Si continua con la pubblicazione di parti dell'articolo "ACCOUNTING FRAUD: A LITERATURE REVIEW" redatto da Marco Tutino (Head of Department of Business Studies presso Università degli Studi di Roma Tre) e Matteo Merlo (University of Bologna), 2019.
Pubblicato sulla rivista "Risk Governance and Control: Financial Markets & Institutions", 9(1), 8-25.
1. INTRODUCTION
In 2002 WorldCom, a telecommunications company got caught inflating assets by an amount of 11 billion $. In the same year, Tyco’s CEO and CFO stole 150 million $, giving themselves loans, and inflated the company’s income. In 2009, an Indian IT services and back-office accounting firm, Satyam, boosted its revenues by 1.5 billion $. Accounting fraud scandals, like these, occurred in the last twenty years, and burned billions of dollars. For this reason, the purpose of the following review is to analyse which factors lead to accounting fraud and determine its occurrence.
1. INTRODUCTION
In 2002 WorldCom, a telecommunications company got caught inflating assets by an amount of 11 billion $. In the same year, Tyco’s CEO and CFO stole 150 million $, giving themselves loans, and inflated the company’s income. In 2009, an Indian IT services and back-office accounting firm, Satyam, boosted its revenues by 1.5 billion $. Accounting fraud scandals, like these, occurred in the last twenty years, and burned billions of dollars. For this reason, the purpose of the following review is to analyse which factors lead to accounting fraud and determine its occurrence.
Accounting fraud has a wide meaning; it consists of intentional manipulation of financial statements, which are done in order to create an illusion about a company’s wealth. The main actors in the process are either employees (i.e. accountants) or the organization itself, with top management team. Therefore, the reason why an accounting fraud is committed, beyond the purpose of deceiving stakeholders is often related to obtaining more favorable financing or avoiding debt obligations.
The aim of the review is to highlight what factors, during the years, facilitated the spread of fraud and, once they are identified, this could help to understand what should be done to prevent these events, in the future. Furthermore, the paper is a stepping stone for a more in-depth study that could be done on the same topic, through empirical analysis.
The study has been done on the current literature related to accounting fraud. It investigates how a company’s organization could be influenced in order to prevent fraudulent behaviours. First, the governance has been analysed, focusing mostly on the role played by CEOs in the event of fraud (Troy et al., 2011; Armstrong et al., 2009; Jensen et al., 2004; Schnatterly, 2003).
Second, the focus has moved to the ethical climate which surrounds companies before the “storm” (Micewski and Troy, 2007; Soltani, 2014). Indeed, increasing education and awareness of ethics among employees and directors could be a way to avoid fraud and misconduct (Miller, 2016). Also examined is the corporate social responsibility, its consequences, and why it is so important for directors (Bowen, 1953; Carrol, 1979). Then, there has been an analysis of creative accounting (Griffiths, 1986; Jones, 2011), which differs from accounting fraud for its legit nature, and the methods of how it is committed.
The second part of the literature review is based on the detection of fraud.
The main statistical methods applied to data have been examined first (Benford, 1938; Altman, 1968; Beneish, 1999), and then those methods which are not analytical, such as whistleblowing and fraud triangle. In conclusion, the role of a forensic accountant has been investigated, focusing on its expertise (Digabriele, 2009; Bhasin, 2016; Hegazy, 2017) and on its contribution inside investigations (Kolar, 2013; Quirin, 2014).
(segue...)
