Financial statements which consist of objective, real and reliable information represent the key basis for making many business decisions. If, when writing financial statements, certain manipulation techniques are used for displaying the best possible results of transactions, the quality of financial reports will be endangered. Many financial frauds have led to a great mistrust in the system of financial reporting and the profession of accounting and auditing, which are often accused of the emergence of fraud and losing trust in the reliability of financial information by many users and economic decision makers. These are the reasons why the paper discusses the techniques of manipulation in financial statements, especially in balance sheets and cash flow statements, since these forms of manipulation are harder to detect and prevent when compared to manipulations of revenues and expenses in the income statement.

Purpose This study aims to investigate what are the capabilities and limits of external audit in detecting frauds in companies operating in the territory of the Republics: Serbia, Croatia, Macedonia and Bosnia and Herzegovina. Design/methodology/approach In total, 51 certified auditors from Serbia, Croatia, Macedonia and Bosnia and Herzegovina were surveyed to analyze what are the most frequent warning signals of the existence of the frauds auditors encounter during the verification of company’s financial statements. Findings The study indicated that the auditors of the Republic of Serbia more often encountered groundless overstatement of revenues compared with other countries, while regarding manipulative representation of inventories, the largest mean value and median are still among the auditors of the Republic of Serbia. Practical implications Based on the research results, it can be concluded that it is necessary to expand the legal obligation and power of external auditors when, in financial statement auditing, they come to clear findings that indicate fraud. Expansion of external auditors’ powers would reduce their current limitations and expand the domain of action. Originality/value Limitations in external auditors’ work prevent the processing of frauds. However, auditors’ analysis of financial statements and pointing to potential irregularities can be a good manner for the early detection and prevention of frauds in company’s operations.

The emergence of internal control over specific segments of activities has been associated with management needs for evaluation of the consistency between the actual situation and development targets. Monitoring activities should enable detection and timely reaction to possible target-related deviations. While responding to complex market needs, companies are exposed to numerous internal and external influences, some of which may cause significant damage. Companies have realized that it is safer and cheaper to establish their own internal control systems in order to prevent such influences. The aim of this work is to show how the overall quality of control and company performance is improved through implementation of preventive methods by internal controls, and to indicate that a developed system of internal control represents a protective barrier against various kinds of data manipulation and fraud inside the companies. Special attention was paid to fraud in financial statements since it can cause the most serious damage leading to instability of the economic-financial environment.

Companies can use various manipulative techniques when preparing general-purpose financial statements in order to present better financial position and better performance. Fraudulent financial statements can lead their users to wrong decisions and, consequently, cause big losses and distort confidence in the financial reporting system. Therefore, it is important to timely discover and prevent financial reporting frauds. Timely detection of fraud is one of the key tasks of forensic accountants, who should pay attention to fraud indicators, i.e. warning signs of fraud. Warning signs are not evidence of fraud but point to the need for a more detailed investigation. The aim of the research in this paper is to examine whether there are warning signs and to understand the degree of fraud risk in financial reporting by analyzing financial statements of companies in the Republic of Serbia. The research is conducted on a sample of 42 companies. By applying the Beneish model, we find that the general fraud risk is not insignificant. Borrowing activities of companies are identified as a significant source of this risk, while forensic accountants should pay special attention to income recognition and accrual items, i.e., items related to recognition of income and expenses before or after cash inflows or outflows, including depreciation. Higher risk of fraud is identified in manufacturing companies and financial institutions than in trade and service companies. The research results indicate the need to strengthen the mechanisms of financial reporting control in the Republic of Serbia.

This paper explores the attitudes of the preparers of financial statements in the emerging economy of Serbia towards International Financial Reporting Standards (IFRS). Our research shows that preparers are mainly satisfied with the quality of IFRS and the environment for IFRS application in Serbia and that they generally support the process of global convergence of financial reporting standards. Nevertheless, we find that there is a need to improve the environment for IFRS application in Serbia, and we identify areas that financial reporting regulators in emerging economies should address when attempting to improve the environment for IFRS application. Our research also shows that perceived IFRS quality is dependent on the preparer's experience in applying IFRS and his or her perceptions of the environment in which IFRS are applied. Perceived IFRS quality and attitudes towards the compatibility between IFRS and the environment for application of IFRS affect the level of support for the global convergence of financial reporting standards.

The aim of this paper is to examine the influence of enterprise characteristics on the degree of application of fraud prevention measures. In addition, this paper is supposed to show whether respondents' characteristics affecttheir opinion about the effectiveness of different fraud prevention measures, as well as if there is a difference between the degree of their implementation and respondents' opinion on their effectiveness. The research was conducted in November 2018 and the data were collected using a questionnaire which was taken overto a great extent from N'Guilla Sow, Basiruddin, Mohammad and Zaleha Abdul Rasid [17, pp. 514-517]. Although the non-parametric statistical techniques used showed that there is (1) no influence of enterprise characteristics on the existence of fraud prevention measures and (2) no influence of respondents' characteristics on their opinion about the effectiveness of fraud prevention measures, the median analysis showed that there is some influence. We have also found that there is some difference between the level of existence of the said measures and respondents' opinion about their effectiveness.

Fraud is linked to economic and financial pressures that force people to commit it. Any fraud, regardless of the gender and age of the fraud perpetrators, inevitably leaves a short-term or long-term negative mark on society’s economy. Many financial frauds in the past (Enron, WorldCom, Parmalat) have left profound negative consequences on global financial markets. Such “financial strikes” on the financial markets led to financial losses of many companies (not only those in which frauds were committed), the dismissal of many workers, and even the bankruptcy of companies. Successful detection and prevention of fraud imply the harmonious and efficient operation of several factors. One of them understands people’s attitudes towards fraud. It is necessary to understand what motivates an individual to commit fraud and the conditions under which someone would commit fraud. Plenty of resources and time have been invested in understanding the motives for adult fraud, i.e., mature people. Experience has shown that it is much more challenging to educate people of that era about the harmful effects of fraud and thus convince them not to commit fraud. For these reasons, the subject of this paper is the consideration of the attitudes of the younger population towards fraud in Serbia. More precisely, the paper discusses the attitudes of young people aged 18 to 30 regarding motives, pressures, and opportunities to commit fraud, participate in corruption, or offer bribes. The main objective is to indicate the tendency of young people to participate in fraud and examine whether respondents’ gender influences their willingness to participate in fraud. The research results suggest that, according to young people, the main motive why someone would participate in fraud is financial gain and that young people would participate in fraud only if they could get medical intervention sooner. They also believe that fraud is most prevalent in public administration and that men are more prone to fraud than women, but that the influence of gender is very small.

Corruption is a phenomenon that causes strong economic, political, social and moral deviations in modern society, and for these reasons it represents a very relevant topic of research. Economic science is a powerful tool for analysing corruption, and the economic approach is of fundamental importance for understanding where the incentive for corruption is the greatest and where its influence is the most pronounced. Opposing all forms of economic destruction would facilitate the functioning of the economic system, simultaneously generating fiscal revenues, and a true commitment to the fight against corruption, strengthening the rule of law, improving the efficiency of institutional reforms and the judicial system would encourage long-term economic growth. The transition is also one of the significant factors that initiates the expansion of corruption in numerous young transitional states, including the Republic of Serbia. Therefore, the essential goal of this paper is to collect and offer a wider range of information and knowledge about the genesis of the problem. Proceeding from the previously defined problem, the hypothesis on which this work is based is as follows: so far, theoretical and practical research on the impact of corruption on economic growth confirms that the relationship between corrupt practices in our country and basic macroeconomic and microeconomic indicators is inversely proportional.