Research in the International Journal of Accounting, Auditing and Performance Evaluation has considered the growing concerns regarding financial integrity and transparency and has looked at the concept of financial statement fraud (FSF), how it might be more easily detected, and how it might be prevented. The work results in some practical insights into how fraud risks might be mitigated around the world and shares with implications for the various stakeholders, including regulators, financial analysts, and investors.
Milad Soltani and Alexios Kythreotis of the European University Cyprus in Nicosia, Cyprus, and Arash Roshanpoor of the Islamic Azad University in Tehran, Iran, explain that there is an increasing need for accountability in the wake of contemporary financial scandals. Regulatory measures and laws have been put in place but subsequent crises repeatedly emphasise a need for tougher measures against fraud and greater financial transparency at all levels.
The team has developed a framework for understanding the factors that contribute to fraudulent behaviour and looked at the efficacy of the fraud triangle for addressing the problem. To do so, the researchers used a meta-analysis of studies in these areas to achieve their three primary objectives. First, they identified effective risk factors for FSF, considering the influence of a nation’s characteristics on fraud risks. Secondly, they examined variations in research outcomes, focusing on country-related attributes impacting FSF detection. Thirdly, they have evaluated global fraud risks and propose tailored fraud detection models by clustering countries with similar characteristics.
There was, the researchers found, a significant difference in fraud risk among countries despite some of them sharing similar characteristics. They say that this suggests a tailored approach to fraud detection models is needed to examine each cluster of countries. Such findings will be important to policymakers, regulators, and financial analysts hoping to develop and implement new targeted measures to fight financial fraud globally.
Soltani, M., Kythreotis, A. and Roshanpoor, A. (2024) ‘The moderate role of national culture and prosperity index on the effectiveness of the fraud triangle to prevent financial statement fraud: a cross-country meta-analysis approach’, Int. J. Accounting, Auditing and Performance Evaluation, Vol. 20, Nos. 3/4, pp.251–290.