PRE FRAUD: AN EMPIRICAL IN MALAYSIA

Year 2012, Volume: 4 Issue: 1, 143 - 151, 01.06.2012

Sherliza Puat Nelson

Abstract

The paper specifically examines the pre fraud firms’ characteristics for over 3
years before fraud occurred. Selections of companies were made from Securities
Commissions’ enforcement actions released between the years 2000 until 2008. A
matched pair sampling was made with the control group, and 192 firms’
observations were made. Findings revealed that there were decreased in cash flow
as well as lesser number of board sizes during the three years before the fraud for
fraud firms. In addition, roles of independent directors may lessen the impact of
fraud.

Keywords

Fraud, board size, long term debt, firm size

References

• Arshad, R., and Othman, H., (2011). Ownership Structure, Capital Structure and Fraudulent Financial Reporting. International Conference On Financial Criminology (ICFC) , June 8-9, 2011, Putrajaya, Kuala Lumpur.
• Erickson, M., Hanlon, M., and Maydew, E.L., (2006). Is There a Link between Executive Equity Incentives and Accounting Fraud? Journal Of Accounting Research, Vol. 44, No. 1.
• Fama, E.F. and M.C. Jensen, 1983a. Separation of Ownership and Control. Journal of Law and Economics,26(2): 301-325.
• Haniffa, R. and M. Hudaib, ( 2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance and Accounting, 33(7) and (8): 1034-1062.
• Jensen, M., and Meckling, W., (1976). Theory of the firm : Managerial behaviour, agency costs and ownership structure. Journal of Finance and Economics, Vol. 3, pp. 305-360.
• Kassim,N., and Khalid, N.K., (2010).The influence of the concept of ‘taklif’ to accountants in preventing fraudulent financial reporting and auditing. Malaysian Accounting review. Special Issue Vol. 9 No. 2, 71-83.
• Lee, T. S. and Y. Yeh. (2004). Corporate Governance and Financial Distress: Evidence from Taiwan, Corporate Governance 2 (3): 378-388.
• Mustafa, S.T., and Youssef, N.B., (2010). Audit committee financial expertise and misappropriation of assets. Managerial Auditing Journal, Vol. 25, No. 3, pp. 208-225.
• Nelson, S.P., (2011). Audit Committee Expertise and Financial Reporting Quality. Saarbrucken, Germany: LAP LAMBERT Academic Publishing. ISBN 978-3-8465-5764-8.
• Nor, J.M., Ahmad,N., and Saleh,M.N., (2010). Fraudulent financial reporting and company characteristics: tax audit evidence. Journal of Financial Reporting and Accounting, Vol. 8 Iss: 2, pp.128 – 142.
• Owens-Jackson, L., Robinson, D., and Shelton, S.W., (2009). The Association Between Audit Committee Characteristics, the Contracting Process and Fraudulent Financial Reporting. American Journal of Business, Vol. 24, No.1.
• Peyrefitte, J., Fadil, P.A., and Thomas, A.S., (2002). The Influence of Managerial Experience on Large Firm Internationalisation. International Journal of Management, Vol. 19, No. 3, pg. 495.