Forensic Auditing Tools in Detecting Financial Statements' Irregularities

2019 ◽  
pp. 256-275 ◽  
Author(s):  
Radiah Othman ◽  
Rashid Ameer ◽  
Fawzi Laswad
Keyword(s):  
Balance Sheet ◽  
Financial Statements ◽  
Benford’S Law ◽  
Total Current ◽  
Audit Planning ◽  
Income Statement ◽  
Benford's Law ◽  
Sampling Procedures ◽  
Benford Law

This chapter illustrates a three-stage analytical procedure to examine and detect the likelihood of financial statements manipulation and identify the accounts that were manipulated by Toshiba. It applies the Beneish model and Benford's law to Toshiba's balance sheet and income statement from 2002 to 2016. The results show significant deviation from Benford's law in the pre-fraud period in equity, long-term receivables and property, plant and equipment, long-term liabilities, and in the post-fraud period in the long-term liabilities, equity, long-term receivables, and total current assets. The results provide evidence of the usefulness of Beneish and Benford law as forensic auditing tools for detecting financial statements' irregularities and fraud that would be useful for the audit planning and sampling procedures.

scholarly journals APLIKASI HUKUM BENFORD DALAM MENGANALISA KASUS GARUDA INDONESIA

2020 ◽  
Vol 13 (2) ◽  
Author(s):  
Theresia Hesti Bwarleling
Keyword(s):  
Distribution Pattern ◽  
Financial Statements ◽  
Benford’S Law ◽  
Average Absolute Deviation ◽  
Absolute Deviation ◽  
Audit Planning ◽  
Benford's Law ◽  
Benford Law

<p><strong>ABSTRACT</strong>: Benford's Law is a simple and effective tool in finding fraud for an auditor. The purpose of this study was to determine whether Benford's Law can be used effectively in analyzing the indication of ambiguity in the financial statements of PT. Garuda Indonesia (Persero) Tbk. 2018. To answer this question, this research uses all accounts in the company's financial statements from 2018 and 2017. In assessing whether these accounts have differences in distribution with Benford's Law, this study uses the average absolute deviation. Then the predicted absolute deviation results are tested by referring to the exposure of Garuda's incidental publications (July, 2019). The results of this study indicate that the value of the financial statements of PT. Garuda Indonesia (Persero) Tbk. in the year 2018 fulfills the Benford Law distribution pattern. Meanwhile, in 2017 there were several deviant account values which were then asked to be restated in the 2018 reporting. Benford's law has once again proven to be used as an effective tool in audit planning.</p><p><strong>Keywords:</strong> Benford Law, Garuda Indonesia Financial Statements, Average Absolute Deviation</p><p align="center"><strong> </strong></p><p><strong>ABSTRAK:</strong> Hukum Benford merupakan alat bantu yang sederhana dan efektif dalam menemukan kecurangan bagi seorang auditor. Tujuan dari penelitian ini adalah untuk mengetahui apakah Hukum Benford dapat digunakan secara efektif dalam menganalisa adanya indikasi kerancuan Laporan Keuangan PT. <a href="https://www.cnnindonesia.com/tag/garuda-indonesia">Garuda Indonesia</a> (Persero) Tbk. Tahun 2018. Untuk menjawab pertanyaan tersebut, riset ini menggunakan seluruh akun dalam laporan keuangan perusahaan tahun 2018 dan 2017. Dalam menilai apakah akun-akun tersebut memiliki perbedaan distribusi dengan Hukum Benford, penelitian ini menggunakan rata-rata deviasi absolut. Kemudian hasil rata-rata deviasi absolut diuji prediksinya dengan merujuk pada paparan publikasi insidentil Garuda (Juli, 2019). Hasil dari penelitian ini menunjukkan bahwa nilai akun Laporan Keuangan PT. <a href="https://www.cnnindonesia.com/tag/garuda-indonesia">Garuda Indonesia</a> (Persero) Tbk. Tahun 2018 memenuhi pola distribusi Hukum Benford. Sedangkan pada tahun 2017 terdapat beberapa nilai akun yang menyimpang dan kemudian diminta untuk disajikan ulang di pelaporan tahun 2018. Hukum Benford sekali lagi terbukti dapat digunakan sebagai alat bantu yang efektif dalam perencanaan audit.</p><p><strong>Kata Kunci: </strong>Hukum Benford, Laporan Keuangan <a href="https://www.cnnindonesia.com/tag/garuda-indonesia">Garuda Indonesia</a>, Rata-rata Deviasi Absolut</p>

scholarly journals A New Approach for Proper Reporting of Pension Benefit Obligations in the Financial Statements of “Old Funds” for Professionals

2020 ◽  
Vol 13 (8) ◽  
pp. 117
Author(s):  
Carla Morrone ◽  
Maria Teresa Bianchi ◽  
Anna Attias
Keyword(s):  
Financial Reporting ◽  
Balance Sheet ◽  
Financial Statements ◽  
Pension Benefit ◽  
New Approach ◽  
Income Statement ◽  
Pension Liabilities

In this paper, we focus on the disclosure of pension liabilities for entities referred to in Italian Legislative Decree 30 June 1994 no. 509 (also called &ldquo;old funds&rdquo; for professionals), which is crucial for a suitable communication. After illustrating the limits of current statutory financial statements&rsquo; in relation to the information they provide on pension benefit obligations, we propose three potential solutions to bridge the gap. Each of these proposals helps ensure the completeness and clarity of financial reporting and improves upon the informational capacity and quality of disclosure. In our opinion, one of these approaches, in particular, would be preferred because of its ease of adoption. Indeed, the disclosure in the explanatory notes allows for the quantification of pension benefit obligations, and hence a more proper evaluation of entities in the medium/long- term, with no impact on annual economic-financial results as reported in the balance sheet and the income statement.

Audit Quality Inputs and Financial Statement Conformity to Benford’s Law

2020 ◽  
pp. 0148558X2093046
Author(s):  
Thien Le ◽  
Gerald J. Lobo
Keyword(s):  
Cash Flow ◽  
Audit Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Financial Statement ◽  
Benford’S Law ◽  
Audit Report ◽  
Audit Firm ◽  
Income Statement ◽  
Benford's Law

We examine whether audit quality inputs are related to the conformity of financial statements to Benford’s law. We find that overall financial statement conformity increases with audit fees, nonaudit fees, and audit report lag, and decreases with audit firm tenure. We also find that these audit quality inputs are more strongly associated with income statement conformity than with cash flow statement conformity. Our findings document the role that auditing plays in enhancing the conformity of financial statements to Benford’s law.

ANALISIS LAPORAN KEUANGAN UNTUK MENILAI KINERJA KEUANGAN PT. ASTRA AGRO LESTARI Tbk

2019 ◽  
Vol 5 (2) ◽  
pp. 75-88
Author(s):  
M. Shobihin ◽  
Sayekti Suindyah Dwiningwarni ◽  
Supriadi Supriadi
Keyword(s):  
Financial Performance ◽  
Good Condition ◽  
Balance Sheet ◽  
Financial Statements ◽  
Ratio Analysis ◽  
Business Decisions ◽  
Financial Ratio ◽  
Financial Ratio Analysis ◽  
Income Statement ◽  
Quantitative Descriptive

The financial statements serve as a benchmark in assessing the financial performance of the company as the basis for making business decisions. The motivation in conducting this research is to support previous research to see the development condition of one of the oil palm plantation companies. The purpose of this study is to assess the financial performance by using financial ratio analysis and horizontal analysis. The method used in this research is Quantitative Descriptive with analysis design using Term series Analysis. The result of the research based on financial ratio analysis shows the liquidity ratio and solvency ratio in good condition, while the activity ratio and profitability ratio are not good because it is below the industry average of similar companies. Based on horizontal analysis, financial performance fluctuated and influenced internal and external factors such as operational performance and the average price of world palm oil. The limitations of this study are using only two analytical tools and financial statements analyzed only the balance sheet and income statement.

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 FSBu 25/2018 “Accounting for Leases”   and IFRS 16 “Leases”: A comparative Analysis of Key Provisions

2020 ◽  
Vol 6 (6) ◽  
pp. 42-51
Author(s):  
V. S. Plotnikov ◽  
O. V. Plotnikova
Keyword(s):  
Structural Information ◽  
Balance Sheet ◽  
Financial Statements ◽  
Practical Significance ◽  
Accounting System ◽  
The Subject ◽  
The Cost ◽  
Lease Accounting ◽  
Comparative Description

The article is devoted to the problem of accounting reflection of rental relations, which has been the subject of discussion by professional accountants for more than 100 years. At present, more standards are devoted to this problem in world practice than to other accounting objects. Nevertheless, a number of issues remain unresolved. The methodological framework of the study is based on a comparative description of the provisions of IFRS 16 “Leases” and FSBU 25/2018 “Accounting for Leases” and includes a new institutional theory, Conceptual framework for the presentation of financial statements. The research methodology provides for the reclassification of balance sheet items, which allows for significant structural information regarding the reflection of rental objects. The analysis revealed the following differences in standards: the Russian FSBU 25/2018 unreasonably introduces accounting for leasing transactions into the financial lease accounting system; insufficiently convincingly and without proper evidence the issues of identification of financial lease accounting objects are covered. The prospective direction of accounting for financial leases is the possibility of reflecting the property transferred by the lessee as an element of the cost of financial capital, at the same time, the tenant’s long-term obligations should be recognized as existing obligations. The practical significance of the study is determined by the possibility of reducing the level of debt in the balance of the parties to the lease transaction.

scholarly journals Social Insurance Accounting for a Notional Defined Contribution Scheme Combining Retirement and Long-Term Care Benefits.

2018 ◽  
Vol 10 (8) ◽  
pp. 2832 ◽  
Author(s):  
Carlos Vidal-Meliá ◽  
Manuel Ventura-Marco ◽  
Juan Manuel Pérez-Salamero González
Keyword(s):  
Social Insurance ◽  
Long Term Care ◽  
Balance Sheet ◽  
Defined Contribution ◽  
Term Care ◽  
Income Statement ◽  
Accounting Model ◽  
Notional Defined Contribution ◽  
Double Entry

This paper develops a social insurance accounting model for a notional defined contribution (NDC) scheme combining retirement and long-term care (LTC) contingencies. The procedure relies on standard double-entry bookkeeping and enables us to compile a “Swedish” type actuarial balance sheet (ABS) following a framework equivalent to an open group approach. This methodology is suitable for reporting the system’s solvency status and can show periodical changes in the system’s financial position by means of an income statement. The information underpinning the actuarial valuation is based on events and transactions that are verifiable at the valuation date, without considering expected future trends. The paper also contains an illustrative example to make it easier for policymakers to understand the main advantages and difficulties of our proposal. The policy conclusions stress the need to properly report social insurance benefits to enhance transparency and sustainability and to improve decision-making because it is in the public interest to do so.

scholarly journals Issues surrounding the classification of accounting information

2011 ◽  
Vol 12 (3) ◽  
pp. 353-369 ◽  
Author(s):  
Huibrecht Van der Poll ◽  
Daan Gouws
Keyword(s):  
Balance Sheet ◽  
Accounting Information ◽  
Financial Statements ◽  
Classification Theory ◽  
New Classification ◽  
Second Nature ◽  
Classification Framework ◽  
Income Statement ◽  
Current Classification

The act of classifying information created by accounting practices is ubiquitous in the accounting process; from recording to reporting, it has almost become second nature. The classification has to correspond to the requirements and demands of the changing environment in which it is practised. Evidence suggests that the current classification of items in financial statements is not keeping pace with the needs of users and the new financial constructs generated by the industry. This study addresses the issue of classification in two ways: by means of a critical analysis of classification theory and practices and by means of a questionnaire that was developed and sent to compilers and users of financial statements. A new classification framework for accounting information in the balance sheet and income statement is proposed.

Value-added statement as a trigger to organizational unlearning

2019 ◽  
Vol 33 (6) ◽  
pp. 22-25
Author(s):  
Shubham Sharma ◽  
Usha Lenka
Keyword(s):  
Design Methodology ◽  
Value Added ◽  
Financial Statements ◽  
Environmental Aspects ◽  
Value Addition ◽  
Content Type ◽  
Economic Context ◽  
Income Statement ◽  
Financial Metrics

Purpose Organizational unlearning is easier said than done. Organizations are usually not cognizant of the ripe time to start questioning and discarding their existing paradigms and past success formulas. This paper aims to recommend the use of a financial metric, i.e. value-added statement, as a trigger to unlearning in organizations. Design/methodology/approach This paper uses a review of existing literature on organizational unlearning to highlight that although prescriptive studies on unlearning are abundant, “how” and “when” organizations should contemplate and discard the obsolete knowledge and routines is still inconspicuous. Findings Value-added statement is an adequate reporting measure that incorporates the contribution of organization toward not only its shareholders but also other stakeholders such as employees, providers of long-term finance, government, and public. It supplements income statement and provides an insight of how organizations are serving its interest groups. A decline in value addition by an organization in a reporting period can serve as a trigger to question the existing practices and break organization’s over-dependence on “one size fits all” approach. Originality/value Unlearning is considered as a means to attain financial performance in an organization. This paper attempts to recommend a financial metric which incorporates the economic, social, and environmental aspects of business, i.e. value-added statement. The rationale for not recommending other financial metrics as a trigger for unlearning is based on grounds of possible manipulation. Moreover, these financial statements are affected by legal, political, and economic context of a nation.

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