Firm-related risk factors and the likelihood of financial statement fraud in the Philippines (period 2000-2009)

Date of Publication

2012

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Junette A. Perez

Defense Panel Member

Michelle Manalang
Neriza Casas
Rene Betita

Abstract/Summary

This study determines a set of firm-related fraud risk factors that affect the likelihood of financial statement fraud in the Philippines. Using Donald R. Cressey's 1953 fraud triangle that identifies the factors that contribute to fraud, proxy variables are derived that are suitable to the Philippine setting. The variables are tested using logit regression with the use of fraudulent firms accused by the SEC and the matching non-fraudulent firms.

The results of the study show that among the variables in Cressey's fraud triangle, only opportunity and rationalization are significant, not pressure thus Cresseys' framework is not applicable in the country. CEO, an opportunity variable implying that if the CEO of the company also acts as the chairman of the board, then there is more opportunity for the person to commit fraud, and AUDREPORT, a proxy variable for rationalization claiming that when the audit opinion contains additional language then the likelihood of fraud increases, are the main drivers of the perpetration of fraudulent financial reporting in the Philippines. However, both of these factors must be present for fraud to be committed. The offender must have the opportunity to commit fraud and rationalization that justifies the crime. Opportunity unlocks the doorway to fraud while rationalization draws the person towards it.

This study also constructs a fraud prediction model, based on the fraud risk factors identified, suitable to the Philippine setting. The model derived successfully predicts the likelihood of a firm to commit fraud through publicly available information 88.89% of the time.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21221

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

86 leaves

Keywords

Misleading financial statements--Philippines; Financial statements--Philippines

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