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International Journal of Research and Scientific Innovation (IJRSI) |Volume X, Issue I, January 2023|ISSN 2321-2705

Critical Insights into The Attributes of An Effective Board of Directors as A Deterrent to Corporate Fraud

Abdul Azim Mohd Uzir, Nur Ashikin Mohd Saat*
Department of Accounting and Finance, School of Business and Economics, Universiti Putra Malaysia
*Corresponding Author

IJRISS Call for paper

Abstract: – This paper examined the characteristics of board of directors that are effective in mitigating corporate frauds by critically reviewing findings from previous and recent studies. The board of directors’ roles are first assessed in order to investigate their statutory duties and responsibilities, which will influence their governing actions to implement and enforce monitoring and disciplining measures to prevent misconduct and malpractice. The gender diversity of board members, corporate experience, independence, and frequency of board meetings are key board authorities, reputation, and influence in controlling fraudulent conduct in organisations. The establishment of specific law enforcement authorities and laws, specifically the Anti-Corruption Commission, the Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities, the Penal Code, and the Companies Act, are critical components in ensuring that fraudulent activities are prevented.

Keywords: Corporate Governance, Board of Directors, Fraud, Authorities, Laws.


Generally, corporate fraud is known as illegal activities intentionally committed by individuals within the company or third parties with the purpose of providing misleading information to the public or gaining advantages over others (Chartered Institute of Management Accountant, 2009). Common types of corporate fraud include theft of assets, misuse of accounts, financial accounting misstatements, bribery, corruptions and many more.
Essentially, corporate fraud has been a serious matter which serves as the biggest threat towards an organization’s future prospects as it would most definitely impair a company’s image and reputation. The world has become accustomed with the cases of fraudulent activities in the corporate sector. Basically, corporate fraud does not only bring negative impacts towards the company, but also adversely impacts the public (Sharina & Rohana, 2016). This is evident from well-known cases such as Enron, Worldcom and Lehman Brothers where investors’ confidence was widely damaged as they suffered massive losses (Barth & Landsman, 2010).
Meanwhile, in Malaysia, illegal matters within the corporate sector have seen an alarming increase lately. Survey conducted by PricewaterhouseCoopers (2020) discovered that from 2016 to 2020, fraud and corruption cases in companies across the country have significantly increased from 30% to 43%.