The Panel Data Analysis of Fraud Risk in Financial Auditing

Author:Univ. Prof. Elisabeta JABA, Ph. D. Emeritus; Ioan-Bogdan ROBU, Ph. D. Student; Univ. Lecturer Christiana-Brigitte BALAN, Ph. D.; Mihaela-Alina ROBU, Ph. D. Student

JEL:C12, C58, M41, M42

DOI:

Keywords:financial auditing, fraud risk, panel data analysis, financial ratios

Abstract:
The purpose of an audit is to express an opinion by the auditor on the accuracy of the financial statements of the client company. During its engagement, the auditor should also assess the fraud risk and how much it can distort the information in the financial statements. The practice has shown that depending on its determinants, synthesized in pressures, opportunities and attitudes, there are significant differences in terms of the risk of fraud. Differences can be identified at branch level and occur between firms or at different periods of times, between financial years. In the first phase, the study aims to estimate the fraud risk determined by indebtedness, as a pressure factor and in the second phase to analyze the influence of some financial rates of return to the fraud risk, using panel data. The study considered a sample of 50 companies listed on the New York Stock Exchange and which have been subject or not to financial fraud in fiscal year 2002. For data analysis the authors used the statistical software SPSS 19.0 and SAS 9.2. The analysis results indicate significant differences in terms of fraud risk caused by financial leverage, as an indicator of indebtedness. There are identified cross-sectional differences at the level of the companies considered in the sample and cross-time differences at the level of the financial years for the period studied. These differences, over time and across firms of the sample, are explained by the influence of rates of return on the fraud risk.\r\n\r\n

---