Misappropriation of Assets and Fraud Indicators in Financial Reporting: A Case Study

Year 2021, Volume: 1 Issue: 1, 1 - 21, 31.07.2021

Musa Özçelik , Ganite Kurt

Abstract

There are indicators signaling that fraud has occurred or may occur in an organization. These are called as fraud indicators. Identifying the fraud indicators in advance of the damage grows before or after fraud occurs will reduce losses caused by fraud. In this study, the misappropriation of assets in SAS No: 99 and ISA Article 240 and fraud indicators determined for financial statements frauds are presented with an authentic grouping, and it has been conducted a case study. As a result of grouping, fraud indicators are divided into two main groups as before and after fraud. While the indicators before fraud are presented in three groups as pressure, opportunity, and rationalization; unlike the literature, the indicators after fraud are presented in three separate groups as concealing, conflict, and variation. There might occur some changes and conflicts, as well as the behaviors aimed at concealing the fraud after fraud occurs. The examples of events that occurred in a bank operating in Turkey have been examined and the warning signs appeared before and after the occurrence of fraud have been identified and it has brought 11 new fraud indicators into the literature.

Keywords

Audit, Warning Signs, Red Flags, Banking

Varlıkların Kötüye Kullanımı ve Finansal Raporlamada Hile Göstergeleri: Örnek Olay Analizi

Abstract

Bir örgütte hile meydana geldiğinin veya gelebilecek olacağının sinyalini veren göstergeler vardır. Bu göstergelere hile göstergeleri denmektedir. Hile göstergelerini hile meydana gelmeden önce veya meydana geldikten sonra zarar büyümeden tespit etmek hile kaynaklı kayıpları azaltacaktır. Bu çalışmada SAS No: 99 ve ISA Madde 240’da yer alan varlıkların kötüye kullanımı ve finansal tablo hileleri için belirlenen hile göstergeleri özgün bir gruplandırma ile verilmiş ve örnek olay incelemesi yapılmıştır. Gruplandırma sonucunda hile göstergeleri hileden önce ve hileden sonra olmak üzere iki temel gruba ayrılmıştır. Hileden önceki göstergeler baskı, fırsat ve haklı gösterme olmak üzere üç grupta sunulurken, literatürden farklı olarak hileden sonraki göstergeler ise gizleme, çatışma ve değişim olmak üzere üç ayrı grup halinde sunulmuştur. Bir hile meydana geldikten sonra hileyi gizlemeye yönelik davranışlar olduğu gibi bir takım değişimler ve çatışmalarda çıkabilmektedir. Türkiye’de faaliyet gösteren bir bankada yaşanan örnek olaylar incelenerek hile meydana gelmeden önce ve meydana geldikten sonra ortaya çıkan uyarı işaretleri tespit edilmiş ve literatüre 11 adet yeni hile göstergesi kazandırılmıştır.

Keywords

Denetim, Uyarı İşaretleri, Kırmızı Bayraklar, Bankacılık

References

• Abbott, L. J., Park, Y., ve Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26, 55 – 67.
• Agyei-Mensah, B. K. (2015). The determinants of financial ratio disclosures and quality: Evidence from an emerging market. International Journal of Accounting and Financial Reporting, 5(1).
• AICPA. (2002). Consideration of fraund in a financial statement audit. statements on auditing standards, Sas No. 99, AU Section 316.
• Amat, O. (2019). Detecting accounting fraud before it's too late. John Wiley & Sons.
• Association of Certified Fraud Examiners (ACFE) (2014). Report to the nations on occupational fraud and abuse. Austin, TX: The association of certified fraud examiners, Inc.
• Association of Certified Fraud Examiners (2018). Report to the nations 2018 global study on occupational fraud and abuse. USA: Association of Certified Fraud Examiners, Inc.
• Bağımsız Denetim Standardı 200: Bağımsız denetçinin genel amaçları ve bağımsız denetimin bağımsız denetim standartlarına uygun olarak yürütülmesi. Erişim adresi: https://www.kgk.gov.tr/Portalv2Uploads/files/Duyurular/v2/BDS/BDS%20200(1).pdf
• Bağımsız Denetim Standardı 240: finansal tabloların bağımsız denetiminde bağımsız denetçinin hileye ilişkin sorumlulukları. Erişim adresi: https://www.kgk.gov.tr/Portalv2Uploads/files/Duyurular/v2/BDS/BDS %20240(1).pdf
• Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting review, 443-465.
• Belloli, P. ve McNeal, A. (2006). Fraudulent overtime: access to the company's time recording system enables a local site manager to commit fraud. Internal Auditor, 63(3), 91-94.
• Carcello, J. V., Hermanson, D. R., ve Raghunandan, K. (2005). Factors associated with US public companies' investment in internal auditing. Accounting Horizons, 19(2), 69-84.
• Carey, P., Simnett, R., ve Tanewski, G. (2000). Voluntary demand for internal and external auditing by family businesses. Auditing: A Journal of Practice & Theory, 19(1), 37-51.
• Chadwick, W. E. (2000). Keeping internal auditing in-house. Internal Auditor, 57(3), 88.
• Coram, P., Ferguson, C., ve Moroney, R. (2008). Internal audit, alternative internal audit structures and the level of misappropriation of assets fraud. Accounting & Finance, 48(4), 543-559.
• Cressey, D. R. (1950). Other People: A Study in a Social Psychology of Embezzlement. Glenco, IL, Freepress.
• Dechow, P. M., Sloan, R. G., ve Sweeney, A. P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary accounting research, 13(1), 1-36.
• Dzamba, A. (2004). 36 Red flags to look for when reviewing financial reporting controls. Financial Analysis, Planning & Reporting, 4(8), 1-12.
• Elliot, R.K. ve Willingham.J.J. (1980). Management fraud: detection and de-terrence. New York: Petrocelli Books.
• Gramling, A. A. & Ramamoorti, S. (2003). Research opportunities in internal auditing. Institute of Internal Auditors.
• Green, B. P. ve Calderon, T. G. (1996). Information privity and the internal auditor's assessment of fraud risk factors. Internal Audıtıng-Boston-Warren Gorham And Lamont Incorporated, 11, 4-15.
• Holtfreter, K. (2004). Fraud in US organisations: an examination of control mechanisms. Journal of Financial Crime, 12(1), 88-95.
• IFAC. (2009). The Audıtor’s Responsıbılıtıes Relatıng To Fraud In An Audıt Of Fınancıal, Internatıonal Standard On Audıtıng, ISA No. 240. Koornhof, C., ve Du Plessis, D. (2000). Red flagging as an indicator of financial statement fraud: The perspective of investors and lenders. Meditari: Research Journal of the School of Accounting Sciences, 8(1), 69-93.
• KPMG (2016). Global profiles of the fraudster: technology enables and weak controls fuel the fraud. Erişim adresi: https://home.kpmg/xx/en/home/insights/2016/05/global-profiles-of-the-fraudster.html/
• KPMG (2004). Fraud Survey 2004. KPMG, Brisbane, Qld.
• KPMG (2013). Perfiles globales del defraudador. KPM Forensic, Madrid. Çevrimiçi, https://www.portal.protecturi.org/wp-content/uploads/2013/12/Perfiles-globales-defraudador.pdf
• Krambia‐Kapardis, M., Christodoulou, C., ve Agathocleous, M. (2010). Neural networks: the panacea in fraud detection?. Managerial Auditing Journal, 25(7), 659-678.
• Luehlfing, M. S., Daily, C. M., Phillips Jr, T. J., ve Smith, L. M. (2003). Cyber crimes, intrusion detection, and computer forensics. Internal Auditing, 18(5), 9-9.
• Marden, R., ve Edwards, R. (2005). Employee fraud in the casino and gaming industry. Internal Auditing, 20(3), 21-30.
• Marilena, Z. ve Corina, I. (2012). Embellishment of financial statements through creative accounting policies and options. Procedia - Social and Behavioral Sciences, 62, 347- 351.
• McMullen, D. A. (1996). Audit committee performance: An investigation of the consequences associated with audit committees. Auditing, 15(1), 87-103.
• Nestor, S. (2004). The impact of changing corporate governance norms on economic crime. Journal of Financial Crime, 11(4), 347-352.
• Olcina, E. (2016). Motivaciones y perfil del defraudador en la empresa. Revista de Contabilidad y Dirección 23: 11–26.
• Pincus, K. V. (1989). The Efficacy of a Red Flags Questionnaire for Assessing the Possibility of Fraud, Accounting, Organizations and Society, 14(1-2), 153-164. Price Water House Coopers (PwC), (2009). The Global Economic Crime Survey, Çevrimiçi, https://www.pwc.com/gx/en/economic-crime-survey/pdf/global-economic-crime-survey-2009.pdf
• Robertson, J. C. (2000). Fraud Examination for Managers and Auditors. Austin, TX: Viesca Books.
• Wallace, W. A. ve Kreutzfeldt, R. W. (1991). Distinctive characteristics of entities with an internal audit department and the association of the quality of such departments with errors. Contemporary Accounting Research, 7(2), 485-512.
• Wolfe, D. T. ve Hermanson, D. R. (2004). The fraud diamond: Considering the four elements of fraud. CPA Journal, 74(12), 38-42.
• Zain, M. M., Subramaniam, N., ve Stewart, J. (2006). Internal auditors’ assessment of their contribution to financial statement audits: The relation with audit committee and internal audit function characteristics. International Journal of Auditing, 10(1), 1-18.