Effect of Financial Statement Fraud on Organizational Performance : Current School News

Effect of Financial Statement Fraud on Organizational Performance

Effect of Financial Statement Fraud on Organizational Performance.

ABSTRACT

This study examined the effect of financial statement fraud on organisational performance. Specifically, in actual fact, dependence on the information provided in financial statements constitutes one of the greatest global challenges for businesses.

Return on Assets (ROA) was obtained from the financial statements of Nigeria Banks from year 2000 to 2015 in order to measure their financial performance, multiple regression analysis model was used to determine the effect of independent variables on the dependent variable.

All the above findings on the classification of causes of fraud are caused by management, technological, legal, personal and social.

The study found out that the Y-intercept was 0.426 for all years. It was recommended that Deposit money banks management should come up with a policy which clearly indicates steps to be taken on any staff found committing fraud. This will help reduce internal fraud which is more elaborate in the bank than external.

TABLE OF CONTENTS

Title Page        i

Declaration           ii

Certification     iii

Dedication          iv

Acknowledgements    v

Abstract           vi

Table of Contents           vii

List of Tables     ix

List of Figures          x

CHAPTER ONE:  INTRODUCTION

  • Background of  1
  • Statement of the Problem       2
  • Objectives of the Study           4
  • Research Question             4
  • Statement of the Hypothesis             4
  • Significance of the Study             5
  • Scope of the Study                         5
  • Justification of the Study 5
  • Definition of Terms                         6

CHAPTER TWO:  LITERATURE REVIEW

2.1       Introduction               7

2.2       Conceptual Framework       7

2.3       Theoretical Framework      14

2.4       Literature Review       21

CHAPTER THREE: RESEARCH METHODOLOGY

3.1       Introduction               46

3.2       Research Design       46

3.3       Population of the Study       46

3.4       Sample of the study    46

3.5       Data Collection and Research Instruments         47

3.6       Data Analysis           47

3.7       Limitations of the Study         48

CHAPTER FOUR

4.1       Introduction         49

4.2       Data Analysis and Interpretation   50

4.4       Discussion of Findings             53

CHAPTER FIVE:  SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1       Summary of Findings     55

5.2       Conclusions      55

5.3       Recommendations    56

5.4       Suggestions for Further Studies        57

Reference  58

Appendix               65

INTRODUCTION

1.1       Background of the Study

As a countermeasure to high profile accounting scandals and business collapses, among the most notable being Enron in 2001, the Sarbanes Oxley Act was passed by the United States of America congress in 2002.

The purpose of the Act is to add strength to a public company’s internal control mechanism and financial reporting, which in turn will lead to greater transparency in financial statements (Agami, 2012).

In Malaysia, corporate financial scandals such as those committed by Transmile Group Berhad, Tat Sang Holding and Megan Media Holdings Berhad, (2007) have diminished the firms’ value and shareholders’ wealth.

This has possibly had a negative impact on foreign direct investments. Concomitant with the financial and nonfinancial damage, the faith and reliance of the public in the accounting and auditing profession will be destroyed by financial statement fraud (KPMG, 2012).

PricewaterhouseCoopers (2011) discloses that one of the most challenging issues for businesses globally is fraud. Notwithstanding the imposed regulation and legislation or the control mechanisms implemented by the companies, the intensity of economic crime and the concomitant financial and non-financial damage remains unchanged.

In fact, as reported by PricewaterhouseCoopers (2007), out of every two companies worldwide, one had been a target of economic crime within the preceding two years.

In response to the aforementioned crisis, the improvement of financial statement fraud controls and the integrated strategies of prevention, detection and action to response to financial statement fraud are important for reducing financial statement fraud.

These strategies need to be practiced at all levels in corporations and supported by a board of directors, audit committee oversight, executives, chief executive officer, chief financial officer, chief operating officer and accountants through internal audit, compliance and monitoring functions (KPMG 2007).

REFERENCES

Abbott, L. J. (2000) The Effect of Audit Committee Activity and Independence on Corporate Fraud, Managerial Finance, 26(11), 55-67

Agami, A. M. (2012) Reporting on internal control over financial reporting. The CPA Journal, 76 (11), 32-34.

Albrecht, W. S. (2008, 2010) Business Fraud (The Enron Problem), The American Institute of Certified Public Accountants, U.S.

Alleyne, P., Hudaib, M., Pike, R (2013) Towards a Conceptual Model of Whistle-Blowing Intentions among External Auditors, The British accounting Review, 45 (2013), 10-23

Association of Certified Fraud Examiner (ACFE) (2012) Global Fraud Survey: Report to the Nations on occupational fraud and abuse.

Asukwo, P. E. (2009). Bank Frauds: A Look at the Nigerian Banking Clearing System, ICAN News, January/March.

Ayala, A. & Ibarguan, S. G. (2011) A market proposal for auditing the financial statement for public companies, Journal of Management of Value.

Barlaup, K, Dronen, H.I and Stuart, I (2014) Restoring trust in auditing: ethical discernment and the Adelphia scandal, Managerial Auditing Journal, 24 (2), 183-203

Beasley, M. S., Carcello, J. V., Hermanson, D.R., Neal, T.L. (2010) Fraudulent Financial Reporting 1998-2007: An Analysis of U.S Public Companies, Research commissioned by the Committee of Sponsoring Organizations of the Treadway Commission.

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