Screening Auditors and Equity Analysts Traits Related to Corporate Fraud Risk

This chapter explores the role of auditors and equity analysts in detecting corporate fraud. The chapter touches on high-profile cases, where auditors failed to expose fraudulent activities, underscoring the potential consequences of auditor complacency and conflicts of interest. The chapter discusses the complex relationship between auditor tenure and corporate fraud risk. It also examines factors such as auditor firm size, specialization, and psychological factors. The chapter raises the issue about the clustering of unethical companies around specific auditors. Equity analysts play a crucial role in evaluating the financial health of publicly traded companies. The relationship between equity analysts and corporate fraud is explored. Research indicates a relationship between analyst coverage and fraudulent activities. Additionally, the level of analyst coverage, both in terms of quantity and quality, can influence the extent of earnings management within a company. Understanding these dynamics can provide valuable insights into corporate fraud detection.