Identifying fraud using restatement information

Nourhene BenYoussef and Saqib Khan

Journal of Financial Crime, 2017, vol. 24, issue 4, 620-627

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 Dechowet 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: Fraud; Accounting restatement; Form 8K; Informational properties; Press release (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfcpps:jfc-07-2016-0046

DOI: 10.1108/JFC-07-2016-0046

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