Abstract
Using data obtained from a sample of 212 respondents drawn from professional and academic accountants in Benue State of Nigeria, we identify, in order of severity, the main consequences of financial statement fraud (FSF) from a developing country perspective. We also ascertain whether significant differences exist in the views of the respondents on what they consider as the major consequences of FSF. The results of our data analyses which document, in order of severity, loss of job, drop in market capitalization and criminal prosecution as the main consequences of FSF are consistent with our a priori expectations in a developing country. The results also reveal significant differences in the rankings of the consequences of FSF by professional and academic accountants, validating the need for bridging the knowledge gap between the dyad on the phenomenon of interest.
Highlights
Financial reporting (FR) is intended to serve a number of user groups with diverse and sometimes conflicting interests, such as shareholders, creditors, lenders, labour leaders, and governments
The result of the analysis, based on the overall views of the respondent groups reveals that β4 (Loss of jobs) is ranked the severest consequence of financial statement fraud (FSF) (OR = 2.87; 95% CI = 3.50 - 6.23; p< 0.01), which is highly significant at 95% confidence interval and the implication is that it has 2.87 times the odds of being severest than the odds of low severity
The second ranked overall severer consequence is β5 (OR = 2.45; 95% CI = 2.18-3.41; p= 0.050), which has the odds of 2.45 times of being severer than not
Summary
Financial reporting (FR) is intended to serve a number of user groups with diverse and sometimes conflicting interests, such as shareholders (present and prospective), creditors, lenders, labour leaders, and governments. One perspective considers FR as the way by which managers of organizations give account of their stewardship to their owners and other stakeholders (Van Tendeloo & Vanstraelon, 2005). Others consider FR as: the production and communication of information to shareholders and all other users who have interest in an organization (Olaolye, 2010); the provision of information that is useful in making business and economic decisions, the objective been affected by the economic, legal, political and social environment in which FR takes place (Belkaoui, 2002); and the provision of information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for assessing the stewardship of the entity’s management and for making economic decisions (IASB, 2010). Explanations on why companies engage in FSF resonate from the fraud triangle and fraud diamond theories, and the agency theory
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