Identifying Financial Report Frauds

Chengyue Wang; Liangwei Lyu; Shuo Zhang

doi:10.54254/2754-1169/22/20230281

Research Article

Open access

Published on 13 September 2023

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Wang,C.;Lyu,L.;Zhang,S. (2023). Identifying Financial Report Frauds. Advances in Economics, Management and Political Sciences,22,9-17.

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Identifying Financial Report Frauds

Chengyue Wang *^,1, Liangwei Lyu ², Shuo Zhang ³

¹ University of Michigan
² One Direction Academy
³ The University of Hong Kong

* Author to whom correspondence should be addressed.

https://doi.org/10.54254/2754-1169/22/20230281

Abstract

Misreporting numbers in a company’s financial statements is not negligible, as manipulations will not reflect a reliable disclosure. With financial manipulation becoming more and more regular, it is obvious that solving financial manipulation is an issue that needs to be addressed gently. It becomes a necessity to find techniques or mechanisms that can effectively identify the potential of financial report fraud, increase the credibility of the corporation and boost the confidence of investors. In this paper, we argue that the M-score and F-score as two reliable tools for predicting the possibilities of financial manipulations. In this essay, we will introduce the background and principles of these two mechanisms, then verify their reliability and effectiveness on sample Us-listed Chinese companies, which include those associated with financial report frauds in the past. In addition, we will lay out our discovery and full verifying procedure to help readers have a better understanding of our research and perspectives.

Keywords

financial manipulations, US-listed Chinese companies, financial report frauds

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References

[1]. Kniepmann, Clay M. “Fraud Triangle.” Corporate Finance Institute, 29 Nov. 2022, https://corporatefinanceinstitute.com/resources/accounting/fraud-triangle/.

[2]. Turner, Jerry L., et al. An Analysis of the Fraud Triangle. Jan. 2003, https://www.researchgate.net/profile/Theodore-Mock/publication/237777981_An_Analysis_of_the_Fraud_Triangle/links/00b4952769aa39a5fe000000/An-Analysis-of-the-Fraud-Triangle.pdf.

[3]. Beneish, Messod D., et al. “Fraud Detection and Expected Returns.” SSRN, 5 Feb. 2012, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1998387.

[4]. Dechow, Patricia, et al. “Predicting Material Accounting Misstatements.” SSRN, 30 June 2007, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=997483.

[5]. Keune, M. , & Johnstone, K. M. . SSRN-Inferences from the Revelation of Previously Uncorrected Accounting Misstatements by Marsha Keune, Karla Johnstone.

Cite this article

Wang,C.;Lyu,L.;Zhang,S. (2023). Identifying Financial Report Frauds. Advances in Economics, Management and Political Sciences,22,9-17.

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The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

Conference website: https://2023.icmred.org/

ISBN：978-1-915371-87-4(Print) / 978-1-915371-88-1(Online)

Conference date: 28 April 2023

Editor：Canh Thien Dang, Javier Cifuentes-Faura

Series: Advances in Economics, Management and Political Sciences

Volume number: Vol.22

ISSN：2754-1169(Print) / 2754-1177(Online)

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