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Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments

Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments The purpose of this paper is to explore the audit-related causes of financial scandals and advice on how emerging technologies can provide solutions thereto. Specifically, this study seeks to look at the facilitators of financial statement fraud and explain specific fintech advancements that contribute to financial information reliability for equity investments.Design/methodology/approachThe study uses the case studies of Enron and Arthur Andersen to document the evidence of audit-related issues in historical financial scandals. Then, a comprehensive and interdisciplinary literature review at the intersection of business, accounting and engineering, provides a foundation to propose technology advancements that can solve identified problems in accounting and auditing.FindingsThe findings show that blockchain, internet of things, smart contracts and artificial intelligence solutions have different functionality and can effectively solve various financial reporting and audit-related problems. Jointly, they have a strong potential to enhance the reliability of the information in financial statements and generally change how companies operate.Practical implicationsThe proposed and explained technology advancements should be of interest to all publicly listed companies and investors, as they can help safeguard equity investments, thus build investors’ trust towards the company.Social implicationsAside from implications for capital markets participants, the study findings can materially benefit various stakeholder groups, the broader company environment and the economy.Originality/valueThis is the first paper that seeks solutions to financial fraud and audit-related financial scandals in technology and not in implementing yet another regulation. Given the recent technology advancements, the study findings provide insights into how the role of an external auditor might evolve in the future. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting & Organizational Change Emerald Publishing

Fintech in financial reporting and audit for fraud prevention and safeguarding equity investments

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1832-5912
DOI
10.1108/jaoc-09-2019-0098
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to explore the audit-related causes of financial scandals and advice on how emerging technologies can provide solutions thereto. Specifically, this study seeks to look at the facilitators of financial statement fraud and explain specific fintech advancements that contribute to financial information reliability for equity investments.Design/methodology/approachThe study uses the case studies of Enron and Arthur Andersen to document the evidence of audit-related issues in historical financial scandals. Then, a comprehensive and interdisciplinary literature review at the intersection of business, accounting and engineering, provides a foundation to propose technology advancements that can solve identified problems in accounting and auditing.FindingsThe findings show that blockchain, internet of things, smart contracts and artificial intelligence solutions have different functionality and can effectively solve various financial reporting and audit-related problems. Jointly, they have a strong potential to enhance the reliability of the information in financial statements and generally change how companies operate.Practical implicationsThe proposed and explained technology advancements should be of interest to all publicly listed companies and investors, as they can help safeguard equity investments, thus build investors’ trust towards the company.Social implicationsAside from implications for capital markets participants, the study findings can materially benefit various stakeholder groups, the broader company environment and the economy.Originality/valueThis is the first paper that seeks solutions to financial fraud and audit-related financial scandals in technology and not in implementing yet another regulation. Given the recent technology advancements, the study findings provide insights into how the role of an external auditor might evolve in the future.

Journal

Journal of Accounting & Organizational ChangeEmerald Publishing

Published: Sep 2, 2020

Keywords: Financial reporting; Audit; Blockchain; Fintech; Machine learning; Equity investment; Internet of things; Smart contracts; G10; G15; M42

References