The Role of Related Party Transactions in Fraudulent Financial Reporting

Henry, Elaine; Gordon, Elizabeth A.; Reed, Brad J.; Louwers, Timothy J.

doi:10.2139/ssrn.993532

Cited by 43 publications

(51 citation statements)

References 19 publications

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“…This evidence does not contradict the result of this research. In a situation like this, Henry et al [58] remark that the public opinion may reflect an "illusory correlation" i.e. when one perceives a casual relationship (also because of emotional impact), one tends to think that cooccurrence is more frequent than it actually may be.…”

Section: Discussionmentioning

confidence: 99%

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Related Party Transactions and Financial Performance: Is There a Correlation? Empirical Evidence from Italian Listed Companies

Pozzoli¹,

Venuti²

2014

OJAcct

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Related party transactions (RPTs) can have a dual nature. On one hand, these transactions may be considered sound business exchanges, fulfilling the economic needs of the company. On the other hand, RPTs may be considered a mechanism to exploit company resources as a consequence of existing conflicting interests. This study takes into account both aspects. Specifically, this paper investigates the relation between RPTs and companies' financial performance, and thus verifies whether there is an association between these kinds of transactions and earnings management. This study examines the existence of this relation as regards the universe of Italian listed companies for the period of 2008-2011. According to the related data analysis, the research concludes that related party transactions and companies' financial performance results are not correlated and that there is no evidence of a cause-effect relation. Therefore, related party transactions do not appear-thanks also to the existence of control mechanisms-a means used by Italian listed companies to realize earnings management, especially earnings smoothing.

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Section: Discussionmentioning

confidence: 99%

“…when one perceives a casual relationship (also because of emotional impact), one tends to think that cooccurrence is more frequent than it actually may be. Frauds can be realized with or without RPTs however they relatively infrequent [59][60][61][62][63].…”

Section: Discussionmentioning

confidence: 99%

Related Party Transactions and Financial Performance: Is There a Correlation? Empirical Evidence from Italian Listed Companies

Pozzoli¹,

Venuti²

2014

OJAcct

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“…Reference [6] indicates that there are many high profile cases involving RPTs, such as Enron, Adelphia, and Tyco, that set negative perceptions on RPTs. RPTs are a matter of concern for outside shareholders, which in some way creating concern among regulators.…”

Section: Accounting Irregularities In Rptsmentioning

confidence: 99%

“…RPTs are a matter of concern for outside shareholders, which in some way creating concern among regulators. Reference [6] indicates that the importance of RPTs is exemplified by the promulgation of specific standards for both reporting and auditing for RPTs in the United States. In the Malaysian setting, there are specific reforms on RPTs.…”

Section: Accounting Irregularities In Rptsmentioning

confidence: 99%

“…Reference [6] examines SEC enforcement actions that involved fraud and compare fraud cases involving RPTs with comparable fraud cases that did not involve such transactions. They find that fraud-related RPTs had a lower impact in financial statements but are more likely to involve misappropriation and to involve a top executive in some aspects of the fraud.…”

Section: Accounting Irregularities In Rptsmentioning

confidence: 99%

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Accounting Irregularities in Related Party Transactions

Ariff¹,

Hashim²

2014

IJTEF

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Abstract-This paper presents financial reporting issues surrounding Related Party Transactions (RPTs). While RPTs can be value-enhancing for companies, those that are used to expropriate shareholders' wealth may need to be shielded by accounting irregularities. We discuss the theoretical link between RPTs and accounting irregularities and review evidence on accounting irregularities involving RPTs. We also discuss issues with the existing evidence and suggest that future research should work towards identifying: a) the background of RPTs that served as expropriation mechanism, b) the types of RPTs that normally involved accounting irregularities, and c) the effect of accounting irregularities involving RPTs. The results of studies with such approach may benefit the regulators in curbing accounting irregularities, especially those that involved RPTs.

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2012

Financial Statement Fraud

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The Role of Related Party Transactions in Fraudulent Financial Reporting

Cited by 43 publications

References 19 publications

Related Party Transactions and Financial Performance: Is There a Correlation? Empirical Evidence from Italian Listed Companies

Related Party Transactions and Financial Performance: Is There a Correlation? Empirical Evidence from Italian Listed Companies

Accounting Irregularities in Related Party Transactions

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