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Detecting accounting fraud using quantitative techniques

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Abstract

This study deals with the detection of accounting fraud from an economic perspective. It is a topic of great relevance since the accounting information of a company is crucial in the decision-making process of different stakeholders. However, very often accounting frauds occurs and have very negative consequences. This motivates the interest in detecting fraud as soon as possible. In this article, we propose the use of a set of accounting fraud detection techniques and they are applied to the case of Ricoh India, a company that had an accounting fraud that caused a great scandal in 2015. The main contribution of the study is the empirical demonstration that it is possible to detect accounting fraud several years before the deception is disclosed to all interested parties. Early detection of the fraud can be of great use to managers, analysts, investors, and supervisors in their desire to avoid the negative consequences of accounting fraud.

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  • Nirali Singh & Oriol Amat, 2020. "Detecting accounting fraud using quantitative techniques," Economics Working Papers 1738, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1738
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    1. Alina Beattrice Vladu & Oriol Amat & Dan Dacian Cuzdriorean, 2014. "Truthfulness in accounting: How to discriminate accounting manipulators from non-manipulators," Economics Working Papers 1434, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    3. Lev, B & Thiagarajan, Sr, 1993. "Fundamental Information Analysis," Journal of Accounting Research, Wiley Blackwell, vol. 31(2), pages 190-215.
    4. Henselmann, Klaus & Scherr, Elisabeth & Ditter, Dominik, 2012. "Applying Benford's Law to individual financial reports: An empirical investigation on the basis of SEC XBRL filings," Working Papers in Accounting Valuation Auditing 2012-1, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Accounting and Auditing.
    5. Catherine Gowthorpe & Oriol Amat, 2004. "Creative accounting: Some ethical issues of macro- and micro-manipulation," Economics Working Papers 748, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Philip Gharghori & Howard Chan & Robert Faff, 2006. "Investigating the Performance of Alternative Default-Risk Models: Option-Based Versus Accounting-Based Approaches," Australian Journal of Management, Australian School of Business, vol. 31(2), pages 207-234, December.
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    More about this item

    Keywords

    Accounts manipulation; accounting fraud; balance Sheet; Income statement; ratios; Z score;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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