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Identifying fraud using restatement information

Nourhene BenYoussef (Faculty of Business Administration, University of Regina, Saskatchewan, Canada)
Saqib Khan (Faculty of Business Administration, University of Regina, Saskatchewan, Canada)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 2 October 2017

781

Abstract

Purpose

The purpose of this paper is to analyze the restatement information disclosed in the Form 8K and the Press Release. It examines the relationship between manipulating the quantity, quality, manner and timing of restatement information and the probability of committing fraud.

Design/methodology/approach

The authors used 18 informational indicators developed by BenYoussef and Breton (2016), and applied the prediction methodology based on F-scores, developed by Dechow et al. (2011).

Findings

Results indicate that the information content of restatement announcements provides significant insights into the likelihood of fraud occurrence. A firm that manipulated previous earnings will continue to do so, and will try to mislead investors by releasing inaccurate and incomplete information in the Form 8K and the Press Release. The model helps identify this manipulation and hence can be used as a tool for fraud detection.

Research implications/limitations

This paper applies the constructs drawn from Information Manipulation Theory to restatement contexts to detect fraud.

Practical implications

The paper is of use to regulators, investors and financial crime experts, as it provides insights to better fraud detection.

Originality/value

The paper is based on proprietary data that were hand collected, and is being used first time to predict fraud.

Keywords

Acknowledgements

The research was partly funded by the University of Regina, Faculty of Business Dean’s Research Grant.

Citation

BenYoussef, N. and Khan, S. (2017), "Identifying fraud using restatement information", Journal of Financial Crime, Vol. 24 No. 4, pp. 620-627. https://doi.org/10.1108/JFC-07-2016-0046

Publisher

:

Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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