Detecting fraudulent financial statements through SCCORE model: evidence from French context

Sana Doss and Sami Bacha

Journal of Financial Crime, 2025, vol. 33, issue 1-2, 75-93

Abstract: PurposeThis paper aims to investigate the effect of fraud factors on financial statements.Design/methodology/approachBased on a sample of 98 French firms listed on the SBF 120 stock market over the period from 2015 to 2023, this paper uses a probit regression to explore the dynamics of fraud detection.FindingsThe results indicate that fraud in French firms is not solely a problem of companies in distress. Instead, it can be driven by pressure to maintain growth, investor expectations or exploit opportunities arising from rapid asset expansion. The findings also show that reduced external scrutiny associated with a lower need for capital could create greater opportunities for management to manipulate financial statements. However, strong and independent oversight enhance accountability and reduce opportunities for manipulation. Audit tenure and CEO narcissism do not have a significant direct link to fraud.Practical implicationsThis paper has several implications for regulators and auditors. Regulators are increasingly aware of the need to implement stricter oversight mechanisms, enhance whistleblower protections and design more effective compliance programs to detect and deter fraudulent activity. Similarly, auditors must exercise heightened vigilance when auditing high-performing firms with limited external financing, as these conditions may mask underlying financial misreporting.Originality/valueThis paper uses a comprehensive approach to examine the contextual factors influencing the occurrence of fraudulent financial statements, with a particular focus on French context, which is characterized by unique corporate governance structures and specific financial regulations.

Keywords: Fraudulent financial statement; Hexagon fraud; SCCORE model; Fraud theory (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-02-2025-0042

DOI: 10.1108/JFC-02-2025-0042

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