علل، پیامد ها، و مجازات تقلب در صورت های مالی

Financial statement fraud (FSF) has cost market participants, including investors, creditors, pensioners, and employees, more than $500 billion during the past several years. Capital market participants expect vigilant and active corporate governance to ensure the integrity, transparency, and quality of financial information. Financial statement fraud is a serious threat to market participants’ confidence in published audited financial statements. Financial statement fraud has recently received considerable attention from the business community, accounting profession, academicians, and regulators. This article (1) defines financial statement fraud; (2) presents a profile of financial statement fraud by reviewing a selective sample of alleged financial statement fraud cases; (3) demonstrates that “cooking the books” causes financial statement fraud and results in a crime; and (4) presents fraud prevention and detection strategies in reducing financial statement fraud incidents. Financial statement fraud continues to be a concern in the business community and the accounting profession as indicated by recent Securities and Exchange Commission (SEC) enforcement actions and the Corporate Fraud Task Force report. This paper sheds light on the factors that may increase the likelihood of financial statement fraud. This paper should increase corporate governance participants’ (the board of directors, audit committees, top management team, internal auditors, external auditors, and governing bodies) attention toward financial statement fraud and their strategies for its prevention and detection. The Sarbanes-Oxley Act of 2002 was enacted to improve corporate governance, quality of financial reports, and credibility of audit functions. The Act establishes a new regulatory framework for public accountants who audit public companies, creates more accountability for public companies and their executives, and increases criminal penalties for violations of securities and other applicable laws and regulations. Given the difficulties and costs associated with deterring financial statement fraud, understanding the interactive factors described in this article (Cooks, Recipes, Incentives, Monitoring and End-Results (CRIME)) that can influence fraud occurrence, detection and prevention is relevant to accounting and auditing research.

Financial statement fraud (FSF) has received considerable attention from the public, press, investors, the financial community, and regulators because of high profile reported fraud at large companies such as Lucent, Xerox, Rite Aid, Cendant, Sunbeam, Waste Management, Enron Corporation, Global Crossing, WorldCom, Adelphia, and Tyco. The top executives of these and other corporations were accused of cooking the books and, in many cases, were indicted and subsequently convicted. The collapse of Enron has caused about $70 billion lost in market capitalization which is devastating for significant numbers of investors, employees and pensioners. The WorldCom collapse, caused by alleged financial statement fraud, is the biggest bankruptcy in the United States history. Loss of market capitalization resulting from the reported financial statement fraud committed by Enron, WorldCom, Qwest, Tyco, and Global Crossing is estimated about $460 billion (Cotton, 2002). These and other corporate scandals have raised three important questions of (1) how severe is corporate misconduct in the United States, (2) can corporate financial statements be trusted, and (3) where were the auditors? It is trusted that the majority of publicly traded companies in the United States have a responsible corporate governance, a reliable financial reporting process, effective audit functions, conduct their business in an ethical and legal manner, and through continuous improvements enhance their earnings quality and quantity. Nevertheless, the pervasiveness of reported financial statement frauds caused by “cooking the books” and related alleged audit failures have eroded the public confidence in corporate America. The reliability, transparency, and uniformity of the financial reporting process allow investors to make intelligent decisions. Published audited financial statements that reflect a true and honest financial performance instead of a rosy picture and inflated and fraudulent earnings are useful to market participants, including investors and creditors. Enron, WorldCom, and other corporate scandals, earnings restatements, customized and managed pro forma earnings have undermined investors’ confidence in the quality and reliability of the financial system. Capital markets participants (e.g. investors, creditors, analysts) make investment decisions based on financial information disseminated to the market by corporations. Thus, the quality, reliability, and transparency of published audited financial statements are essential to the efficient allocation of resources in the economy. Auditors lend creditability to the information disclosed in a firm’s financial statements by reducing the risk that the information is materially misstated. The importance of financial information to the efficiency of securities markets is repeatedly noted in speeches given by Securities and Exchange Commission (SEC) commissioners. For example, “Audited financial statements provide the foundation for our securities markets. Audited financial statements allow investors to make decisions on whether to buy, hold, or sell a particular security” (SEC, 2002a). “Accurate information also improves the quality of markets by allowing markets to discover the true price at which specific securities trade” (SEC, 2002b). Market participants assess lower information risk associated with high-quality financial reports. This lower perceived information risk will make capital markets more efficient, induce lower cost of capital and higher securities prices. Thus, the society, business community, accounting profession, and regulators have a vested interest in the prevention and detection of financial statement fraud because its occurrences undermine the confidence in corporate America. This article (1) defines financial statement fraud; (2) presents a profile of financial statement fraud by reviewing a selective sample of reported financial statement fraud cases; (3) demonstrates that “cooking the books” causes financial statement fraud and results in a crime; and (4) presents fraud prevention and detection strategies in reducing financial statement fraud incidents.

Financial statement fraud is (1) a serious threat to market participants’ confidence in financial information; (2) estimated to cost corporations substantial money; and (3) viewed as unacceptable, illegitimate, and illegal corporate conduct. The opportunity to engage in financial statement fraud increases as the firm’s control structure weakens, its corporate governance becomes less effective, and the quality of its audit functions deteriorates. Companies take the risk of having to suffer the adverse consequences of engaging in financial statement fraud as long as there is some uncertainty that their deceptive actions may not be detected. Given this uncertainty, companies may engage in a financial statement fraud if they are (1) predisposed toward violating GAAP requirements by issuing fraudulent financial statements as acceptable accounting practices; (2) motivated to engage in fraudulent financial activities in response to internal and external economic and ownership pressures; and (3) provided with the opportunity to perpetuate financial statement fraud because of irresponsible and ineffective monitoring by corporate governance. This article demonstrates that financial statement fraud can be equated to the term CRIME when “C” stands for Cooks, “R” for Recipes, “I” for Incentives, “M” for Monitoring or lack of it, and “E” for End Results. The FSF=CRIME fraud scheme fits many of enforcement actions brought against publicly traded companies and their auditors by the SEC for alleged financial statement fraud (e.g. Enron, Global Crossing, WorldCom, Tyco). One message from this article is that financial statement fraud is a serious threat to investors’ confidence in financial information. Financial statement fraud adversely affects the integrity, quality, and reliability of published audited financial statements. Perpetrators of financial statement fraud, from top executives to employees, should understand that “cooking the books” is a crime that will be prosecuted. The second message is that quality financial reports, including reliable financial statements free of material misstatements can be achieved when there is a well balanced functioning system of corporate governance as depicted in Fig. 1. Although the responsibility of corporate governance participants (the board of directors, the audit committee, the top management team, internal auditors, external auditors, governing bodies) varies regarding the preparation and dissemination of financial statements, a well defined cooperative working relationship among these participants should reduce the probability of financial statement fraud. This paper sheds light on the factors that may increase the likelihood of financial statement fraud and how corporate governance participants should fulfill their responsibilities for preventing and detecting financial statement fraud. This paper should increase corporate governance participants’ attention toward financial statement fraud and their strategies for its prevention and detection. Given the difficulties and costs associated with deterring financial statement fraud, understanding the interactive factors described in this article (CRIME) that can influence fraud occurrence, detection, and prevention is relevant to accounting and auditing research. Financial statement fraud continues to be a concern in the business community and the accounting profession. This study identifies five interactive financial statement fraud factors by analyzing a selected sample of alleged financial statement fraud cases presented in Table 1. Future research should employ a large sample of the SEC’s alleged financial statement fraud cases across different industries to examine the nature of the relationship among these identified interactive financial statement fraud factors (CRIME). Future researchers are encouraged to establish more comprehensive financial statement fraud prevention and detection strategies by focusing on the role and responsibility of corporate governance participants explored in this study. Finally, this paper, by demonstrating that financial statement fraud can be equated to the term CRIME, contributes to the prior research (e.g. Wright and Wright, 1997) on “the book-or-waive” decisions by auditors regarding the disposition of detected misstatements in financial statements. Future research in this area should incorporate these five interactive factors in auditors’ decision process or model when they are assessing whether to book or waive discovered misstatements. In the wake of recent corporate and accounting scandals, lawmakers (e.g. Congress), regulators (e.g. the SEC) and the accounting profession (e.g. AICPA) have considered new rules, regulations, and standards to (1) improve corporate governance; (2) enhance the quality of corporate financial reporting and disclosures in providing reliable and relevant information regarding companies’ conditions and results; (3) ensure a more effective oversight of public accounting firms in enhancing auditors’ objectivity, independence, and quality of their audits; (4) refrain auditors to engage in activities that may create potential conflicts of interest (e.g. internal audit outsourcing, information technology); and (5) create a new accounting regulatory system. This study underscores the importance and relevance of these initiatives in continuous improvement of the corporate governance structure, quality of the financial reporting process, and the effectiveness of audit functions. It also suggests that the accounting profession take further measures to improve efficacy of audits. The Sarbanes-Oxley Act of 2002 was enacted in response to a series of high profile financial reporting scandals involving prominent companies, considerable audit failures, and resulting erosion in market confidence. Many provisions of the Act require the SEC and other regulators to adopt additional regulations aimed at (1) creating a new regulatory framework for accountants; (2) establishing higher standards for corporate governance; (3) improving quality and transparency of financial reports; (4) enhancing effectiveness of audit functions; (5) imposing far-reaching requirements on public companies and their executives; and (6) increasing criminal penalties for violations of securities and related laws and regulations. However, many rules pertaining to the implementation of provisions of the Act are yet to be finalized which meanwhile causes considerable uncertainty regarding its eventual impact (e.g. the extent to which the new oversight board will issue audit standards). Critics of the Act (e.g. Cotton, 2002) state that it does not address the core problem of auditors’ conflicts of interest and has narrow implications because it applies to only publicly traded companies and their associates (e.g. auditors, attorneys, analysts). Nevertheless, these emerging rules and regulations should not substitute for needed reforms by the accounting profession to restore public confidence in accounting and auditing disciplines. The accounting profession is provided a rare opportunity for significant and lasting reforms. The future will tell how effectively the accounting profession addresses these challenges.