Comparative analysis of the relationship between internal control weakness and different types of auditor opinions in fraudulent and non-fraudulent firms

Mahmoud Lari Dashtbayaz, Mahdi Salehi and Mahdi Hedayatzadeh

Journal of Financial Crime, 2021, vol. 29, issue 1, 325-341

Abstract: Purpose - This study aims to assess the relationship between internal control weakness and different types of auditor opinions in fraudulent and non-fraudulent firms. The study's main objective is to investigate fraud in business firms and analyze internal controls and types of proposed opinions by the auditor about his desired firm. The outbreak of fraud in firms is of utmost importance to a broad spectrum of society. Internal controls and the auditor's role in preventing and detecting frauds should not be taken for granted. Design/methodology/approach - The present study's statistical population includes 179 listed firms on the Stock Exchange selected as the study sample using the systematic elimination method during 2012–2019. As the study's dependent variable (the type of auditor’s opinion), research hypotheses were analyzed using the Logit regression model. Findings - The results show that the relationship between internal control weakness and opinion type is significantly different in fraudulent and non-fraudulent firms. Moreover, the relationship between internal control weakness and type of auditor opinion in fraudulent firms and the relationship between internal control weakness and type of auditor opinion in non-fraudulent firms are significant. Originality/value - By assessing the related literature, the authors have found no study to directly assess the comparative relationship between internal control weakness and the type of auditor opinion, which can be named as the main objective of the study.

Keywords: Internal control weakness; Type of auditor opinion; Fraudulent and non-fraudulent firms (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-01-2021-0005

DOI: 10.1108/JFC-01-2021-0005

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