Based on theoretical foundations and evidence-based case studies, this book identifies the fundamental motivations underpinning corporate fraud in both developing and developed countries. The book offers practical solutions in terms of monitoring and potentially preventing future corporate fraud activity.
It is expected that uncovered corporate fraud negatively affects the public reputation, and financial performance of fraudulent firms. However, what is of more importance for fraudulent firms is how to regain the trust of customers, investors, and other stakeholders, as this impacts the long-term sustainability of businesses. Operational strategies, including reform, provide an effective channel for a fraudulent firm’s business sustainability yet this notion remains unexplored in the literature.
This authored research book argues that the choice of appropriate operational strategies is critical as they serve as an effective channel for fraudulent firms to re-gain the trust from customers and markets, re-establish their reputation, and enhance the firm’s long-term value. The authors posit that there is no ‘one-size fits-all’ approach because the choice of effective operational strategies is needed to acknowledge the significance of context such as industry type, economic conditions, legal frameworks as well as the firm’s fraudulent characteristics.
Author(s): Larry Li, Adela McMurray
Publisher: Palgrave Macmillan
Year: 2022
Language: English
Pages: 361
City: Singapore
Preface
Contents
List of Figures
List of Tables
Part I The Concept of Corporate Fraud
1 What Is Corporate Fraud?
1.1 Introduction
1.2 More Definitions
1.3 The Early Years of Corporate Fraud
The South Sea Company Bubble (1720)
The City of Glasgow Bank Scandal (1878)
Enron Scandal (2001)
WorldCom Scandal (2002)
Madoff Investment Scandal (2008)
Volkswagen Emission Gate Scandal (2015)
1.4 How to Stop History from Repeating Itself?
1.5 Concluding Remarks
References
2 Types of Corporate Fraud
2.1 Introduction
2.2 Financial Statement Fraud
Types of Accounting Frauds
2.3 Corruption
2.4 Asset Misappropriations
2.5 Concluding Remarks
References
3 Theoretical and Empirical Justification of Corporate Fraud
3.1 Theoretical Justification of Corporate Fraud
Fraud Triangle Theory
Fraud Diamond Theory
Corruption and Corporate Fraud Prevention (CCFP) Model
Theory of Planned Behaviour
3.2 Empirical Justification of Corporate Fraud
Board Composition
Audit Matters
Ownership Structure
Executive Matters
External Factors
Detection and Prevention
3.3 Concluding Remarks
References
Part II Corporate Fraud Across Countries and Industries
4 Corporate Fraud in Developing Countries
4.1 Asia Pacific Region
4.2 Latin America and the Caribbean Region
4.3 Africa
4.4 Unique Features in Developing Countries
Social Ties
State Ownership and Political Connections
Quality of Legal System
4.5 Concluding Remarks
Appendix: Glossary of Terminology (from 2020 Report to the Nation on Occupational Fraud and Abuse)
References
5 Corporate Fraud in Developed Countries
5.1 United States (US)
5.2 West Europe
5.3 Canada
5.4 More Discussion
5.5 Unique Features in Developed Countries
Media
Short Selling
5.6 Concluding Remarks
References
6 Corporate Fraud Comparison Across Industries
6.1 Introduction
6.2 Percentage of Fraud Across Industries
6.3 Fraud Severity Across Industries
6.4 Industries with Most Corruption Cases
6.5 Industries with Most Asset Misappropriations
Banking and Financial Services Industry
Manufacturing Industry
Government and Public Administration Sector
6.6 Industries with Most Financial Statement Fraud
6.7 Concluding Remarks
References
7 Corporate Fraud Trends
7.1 Introduction
7.2 Evolution of Fraud
7.3 Cyber Fraud
7.4 Cybersecurity: Past and Future
7.5 Reasons for Rapid Growth of Cybercrime
7.6 How to Stop Cybercrime
7.7 Concluding Remarks
References
Part III How to Prevent Corporate Fraud
8 External Factors: Legal Framework and the Business Environment
8.1 Introduction
8.2 Business Environment
Culture and Fraud
Power Distance
Individualism vs Collectivism
Uncertainty Avoidance
Masculinity vs Femininity
Long-Term Orientation (LTO) vs Short-Term Orientation (STO)
Indulgence vs Restraint
Religion and Fraud
8.3 Legal Framework
Investor Protection
Ownership Concentration and Fraud
Legal Enforcement and Fraud
Private Enforcement and Fraud
8.4 Revisit the Theoretical Models
8.5 Concluding Remarks
References
9 Internal Factors: Organisational Culture and Governance
9.1 Introduction
9.2 Why Internal Factors Matter
9.3 Organisational Culture and Fraud
9.4 Leadership and Fraud
9.5 Internal Control and Fraud
9.6 Management Incentives and Fraud
9.7 Ownership Types and Fraud
9.8 Stakeholders and Fraud
9.9 Concluding Remarks
References
Part IV Bring New Hope to the Business
10 Trust Repairing Post-scandal Priority
10.1 Introduction
10.2 Theories of Crisis Management
10.3 Types of Post-Scandal Organisation
The Redemptive Organisation
The Rouge Organisation
The Tread Water Organisation
10.4 Right Crisis Management
Good Preparation
Long Term Focused
Quick Response
Accurate and Transparent Recovery
High Ethical Standard
Performance Evaluation
10.5 Concluding Remarks
References
11 Internal Reform During the Post-scandal Period
11.1 Introduction
11.2 Where to Start?
11.3 Observable Warning Signals
11.4 Perpetrators’ Department
11.5 Internal Control
What is Internal Control?
Internal Control Approaches
Internal Controls: Prevent Fraud Before it Happens
Internal Controls: Accounting-Related Matters
Internal Controls: Anti-Corruption Campaign
Internal Controls: Asset Misappropriation Controls
Internal Control: Cyber Security
11.6 The Design of Internal Controls
11.7 Concluding Remarks
References
References
Index
