Open AccessUsing Financial Statement Data To Identify Factors Associated With Fraudulent Financial Reporting
Author(s) -
Obeua S. Persons
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v11i3.5858
Subject(s) - leverage (statistics) , financial statement , business , asset (computer security) , financial ratio , accounting , actuarial science , finance , econometrics , economics , statistics , audit , computer science , mathematics , computer security
Based on stepwise-logistic models, this study finds that financial leverage, capital turnover, asset composition and firm size are significant factors associated with fraudulent financial reporting Prediction results suggest that these models outperform a nae strategy of classifying all firms as nonfraud firms for all levels of relative costs of type I and type II errors. The models also correctly identify a large percentage of fraud firms and misclassify a relatively small percentage of nonfraud firms when realistic relative error costs are assumed.