Determinants of Fraudulent Financial Reporting in Nigeria: Integrating Fraud Triangle Theory Elements

Toba Olakunle ACA Abiloro and Oladele Ebenezer Olorunfemi
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Toba Olakunle ACA Abiloro: Lecturer, Accountancy Department, Rufus Giwa Polytechnic, Owo, Ondo state, Nigeria.
Oladele Ebenezer Olorunfemi: Lecturer, Management Science Department, Bamidele Olumilua University of Education, Science and Technology, Ikere-Ekiti, Ekiti state, Nigeria

International Journal of Research and Innovation in Social Science, 2021, vol. 05, issue 12, 288-297

Abstract: This paper investigates the key determinants of fraudulent financial reporting in Nigeria by integrating fraud triangle theory elements (that is, Pressure [external pressure-Debt, financial stability-LDR, and financial target-ROA], Opportunity [ineffective monitoring], and Rationalization [auditor’s change]. The population this study is banking company listed on the Nigerian Stock Exchange with a total sample of 135 from 15 banking companies between 2012-2020. Based on the results of research using regression analysis, the findings showed that pressure is having both positive and significant relationship with fraudulent financial reporting; also, rationalization is having significant but negative relationship, whereas opportunity is having positive but insignificant relationship. The study therefore conclude that among others, these elements are the key determinants of fraudulent financial reporting and also recommends that company should avoid huge debt profile and heavy target on the management in order to reduce the pressure to perpetrate fraud by the management. Also, they are encouraged to always appoint audit firm with required quality and integrity, and lastly, they should always enforce constant audit rotation as stipulated by the standard.

Date: 2021
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