Comprehensive red flag model for accounting fraud detection using qualitative and quantitative variables

Pilar Lloret-Millán, Núria Arimany-Serrat and Oriol Amat

Chapter 5 in Research Handbook on Financial Accounting, 2024, pp 87-104 from Edward Elgar Publishing

Abstract: Accounting deceptions have very negative consequences for a large number of economic agents and for the credibility of the system. For this reason, it is important to strengthen preventive measures to avoid the occurrence of deception and to detect it before it is too late. The objective of this chapter is to propose a comprehensive model of warning signals based on qualitative and quantitative variables that have been identified in international academic research on this subject. The list of red flags that is proposed can help to anticipate in advance the potential deception or the one that has already been committed. The comprehensive model includes 105 warning signs referring to issues such as the company’s characteristics, particular moments in which frauds can be committed, people’s profiles and performance, corporate governance, control systems, incentive systems, objectives, financial and accounting practices, results and accounting data, among others. It is a proposal that may be useful for auditors, analysts and supervisory bodies.

Keywords: Business and Management; Economics and Finance (search for similar items in EconPapers)
Date: 2024
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