Financial Statement Fraud: The Need for a Paradigm Shift to Forensic Accounting

Awolowo, Ifedapo Francis

doi:10.7190/shu-thesis-00230

Cited by 6 publications

(7 citation statements)

References 62 publications

(220 reference statements)

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“…This denial is evident in the International Standard on Auditing (ISA) 240, which places the responsibility for preventing and detecting fraud solely on those charged with the management and governance of entities. This denial makes one wonder what auditors' role is in reducing information asymmetry, which is evident in an agency relationship between shareholders and the management (Awolowo, 2019).…”

Section: Auditing Profession Is In Denialmentioning

confidence: 99%

Why Audit will Continue to Fail!

Awolowo

Garrow

2022

Academia Letters

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University BackgroundThe Wirecard €1.9 billion missing cash and 3.2 billion debt scandals have ignited the conversation about audit complacency in the financial reporting process. Financial statement fraud, audit failures and the sudden collapse of companies without any warning signs have increased in size and occurrence recently, and Wirecard is another example of this. While we were still anguishing on the Wirecard scandals and the inability of their auditor to pick up this material fraud, then came Lookers, the UK car dealership company, and the revelation of it overstating its profitability by £25.5 million (Campbell, 2020).Financial statement fraud is not new. This list is unending when we talk about financial statement fraud. Management has always deployed different techniques to portray a good outlook for their companies through manipulations of financial statements. This can be dated back to the

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Section: Auditing Profession Is In Denialmentioning

confidence: 99%

Why Audit will Continue to Fail!

Awolowo

Garrow

2022

Academia Letters

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“…Auditors' primary goal is to provide reasonable assurance that the financial statement audited by them are free from material misstatements, and their failure at effectively detecting fraud is largely accounted for by their lack of sensitivity in detecting tell tales signs as well as and red flags of fraud (Chu & Pyke, 2013;Awolowo, 2016).…”

Section: Auditors Skillmentioning

confidence: 99%

Drivers of Audit Failure and Fraudulent Financial Reporting: Evidence From Nigerian Distressed Banks

Akhidime

2019

MAR

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This study examined the drivers (prime facilitators and the motivations) of fraudulent financial reporting and audit failures in distressed Nigerian distressed banks. The study carried out an analytical review of literature that includes previous empirical studies, reports of investigations of the Nigerian Banks by Financial Regulatory Agencies and content analysis of the audited financial statements of the distressed banks. The major findings of this study are that the Audit failures that featured in the distressed banks were driven by the overwhelming influence of the board over their auditors. The board through the purchase of their ‘desired’ poor audit quality’ at high cost, exposed the auditors to economic bonding which compromised their independence and facilitated the issuance of favourable/unqualified audit opinion on the board’s fraudulent financial statements that covered up the boards unethical management practices and material irregularities that undermined the going concern prospects of the banks. The auditors favourable opinions were proved to be untrue, thus resulting in Audit failures. The policy implications of the inferences from this study is that the Nigerian legal and corporate accounting and auditing framework require the fundamental re-engineering of its rules and structure so as to shield auditors from the undue influence of the boards, checkmate the excesses of the executive directors through the upward review of the proportion of non-executive directors on boards, while also providing adequate control over the periodic upward review of audit fees.

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“…They note that a system based on policies and procedures plays an important role in reducing financial crimes and the associated fraud. They suggest providing training in ethics and standards for professionals and explaining that educational Forensic accounting awareness and training in audit, accounting standards and regulations will curtail firms' fraudulent activities (Awolowo, 2019). On the same note, Chui and Pike (2013) highlight that proper training in forensics can minimise the gap between the skill sets and the objectives of the fraudulent investigation tasks assigned to auditors.…”

Section: Introductionmentioning

confidence: 99%

A systematic review on forensic accounting and its contribution towards fraud detection and prevention

Kaur

Sood

Grima

2022

JFRC

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Purpose This paper aims to determine how forensic accounting contributes to fraud detection and prevention and answer the following research questions: What are the standard techniques for fraud detection and prevention; and What are the significant challenges that hinder the application of forensic accounting in fraud prevention and detection? Design/methodology/approach The authors use the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) method to carry out a systematic literature review (SLR) to identify and assess the existing literature on forensic accounting. Findings There exists a positive correlation between forensic accounting and fraud detection and prevention. Moreover, in both the empirical and non-empirical findings, the authors note that fraud is complex, and in carrying out fraud investigations, one must be aware of its complexity. Practical implications Although drug counterfeiting is a sector where forensic accountants have paid less attention, it is a rapidly expanding fraud area. This paper finds that to detect fraud at an early stage, one must increase consumer understanding of basic forensic accounting techniques by implementing accurate supply chain monitoring systems and inventory management controls and conducting adequate and effective regulatory, honest and legitimate customs inspections. Social implications The major factors that restrict forensic accounting are a lack of awareness and education. Hence, it is essential to incorporate forensic accounting in undergraduate and post-graduate courses. Originality/value From the existing literature, it has been observed that very few studies have been conducted in this field using the PRISMA and SLR techniques. Also, the authors carried out a holistic study that focuses on three different areas – fraud detection, fraud prevention and the challenges in forensic accounting.

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Financial Statement Fraud: The Need for a Paradigm Shift to Forensic Accounting

Cited by 6 publications

References 62 publications

Why Audit will Continue to Fail!

Why Audit will Continue to Fail!

Drivers of Audit Failure and Fraudulent Financial Reporting: Evidence From Nigerian Distressed Banks

A systematic review on forensic accounting and its contribution towards fraud detection and prevention

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