A tool to create a distortion of the quality of financial information, creating uncertainty about the consistency and comparability of information for users, in which case we are dealing with an accounting of intent.
Published in Chapter:
Fraud Risk Management for Listed Companies' Financial Reporting
Tatiana Dănescu (University of Medicine, Pharmacy, Sciences, and Technology of Targu-Mures, Romania), Ionica Oncioiu (Titu Maiorescu University, Romania), and Ioan Ovidiu Spătăcean (University of Medicine, Pharmacy, Sciences, and Technology of Targu-Mures, Romania)
Copyright: © 2019
|Pages: 20
DOI: 10.4018/978-1-5225-8455-1.ch008
Abstract
Using accurate and reliable financial information is the primary condition for successful investments on a stock exchange. Nevertheless, some major corporate scandals broke out at the 21st century horizon and concluded with a major capital market crisis in confidence. Recent events have proved that Romanian capital market is no exception. All these unfortunate scandals had in common some ingredients, among which are a poor corporate governance, a lack of accountability, and misrepresentation of financial information. This chapter relates to the need of integrity in financial reporting process, as the basis for adequate, reliable, and comprehensive information used in decision making by investors in general, institutional investors in particular. The main focus is to review the characteristics of financial information in order to identify some patterns and depict an overview for sensitive areas that may be vulnerable to fraudulent behavior, such as fair value measurements, related party transactions, revenue recognition, provisions, or asset impairment (inventories and receivables).