The influence of fraud triangle factors on real earnings management

Hasnan, Suhaily; Othman, Nurshylah; Hussain, Alfiatul Rohmah Mohamed; Ali, Mazurina Mohd

doi:10.22495/jgrv11i2art8

Cited by 3 publications

(2 citation statements)

References 52 publications

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“…A director who holds multiple directorships is someone who serves on the boards of multiple firms (Zahra and Pearce, 1989). Although directors holding multiple directorships may offer a broader and more diverse range of experience and knowledge that can be valuable when making decisions (Quang Trinh, 2022), holding multiple directorships can be burdensome for some (Hasnan et al , 2022). Indeed, directors who serve on numerous boards and committees may find it challenging to focus due to their hectic schedules.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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Is audit committee busyness associated with earnings management? The moderating role of foreign ownership

Saleh,

Mansour

2024

ARJ

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Purpose An audit committee (AC) whose members hold multiple directorships can adversely affect a firm’s earnings management (EM) behavior due to a lack of time that can prevent members from performing their responsibilities effectively. This paper aims to investigate the moderation role of foreign ownership (FOWN) on audit committee multiple directorships (ACMD) as it relates to accrual EM. Design/methodology/approach Using a sample of 528 observations for Palestinian listed companies over 2009–2019, this research used panel data regression to explore the specified relationships. Additionally, the study conducted a regression analysis using alternative measurements of the ACMD and the extended modified Jones model (2006) to assess robustness. Furthermore, generalized method of moments and a two-stage least squares method were used to address potential endogeneity concerns. Findings The results show that multiple directorships lead to a scarcity of time that can adversely affect efficient management oversight and documented an adverse association between FOWN and discretionary accruals. The results are consistent with agency theory that FOWN brings in expertise and experience from countries with strong governance to benefit local firms and thus recover control, lower agency costs, raise a firm’s value and thus alleviate EM. Originality/value This study provides unique explanations and recommendations for restraining excessive ACMD because this practice decreases managers’ ability to decrease EM. The mixed outcomes in earlier literature on the AC characteristics and EM also indicate a contingent role that may clarify this inconsistency.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…As a result, the AC’s busyness may potentially exert a significant influence on EM. Multiple directorships refer to AC members who serve on various board committees (Hasnan et al , 2022). Multiple directorships can have a double-edged sword edge effect on a firm’s EM behavior.…”

Section: Introductionmentioning

confidence: 99%

Is audit committee busyness associated with earnings management? The moderating role of foreign ownership

Saleh,

Mansour

2024

ARJ

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Material accounting misstatements: Do managerial overconfidence, financial distress, and corporate governance practices matter?

Azhari

Hasnan

Sanusi

et al. 2022

CBSR

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This study examined factors related to the occurrence of material accounting misstatements in Malaysian public listed companies (PLCs). Two factors, motivation and opportunity, were assessed in this study. According to Jensen (1993), as the consequences of material accounting misstatement can be extremely detrimental to the firms and their employees, the occurrence of such affairs must be driven by strong motivation and a great opportunity. The motivation factors consist of managerial overconfidence and financial distress, while the opportunity factors include internal and external corporate governance practices. A total of 103 misstatement and 103 non-misstatement firms, gathered from 2010 to 2018, were examined. Univariate and binary logistic regression analyses were deployed to test the hypotheses. Evidently, highly financial distress, a higher proportion of board independence, the practice of CEO duality, and a larger size of borrowings exerted a significantly positive relationship with material accounting misstatements. Interestingly, a higher proportion of independent board members encouraged the likelihood of material accounting misstatements instead of mitigating such mishaps. This study provides insights to regulators on the efficacy of corporate governance practices in curbing material accounting misstatements. The study addresses the element of managerial overconfidence, which was previously limited to studies on capital structure and leverage decisions.

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Understanding accounting fraud motivation, protection procedures, and firms’ performance: External auditors’ perspective

Yaqoub,

Hamad,

Alhammadi

et al. 2023

CGOBR

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This paper explores accounting fraud motivation, protection procedures, and the impact on firms’ performance from the perspective of external auditors. Data were collected through semi-structured interviews with highly experienced external public auditors. This paper highlights personal and environmental factors as the two most essential fraud motivations. Examining and checking on the internal audit system’s strengths and weaknesses are more important in detecting fraud than training and auditing procedures. Besides, the findings show that modern technology can minimize the chances of fraud by providing efficient and timely preventive measures (Halbouni et al., 2016). However, it is difficult for software developers to create systems that address new types of fraud, explaining why human auditing skills are vital in detecting procedures. The findings highlight similarities and differences in technology use in the private and public sectors’ fraud protection procedures. Furthermore, fraud activities, directly and indirectly, affect revenues, reputation, and customer trust, respectively (Omar et al., 2016). By understanding the motivations for fraud, protection procedures, and the impact on firms’ performance, this study has the potential to contribute to the development of best practices and effective strategies for preventing, detecting, and managing accounting fraud

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The influence of fraud triangle factors on real earnings management

Cited by 3 publications

References 52 publications

Is audit committee busyness associated with earnings management? The moderating role of foreign ownership

Is audit committee busyness associated with earnings management? The moderating role of foreign ownership

Material accounting misstatements: Do managerial overconfidence, financial distress, and corporate governance practices matter?

Understanding accounting fraud motivation, protection procedures, and firms’ performance: External auditors’ perspective

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