Abstract :

Research Question/Issue: To review fraudulent financial reporting with regulatory controls and explain it from the perspective of various behavioural theories. Research Findings/Insights: Regulatory controls such as the inclusion of independent directors on the company’s board and an increase in non-promoter shareholders are enforced to reduce opportunities for fraud. The fraud triangle theory advocates opportunity as one of the reasons for fraud and these controls address this aspect. The analysis however shows that the presence of these controls does not reduce or deter fraud and often acts as a perverse incentive leading to pressure for better results.
Theoretical/Academic Implications: The study of fraudulent activities with controls in place is discussed from various behavioural theory perspectives. Factors leading to unethical activities are explained by a pathway that shows how these aspects lead to increased unethical activities.
Practitioner/Policy Implications: Regulatory bodies should review the present measures which have failed to control fraudulent activities in the light of emerging research. These bodies should take cognizance of behavioural theories discussed in this study and modify and/or design more effective regulations to prevent such activities. Selection of independent directors should be made stringent and there should be some form of psychometric testing to assess these candidates before appointing them to these key positions.

Application :

Financial Fraud and Behavioral theories

Link to the Full Research Article : https://conferences.euram.academy/2023conference/