  
Darius Vaicekauskas
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Listed Companies ◽  
Economic Benefits ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Revenue Recognition ◽  
Financial Reporting Standards ◽  
The Impact ◽  
First Time

 Revenue accounting is one of the most important areas of financial accounting. Revenue is one of the key absolute financial ratios that reflects the economic benefits generated by entities that result in increased shareholders‘ equity. This article investigates the first time adoption of new IFRS 15 “Revenue from contracts with customers“ which in International financial reporting standards (hereinafter – IFRS) system is mandatory to apply starting from 1 January 2018. The new IFRS 15 supersedes the previous international accounting standards regulating revenue recognition and introduces a conceptual 5-step revenue recognition model. The purpose of this article is to evaluate the impact of the first-time adoption of IFRS 15 “Revenue from contracts with customers“ on the financial statements of Lithuanian listed companies. This purpose is achieved while using the following research methods: analysis of International financial reporting standards (IFRS) and scientific literature, as well as analysis of the content of financial statements. An empirical study revealed that the first-time adoption of IFRS 15 had no material impact on the financial statements of Lithuanian listed companies. Most of the companies surveyed applied the standard using a simplified retrospective modified method and did not pay much attention to the disclosure of first-time adoption. For those affected by the standard, the effect was mostly notable in the following areas: reclassifications of commissions and brokerage fees, changes in revenue recognition principles from the revenue recognition over a time to revenue recognition at specific point in time and vice versa.

scholarly journals The disclosure of events after the reporting period. The example of listed companies from selected European countries

2020 ◽  
Vol 109 (165) ◽  
pp. 139-156
Author(s):  
Małgorzata Szulc ◽  
Paweł Zieniuk
Keyword(s):  
Empirical Research ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Financial Statements ◽  
Listed Companies ◽  
European Countries ◽  
Stock Exchanges ◽  
Financial Reports ◽  
Financial Reporting Standards ◽  
Warsaw Stock Exchange

Purpose: The aim of this article is to present a practical study of disclosures of events after the reporting period in the financial reports of listed companies from selected European countries. The paper presents the results of empirical research based on the source material in the form of financial statements for the year 2018 of listed companies included on the following stock exchange indices: DAX, PSI-20, OMX25, BUX, WIG20, which comprise companies listed on the stock exchanges in Germany, Portugal, Denmark, Hungary and Poland. Methodology/approach: The research sample includes 110 companies. Content analysis of full versions of individual financial statements was performed. Findings: The results show that listed companies comply with the International Financial Reporting Standards regarding the disclo-sure of events after the reporting period. The occurrence of such events in the business practice of com-panies listed on the Warsaw Stock Exchange is much more frequent than in other European countries. The results of the study also present the diversity of events disclosed by respective companies included in the sample after the reporting period. Originality/value: The research allowed us to compare the scope of financial reporting disclosures of events after the reporting period in companies listed on the Warsaw Stock Exchange and in other European companies. Comparisons of this kind have not yet been carried out in international empirical research, which makes this article all the more valuable.

Predicting Vietnam Listed Firms’ Financial Statement Fraud Risk

2021 ◽  
Vol 37 (1) ◽  
Author(s):  
Thuy Nguyen Thi Hong
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Financial Statements ◽  
Listed Companies ◽  
Financial Statement ◽  
Financial Statement Fraud ◽  
Financial Leverage ◽  
Research Results ◽  
Listed Firms ◽  
Fraud Risk

Different from previous studies in Vietnam, this paper focuses on fraud risk, identifying the factors that affect the risk of financial reporting fraud of listed companies in Vietnam. Moreover, the research aims to forecast the possibility of fraudulent financial statements of listed companies in Vietnam. Based on M-score models (Beneish, 1999) and F-score model (Dechow et al., 2011), this research develops experimental results based on a sample of 307 companies with 3684 financial statements observations from 2007 to 2018. Research results show that the higher financial leverage in firms’ financial statements, the higher risk of financial statements, and the higher fraud’s tendency. Moreover, the findings also show that perennial firms, bigger firms, and listed firms, they likely to have a higher tendency of financial statement fraud. Research results show that the higher the financial leverage ratio, the more errors in reporting, the higher the tendency for fraud. At the same time, the older a business, the larger its scale and listed on the stock exchange, the more likely it is that the financial statements are fraudulent.

scholarly journals A Concept of Accounting Quality from Accounting Harmonisation Perspective

2016 ◽  
Vol 28 (1) ◽  
pp. 33-37 ◽  
Author(s):  
Renata Legenzova
Keyword(s):  
Public Sector ◽  
Public Interest ◽  
Accounting Standards ◽  
Financial Statements ◽  
Listed Companies ◽  
Financial Disclosure ◽  
Accounting Quality ◽  
Definition Of ◽  
The Eu

Abstract The aim of this paper is to assess if and how a concept of accounting quality differs from perspectives of various types of organisations affected by the accounting harmonisation process. Accounting harmonisation is commonly associated with worldwide adoption of IFRS by public interest companies. However, in the EU this process is much broader and also involves efforts to harmonise accounting standards for non-listed companies and public sector organisations. Analysis of the previous scientific research revealed that accounting quality was commonly assessed from IFRS users’ perspective and approximated with the quality of financial statements. However, based on the interviews with experts of Lithuanian accounting market, the concept of accounting quality for small and medium companies and public sector institutions is ambiguous and still needs to be clarified. Definition of accounting quality only as the quality financial statements is too narrow as financial disclosure is not that important for such companies. For non-listed companies and public sector organisations, other aspects and factors, such as qualification of accountants, supervision of accounting and reporting, overall and managers’ perspective on importance of accounting, have more importance while defining accounting quality.

scholarly journals Do IFRS Promote Transparency? Evidence from the Bankruptcy Prediction of Privately Held Swedish and Norwegian Companies

2021 ◽  
Vol 14 (3) ◽  
pp. 123
Author(s):  
Akarsh Kainth ◽  
Ranik Raaen Wahlstrøm
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Listed Companies ◽  
Bankruptcy Prediction ◽  
Future Research ◽  
Financial Reports ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Creative Accounting ◽  
Privately Held

The purpose of our paper is to investigate whether any differences between International Financial Reporting Standards (IFRS) and local Generally Accepted Accounting Principles (GAAP) impact the transparency of financial reporting of non-listed companies through bankruptcy prediction. This contributes to extant research that has focused on the effects of IFRS adoption in the context of listed companies. For our investigation, we used logistic regression, well-established accounting-based predictors, and a sample of financial statements from privately held Swedish companies using IFRS, and Norwegian companies using Norwegian GAAP. The results indicate that financial statements made under IFRS may be better suited for bankruptcy prediction than those made under Norwegian GAAP. Our findings suggest that the use of IFRS could aid in increasing the informativeness of financial reports by promoting transparency and prevent managers of firms facing insolvency from engaging in creative accounting practices. Our results should, however, be applied with caution, as they may be due to the differences in characteristics across firms that are not captured by our research design. We leave this issue open to future research.

Relationship between Corporate Attributes and Timeliness in Corporate Reporting: Malaysian Evidence

2013 ◽  
Vol 64 (2) ◽  
Author(s):  
Filouz Hashim ◽  
Fatimah Hashim ◽  
Abdul Razak Jambari
Keyword(s):  
Financial Reporting ◽  
Significant Relationship ◽  
Lead Time ◽  
Financial Statements ◽  
Listed Companies ◽  
Corporate Reporting

This study empirically investigates the timeliness of corporate reporting in Malaysia i.e the lead time to publish financial statements and characteristic of companies contributing to the lead time. The sample comprises of 200 listed companies on the Bursa Malaysia representing different sectors for the year ending 2007. The financial reporting lead time is 117 days which is 4 days earlier than the regulated 121days. The regression results revealed that size of the company and audit duration are having a significant relationship with the timeliness of corporate reporting. The remaining variables were found to be insignificant in relation to timeliness of corporate reporting.

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