Predicting Listed Firms’ Financial Statement Fraud Risk in the Vietnamese Securities Market
Main Article Content
Abstract
This paper focuses on fraud risk and identifying factors that affect the risk of financial reporting fraud of listed companies in Vietnam, and on forecasting the possibility of fraudulent financial statements of listed companies in Vietnam. Based on M-score and F-score models and an experimental survey of the research sample of 3,684 financial statements made by 307 companies in the period 2007-2008, the paper indicates that the higher the financial statements are, the more fraud occurs in the statements. Also, the older and larger the companies are, and the longer they have been listed on the stock exchange market, the more fraudulent their financial statements are likely to be.
Keywords:
Financial statement fraud, F-score, M-score, listed company, Vietnam.
References
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[2] D.J. Wood, “What Global Business Citizenship TeIls Us About Sarbanes Oxley”, Business and Professional Ethics Journal 23(1/2) (2004) 167-187.
[3] Ministry of Finance, Vietnam Standard on Auditing 240 - Auditor's Responsibility to Fraud in Auditing Financial Statements, 2012.
[4] P.M. Vuong, N.T.H. Vy, “Predicting the Likelihood of Frauds in Financial Statements of Listed Companies in Vietnam by Using the Financial Ratios”, Industry and Trade Magazine 20 (2020).
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[8] P.M. Dechow, W. Ge, C.R. Larson, R.R. Sloan, “Predicting material accounting misstatements”, Contemporary Accounting Research 28(1) (2011) 17-82.
[9] M.C. Jensen, W.H. Meckling, “Theory of the firm: Managerial behavior, agency costs and ownership structure”, Journal of Financial Economics 3(4) (1976) 305-360.
[10] R.B. Freeman, J.L. Medoff, “What do unions do”, Indus and Lab. Rel. Rev., 38 (1984).
[11] E.I. Altman, “Financial ratios, discriminant analysis and the prediction of corporate bankruptcy”, Journal of Finance 23(4) (1968) 589-609.
[12] D.B. Farber, “Restoring trust after fraud: Does corporate governance matter?”, Accounting Review 80(2) (2005) 539-561.
[13] J.D. Eshleman, P. Guo, “Do Big 4 auditors provide higher audit quality after controlling for the endogenous choice of auditor?”, Auditing: A Journal of Practice and Theory 33(4) (2014)
197-219.
[14] J.P. Boone, I.K. Khurana, K.K. Raman, “Do the Big 4 and the second-tier firms provide audits of similar quality?”, Journal of Accounting and Public Policy 29(4) (2010) 330-352.
[15] L. Bayley, S. Taylor, “Identifying earnings management: A financial statement analysis (red flag) approach”, In Proceedings of the American Accounting Association Annual Meeting, 2017.
[16] P.M. Dechow, R.G. Sloan, A.P. Sweeney, “Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC”, Contemporary Accounting Research 13(1) (1996) 1-36.
[17] M. Semadeni, J.A.A. Cannella, D.R. Fraser, D.S. Lee, “Fight or flight: Managing stigma in executive careers”, Strategic Management Journal 29(5) (2008) 557-567.
[18] S.L. Summers, J.T. Sweeney, “Fraudulently misstated financial statements and insider trading: An empirical analysis”, Accounting Review, 1998, pp. 131-146.
[19] G. Bhavani, C.T. Amponsah, “M-Score and Z-Score for detection of accounting fraud”, Accountancy Business and the Public Interest, 2017, pp. 68-86.
[20] C.M. Boland, S.N. Bronson, C.E. Hogan, “Accelerated filing deadlines, internal controls, and financial statement quality: The case of originating misstatements”, Accounting Horizons 29(3) (2015) 551-575.
[21] V.D. Sharma, E.R. Iselin, “The association between audit committee multiple-directorships, tenure, and financial misstatements”, Auditing: A Journal of Practice and Theory 31(3) (2012) 149-175.
[22] S.A. Richardson, R.G. Sloan, M.T. Soliman, I. Tuna, “Accrual reliability, earnings persistence and stock prices”, Journal of Accounting and Economics 39(3) (2005) 437-485.
[23] O. Barron, J. Pratt, J.D. Stice, “Misstatement direction, litigation risk, and planned audit investment”, Journal of Accounting Research 39(3) (2001) 449-462.
[2] D.J. Wood, “What Global Business Citizenship TeIls Us About Sarbanes Oxley”, Business and Professional Ethics Journal 23(1/2) (2004) 167-187.
[3] Ministry of Finance, Vietnam Standard on Auditing 240 - Auditor's Responsibility to Fraud in Auditing Financial Statements, 2012.
[4] P.M. Vuong, N.T.H. Vy, “Predicting the Likelihood of Frauds in Financial Statements of Listed Companies in Vietnam by Using the Financial Ratios”, Industry and Trade Magazine 20 (2020).
[5] M.D. Beneish, “The detection of earnings manipulation”, Financial Analysts Journal 55(5) (1999) 24-36.
[6] V.T. H. Sac, T.Q. Anh, “The impact of Financial Ratios on Measuring Fraudulent Financial Statements”, Financial Magazine, 2020.
[7] L.T. Men, “Measuring the Quality of Financial Reporting Information of Companies listed on the Ho Chi Minh Stock Exchange”, VACPA Vietnam Association of Certified Public Accountants, 2019.
[8] P.M. Dechow, W. Ge, C.R. Larson, R.R. Sloan, “Predicting material accounting misstatements”, Contemporary Accounting Research 28(1) (2011) 17-82.
[9] M.C. Jensen, W.H. Meckling, “Theory of the firm: Managerial behavior, agency costs and ownership structure”, Journal of Financial Economics 3(4) (1976) 305-360.
[10] R.B. Freeman, J.L. Medoff, “What do unions do”, Indus and Lab. Rel. Rev., 38 (1984).
[11] E.I. Altman, “Financial ratios, discriminant analysis and the prediction of corporate bankruptcy”, Journal of Finance 23(4) (1968) 589-609.
[12] D.B. Farber, “Restoring trust after fraud: Does corporate governance matter?”, Accounting Review 80(2) (2005) 539-561.
[13] J.D. Eshleman, P. Guo, “Do Big 4 auditors provide higher audit quality after controlling for the endogenous choice of auditor?”, Auditing: A Journal of Practice and Theory 33(4) (2014)
197-219.
[14] J.P. Boone, I.K. Khurana, K.K. Raman, “Do the Big 4 and the second-tier firms provide audits of similar quality?”, Journal of Accounting and Public Policy 29(4) (2010) 330-352.
[15] L. Bayley, S. Taylor, “Identifying earnings management: A financial statement analysis (red flag) approach”, In Proceedings of the American Accounting Association Annual Meeting, 2017.
[16] P.M. Dechow, R.G. Sloan, A.P. Sweeney, “Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC”, Contemporary Accounting Research 13(1) (1996) 1-36.
[17] M. Semadeni, J.A.A. Cannella, D.R. Fraser, D.S. Lee, “Fight or flight: Managing stigma in executive careers”, Strategic Management Journal 29(5) (2008) 557-567.
[18] S.L. Summers, J.T. Sweeney, “Fraudulently misstated financial statements and insider trading: An empirical analysis”, Accounting Review, 1998, pp. 131-146.
[19] G. Bhavani, C.T. Amponsah, “M-Score and Z-Score for detection of accounting fraud”, Accountancy Business and the Public Interest, 2017, pp. 68-86.
[20] C.M. Boland, S.N. Bronson, C.E. Hogan, “Accelerated filing deadlines, internal controls, and financial statement quality: The case of originating misstatements”, Accounting Horizons 29(3) (2015) 551-575.
[21] V.D. Sharma, E.R. Iselin, “The association between audit committee multiple-directorships, tenure, and financial misstatements”, Auditing: A Journal of Practice and Theory 31(3) (2012) 149-175.
[22] S.A. Richardson, R.G. Sloan, M.T. Soliman, I. Tuna, “Accrual reliability, earnings persistence and stock prices”, Journal of Accounting and Economics 39(3) (2005) 437-485.
[23] O. Barron, J. Pratt, J.D. Stice, “Misstatement direction, litigation risk, and planned audit investment”, Journal of Accounting Research 39(3) (2001) 449-462.