دانلود مقاله ISI انگلیسی شماره 18244
عنوان فارسی مقاله

کلاهبرداری صورت های مالی در صنعت بانکداری و اثرات اجرای مقررات و نظارت عمومی افزایش یافته

کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
18244 2004 20 صفحه PDF سفارش دهید محاسبه نشده
خرید مقاله
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عنوان انگلیسی
BANKING INDUSTRY FINANCIAL STATEMENT FRAUD AND THE EFFECTS OF REGULATION ENFORCEMENT AND INCREASED PUBLIC SCRUTINY
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Research in Accounting Regulation, Volume 17, 2004, Pages 87–106

کلمات کلیدی
صنعت بانکداری - کلاهبرداری صورت های مالی - اجرای مقررات
پیش نمایش مقاله
پیش نمایش مقاله کلاهبرداری صورت های مالی در صنعت بانکداری و اثرات اجرای مقررات و نظارت عمومی افزایش یافته

چکیده انگلیسی

In October 1987, the chairman of the SEC released his committee’s Report of the National Commission on Fraudulent Financial Reporting, stating that “regulations and standards for auditing public companies must be adequate to safeguard … public trust” (CFFR, p. 5). Using publicly owned banks and savings and loan institutions as a backdrop, we study the effects of regulation and increased public scrutiny on financial statement fraud. Specifically, we examine how the characteristics of bank fraud have changed over the past two decades. We hypothesize that increased public scrutiny through changes in regulation on banks and savings and loans, as well as general financial statement fraud detection standards have altered fraud strategies. The study further explores key characteristics of management fraud that occur in bank and savings and loan organizations. Results indicate that bank frauds have changed over time, and are now more likely to involve withholding real information than create fictitious information. While the frequency of frauds did not significantly change over time, the magnitude of each fraud event has declined. This may imply that public regulation and scrutiny may have little effect on the frequency of fraud, but does affect fraud strategies.

مقدمه انگلیسی

The Report of the National Commission on Fraudulent Financial Reporting (CFFR) ( Treadway Commission, 1987) noted that “when the independent public accountant opines on a public company’s financial statements, he assumes a public responsibility. The regulations and standards for auditing public companies must be adequate to safeguard that public trust” (p. 5). This study uses publicly owned banks and savings and loan institutions as a backdrop to study changes in financial fraud strategies under conditions of increased regulation and increased public scrutiny. Understanding how fraud strategies have changed over time under existing public regulation and scrutiny is one step towards developing future public regulation and private guidance. Prior studies have examined financial statement fraud largely as a static issue, and academic research has not yet considered changes in the business environment and the potentially significant confounding effects of the passage of time. This study extends prior research by examining how fraud changes over time. As a secondary focus, this exploratory study also examines key management fraud characteristics in the banking profession, including publicly owned banks and savings and loan (S&L) institutions. This is important since over 20 years ago, Ramage, Kreiger and Spero (1979) noted that financial institutions have different error characteristics than other industries. Key to improving financial reporting effectiveness is understanding where and how frauds occur (Nieschwietz et al., 2000), which in turn should help private guidance within the public accounting profession. Appropriate industry regulation, whether public or private, can reduce the incidence of financial statement misstatement. For example, Maletta and Wright (1996) found that companies in publicly regulated industries had fewer routine errors, a lower rate of misstatement, and more audit-detected errors than unregulated companies. In contrast, savings and loan institutions have fallen under close public regulation. However, Thompson (1993) reported that the use of public regulatory accounting principles (RAP) over the private sectors generally accepted accounting principles produced higher reported income and fewer assets supporting regulatory capital. While Johnson and Khurana’s (1995) study offers evidence that private guidance through Statement on Auditing Standards (SAS) have effectively increased the proportion of appropriately modified auditor’s reports. Nichols, Bishop and Street (2001) also reported that recent private (SFAS) accounting guidance has improved financial reporting, through increased disclosure, in the banking industry. Besides reporting areas of bank-specific fraud risk, this paper also identifies fraud strategies, which, in turn, can help auditors examine and assess fraud risks more effectively and guide future authoritative standards. While those developing both public regulation and private guidance may rely on anecdotal evidence to assess risk, the severity and location of risk may have changed. Most error- and fraud-characteristic research was developed from early 1980s data, before the public attention focused on fraud that occurred during the 1980s banking crisis. Data in our sample extends this research by allowing us to compare changes in frauds between periods T1 (1979–1987) and T2 (1988–1996). The former period witnessed increased public awareness and increased SEC-mandated disclosures to help avert potential fraud, according to the Treadway Commission (1987). Examining changes in characteristics between frauds primarily motivated by the economically troubled 1980s and its competitive/merger period in the 1990s should provide public policy data. Information on bank and S&L-specific irregularities should help the public accounting profession to revise guidance to more effectively address risk, despite Mock and Wright’s (1999) finding of no significant association between changes in operationalizing private guidance through audit programs and changes in client risk. Increased understanding of bank fraud may also reduce future litigation and its cost to investors, creditors, auditors and the public, especially since the cost of litigation when fraud exists increases when management knowingly withholds critical information (Bonner, Palmrose & Young, 1998). Our study may be especially relevant given Palmrose’s (1988) and St. Pierre and Anderson’s (1984) findings that about 30% of auditor lawsuits involve commercial banks or S&Ls, thereby damaging public confidence. The first section of this paper discusses relevant public regulation and private auditing guidance, as well as prior misstatement characteristic research. Section two describes the research method and questions. Section three presents the results and analysis of misstatement frequency and magnitude, method and aftermath. The final section presents conclusions, theoretical and practical concerns, study limitations and suggestions for future research.

نتیجه گیری انگلیسی

This exploratory study extends prior misstatement characteristic research to banks and saving and loans, focusing on the related issues of misstatement magnitude, frequency, method and their change over time (T1–T2). Our study shows no significant changes in the frequency by type of bank fraud, but major changes in both method and magnitude. Fraudsters in T1 committed frauds in equal proportions by either creating fictitious information or withholding information. Fraudsters in T2 move towards committing more passive frauds by withholding information. Concurrently, the magnitudes of bank frauds decreased, which could have arisen from increased public and regulatory attention created by the Treadway Commission’s (1987) report, industry guidance through SAS No. 53 (AICPA, 1998), and other industry-specific disclosure requirements. However, changes in fraud characteristics could be reactions to past discovery efforts. Smaller frauds and frauds without a starting point in a bank’s information system may simply be harder to detect. Those in the banking profession who are motivated to commit fraud may have learned from past failures, cultivating their techniques and adapting to changing regulation. Future public regulation should focus on these changes in bank fraud strategies, including revisiting regulations limiting liberal asset valuation and enhancing disclosure of key information. This change should be teamed with increased penalties for SEC enforcement action when management either withholds relevant information or over-values assets. Changes in future private regulation, e.g. industry auditing standards, should also offer guidance on auditing both disclosures and asset valuation. This paper examined bank and savings and loan frauds that occurred from 1979 to1996. It was hypothesized that increased public scrutiny through changes in regulation on banks and savings and loans, as well as general financial statement fraud detection standards have altered fraud strategies. Time period T2 ended with the issue of the fraud standard SAS No. 82. Future research could be extended to study the effects of further changes occurring after 1996. The extension could examine fraud strategy changes due to new public regulation (i.e. Sarbanes-Oxley) and audit standards. Two fraud standards have occurred post T2, including SAS No. 82 (AICPA, 1997) and SAS No. 99, Consideration of Fraud in a Financial Statement Audit ( AICPA, 2003). Further studies could be designed to compare the effects on fraud strategies due to new public regulation “or” changes in audit standards. Changes in audit standards have focused on detection through required audit procedures and increasing levels of professional skepticism. Public regulation has focused on fraud prevention through increasing management responsibility, information disclosure, and penalties. While we move towards increased public regulation, prior research has given pointed towards the effectiveness of private guidance, through accounting and auditing standards, to improve the credibility of financial reporting for banks and savings and loan institutions. Extending the current study could compare the effectiveness of changes in public regulation versus private guidance ( Johnson & Khurana’s, 1995; Nichols, Bishop & Street, 2001). Future results could be used to guide public policy, by focusing fraud prevention on the most effective combination of private and public resources.

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