05 Feb Fraudulent Financial Reporting 1998-2007: An Analysis of U.S. Public Companies

Year of Publication: 2010
Member Price: RM 270
Non Member Price: RM 310

COSO’s latest research project analyses 347 fraudulent financial reporting cases among U.S. public companies for the 10-year period 1998-2007. This study updates the 1999 monograph below and expands previous research by comparing fraud firms with similar no-fraud firms.

The study finds that fraudulent financial reporting cases are becoming larger, are more likely to involve larger companies, are more likely to involve the CEO and/or CFO, and are more likely to involve the misstatement of revenues. Observable board governance characteristics do not differ meaningfully between fraud and no-fraud firms, suggesting the need for research on governance processes and interactions of governance characteristics. Fraud firms are more likely to change audit firms, and the consequences of fraud continue to be severe, with significant stock price declines and frequent bankruptcies, stock exchange delistings, and asset sales for fraud firms. Finally, the authors call for additional research to examine the effects of the Sarbanes-Oxley Act and Section 404.