TY - JOUR
T1 - Financial statement misrepresentation
T2 - the role of internal and external audit
AU - Lois, Petros
AU - Drogalas, George
AU - Karagiorgos, Alkiviadis
AU - Parcha, Adamantia
N1 - Publisher Copyright:
Copyright © 2022 Inderscience Enterprises Ltd.
PY - 2022
Y1 - 2022
N2 - This paper focuses on the importance of internal and external audits in reducing misrepresentation or falsification of financial statements and examines the key characteristics, reasons, and methods for committing as well as confronting fraud. Electronic questionnaires were sent to stock-exchange-listed companies with an internal audit department. Descriptive statistics, factor analysis, and multiple regressions show that internal audit contributes significantly to reducing fraud. Factor analysis shows a significant internal audit contribution against fraud. Linear regression highlights the significance of variables concerning the reasons for falsification, external auditors' competence, and internal auditors' and audit committees' efficiency. Business fraud is organised and therefore difficult to detect, disclose, and prevent, especially when conducted by the board of directors; further, it is more common in businesses without control mechanisms. Audit's role is key in preventing and detecting fraud; it should act as a strong, internal, independent control function. Despite the importance of audit, the phenomenon of fraud, there has not been much empirical research on this issue.
AB - This paper focuses on the importance of internal and external audits in reducing misrepresentation or falsification of financial statements and examines the key characteristics, reasons, and methods for committing as well as confronting fraud. Electronic questionnaires were sent to stock-exchange-listed companies with an internal audit department. Descriptive statistics, factor analysis, and multiple regressions show that internal audit contributes significantly to reducing fraud. Factor analysis shows a significant internal audit contribution against fraud. Linear regression highlights the significance of variables concerning the reasons for falsification, external auditors' competence, and internal auditors' and audit committees' efficiency. Business fraud is organised and therefore difficult to detect, disclose, and prevent, especially when conducted by the board of directors; further, it is more common in businesses without control mechanisms. Audit's role is key in preventing and detecting fraud; it should act as a strong, internal, independent control function. Despite the importance of audit, the phenomenon of fraud, there has not been much empirical research on this issue.
KW - audit committee
KW - external audit
KW - financial statement misrepresentation
KW - fraud
KW - internal audit
UR - http://www.scopus.com/inward/record.url?scp=85129466995&partnerID=8YFLogxK
U2 - 10.1504/GBER.2022.122386
DO - 10.1504/GBER.2022.122386
M3 - Article
AN - SCOPUS:85129466995
SN - 1097-4954
VL - 26
SP - 334
EP - 352
JO - Global Business and Economics Review
JF - Global Business and Economics Review
IS - 3
ER -