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Detecting fraudulent financial reporting using financial ratio

Detecting fraudulent financial reporting using financial ratio PurposeThe main aim of this study is to analyse the financial ratio (i.e. financial leverage, profitability, asset composition, liquidity and capital turnover ratio) in detecting fraudulent financial reporting (FFR).Design/methodology/approachThe logit model was used to identify firms that are related to FFR. The sample firms that engage in fraudulent reporting were obtained from the media centre of Bursa Malaysia. The firms were selected based on their contravention of the Listing Requirements of Bursa Malaysia Securities Berhad. The data cover a period of seven years from 2007 to 2013.FindingsThe results suggest that financial leverage, asset composition, profitability and capital turnover were significant predictors of FFR.Practical implicationsThe findings of this study may assist investors in making decision for their investments.Originality/valueThis study describes firms that breach the Listing Requirements of Bursa Malaysia Securities Berhad using the financial ratio. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Reporting and Accounting Emerald Publishing

Detecting fraudulent financial reporting using financial ratio

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References (45)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1985-2517
DOI
10.1108/JFRA-05-2015-0053
Publisher site
See Article on Publisher Site

Abstract

PurposeThe main aim of this study is to analyse the financial ratio (i.e. financial leverage, profitability, asset composition, liquidity and capital turnover ratio) in detecting fraudulent financial reporting (FFR).Design/methodology/approachThe logit model was used to identify firms that are related to FFR. The sample firms that engage in fraudulent reporting were obtained from the media centre of Bursa Malaysia. The firms were selected based on their contravention of the Listing Requirements of Bursa Malaysia Securities Berhad. The data cover a period of seven years from 2007 to 2013.FindingsThe results suggest that financial leverage, asset composition, profitability and capital turnover were significant predictors of FFR.Practical implicationsThe findings of this study may assist investors in making decision for their investments.Originality/valueThis study describes firms that breach the Listing Requirements of Bursa Malaysia Securities Berhad using the financial ratio.

Journal

Journal of Financial Reporting and AccountingEmerald Publishing

Published: Oct 3, 2016

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