Financial statement comparability and accounting fraud

Belen Blanco, Sandip Dhole and Ferdinand A. Gul

Journal of Business Finance & Accounting, 2023, vol. 50, issue 7-8, 1166-1205

Abstract: We examine the association between financial statement comparability and the likelihood of accounting fraud. Prior research documents a negative association between the quality of a firm's reporting environment and accounting fraud. We build on this literature and show that poor financial statement comparability is associated with a greater likelihood of accounting fraud. We also find that accounting comparability declines over time as the year of fraud detection approaches and that the association between comparability and fraud becomes more negative over this time. In addition, we find that financial statement comparability improves after fraud detection, consistent with the notion that managers improve their financial reporting quality after fraud.

Date: 2023
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https://doi.org/10.1111/jbfa.12652

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