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EFFECT OF FIRM CHARACTERISTICS ON FINANCIAL STATEMENT FRAUD LIKELIHOOD (A CASE STUDY OF LISTED OIL AND GAS FIRM IN NIGERIA)

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 Format: MS WORD ::   Chapters: 1-5 ::   Pages: 67 ::   Attributes: secondary data, Data Analysis, abstract, table of content ::   1,430 people found this useful

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CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF STUDY

The rate of financial statement fraud has increased overtime and the likehood of its occurrences is seen in most of the firms in Nigeria especially the oil and gas firm with a large number of managers and board members.

According to Sherman, Young and Collingwood (2003:158) state that not only managers, but all investors and other interested parties are to blame for financial statement fraud. They are the ones that keep score of company performance and urge companies to perform better. When it becomes difficult for companies to do better, they have to try and enhance performance through other creative means. The line between what is ethical and what is not, between legality and illegality, is very thin and managers are motivated to operate as closely as possible to that line and to sometimes cross the line.

According to Rezaee (2002: 183) identifies the reasons as perceived benefits that outweigh probable costs, internal and external pressure to show more favourable results, an attitude of "living dangerously" and personal satisfactions.

Robertson (2002:105) in the same vein has found that financial statement fraud is mostly committed because management tries to make earnings look better. The embezzlement is usually covered up through valuation judgements and manipulating the timing of entries and valuations. Other reasons are encouraging investment, demonstrating higher earnings per share (EPS), dispelling negative market perceptions, obtaining financing, receiving higher acquisition purchase prices, demonstrating compliance with financing covenants and receiving performance-related bonuses. Although financial statement fraud is usually associated with cases where a fraud is perpetrated on behalf of a company, there are cases where managers use their own influence to manipulate company records for their own benefit (Elliot & Willingham, 1980:8). In such cases, the fraudulent financial statements still harm investors and creditors, because assets that they believe exist, do not really exist. The study in this regard will use listed oil and gas firms in Nigeria as the case study.

1.2 STATEMENT OF RESEARCH PROBLEM

The research on the effect of firm characteristics on financial statement fraud likelihood was based on the increased rate of fraud likelihood in most of the manufacturing firms in Nigeria especially the oil and gas firms. Most of the complaint was that it is difficult for people both in and outside a company to determine whether a company, through its employees and management, displays satisfactory ethical behaviour and does not engage in activities that can increase a company's accounting risk and create the possibility of financial fraud occurring. Most of the manufacturing firms in Nigeria are finding it difficult to prevent financial statement fraud; the activities of the auditors tend to be very ineffective.

1.3 AIMS AND OBJECTIVES OF STUDY

The main aim of the research work is to examine the effect of firm characteristics on financial statement fraud likelihood. Other specific objectives of the study include:

  1. To examine the effect of the firm size on the rate of financial statement likelihood
  2. To investigate on the factors affecting the control of financial statement likelihood
  3. To examine the effect of board members and CEOs on financial statement fraud likelihood
  4. To discuss on the relationship between firm size and the likelihood of financial statement fraud.
  5. To proffer solution to the above stated problems

1.4 RESEARCH QUESTIONS

The study came up with research questions so as to be able to ascertain the above stated objectives. The research questions for the study are stated below as follows:

  1. What is the effect of the firm size on the rate of financial statement likelihood?
  2. What are the factors affecting the control of financial statement likelihood?
  3. Do board members and CEOs have significant effect on financial statement fraud likelihood?
  4. Is there any relationship between firm size and the likelihood of financial statement fraud

1.5 STATEMENT OF RESEARCH HYPOTHESIS

H0: board members and CEOs have no significant effect on financial statement fraud likelihood

H1: board members and CEOs have significant effect on financial statement fraud likelihood

1.6 SIGNIFICANCE OF STUDY

The study on the effect of firm characteristics on financial statement fraud likelihood will be of immense benefit to the oil and gas firms in Nigeria as it will examine the relationship between firm size and the likelihood of financial statement fraud, the effect of the firm size on the rate of financial statement fraud likelihood and finally the study will discuss the factors affecting the control of financial statement likelihood and proffer solution to the problems observed.

1.7 SCOPE OF STUDY

The study on the effect of firm characteristics on financial statement fraud likelihood will be limited to the oil and gas firms in Nigeria as it will cover the factors affecting the control of financial statement likelihood, the relationship between firm size and the likelihood of financial statement fraud and finally the study will cover the effect of the firm size on the rate of financial statement fraud likelihood

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, statistical bulletins).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.9 DEFINITION OF TERMS

FINANCIAL STATEMENT: is a Summary report that shows how a firm has used the funds entrusted to it by its stockholders (shareholders) and lenders, and what its current financial position is.
FRAUD: wrongful or criminal deception intended to result in financial or personal gain

LIKELIHOOD: the state or fact of something's being likely; probability

 

 

 

 

 

 

 

 

REFERENCES

Altman, E.!. & Hotchkiss, E. 2006. Corporate financial distress and bankruptcy. 3rd Edition. New Jersey: John Wiley. Apostolou, B., Hassell, J.M. & Webber, S.A. 2001. Management fraud risk factors: ratings by forensic experts. The CPA Journal. 71(10):48-52. Baucus, M.S. & Near, J.P. 1991. Can illegal corporate behaviour be predicted? An event history analysis. Academy of Management Journal. 34(1 ):9-36. Beasley, M.S. 1996. An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review. 71(4):443-465. Beasley, M.S., Carcello, lV. & Hermanson, D.R. 2001. Financial reporting fraud: could it happen to you? The Journal of Corporate Accounting & Finance. 12(4):3-9. Beasley, M.S., Carcello, J.V., Hermanson, D.R. & Lapides, P.D. 2000. Fraudulent financial reporting: consideration of industry traits and corporate governance measures. Accounting Horizons. 14(4):441-454

 


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Paper Information

Format:ms word
Chapter:1-5
Pages:67
Attribute:secondary data, Data Analysis, abstract, table of content
Price:₦3,000
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