Determinants of Fraudulent Financial Reporting in Nigeria: Integrating Fraud Triangle Theory Elements
- December 29, 2021
- Posted by: RSIS
- Categories: Accounting, IJRISS
International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue XII, December 2021 | ISSN 2454–6186
ABILORO, Toba Olakunle ACA1, OLORUNFEMI, Oladele Ebenezer2
1Lecturer, Accountancy Department, Rufus Giwa Polytechnic, Owo, Ondo state, Nigeria.
2Lecturer, Management Science Department, Bamidele Olumilua University of Education, Science and Technology, Ikere-Ekiti, Ekiti state, Nigeria
Abstract: This paper investigates the key determinants of fraudulent financial reporting in Nigeria by integrating fraud triangle theory elements (that is, Pressure [external pressure-Debt, financial stability-LDR, and financial target-ROA], Opportunity [ineffective monitoring], and Rationalization [auditor’s change]. The population this study is banking company listed on the Nigerian Stock Exchange with a total sample of 135 from 15 banking companies between 2012-2020. Based on the results of research using regression analysis, the findings showed that pressure is having both positive and significant relationship with fraudulent financial reporting; also, rationalization is having significant but negative relationship, whereas opportunity is having positive but insignificant relationship. The study therefore conclude that among others, these elements are the key determinants of fraudulent financial reporting and also recommends that company should avoid huge debt profile and heavy target on the management in order to reduce the pressure to perpetrate fraud by the management. Also, they are encouraged to always appoint audit firm with required quality and integrity, and lastly, they should always enforce constant audit rotation as stipulated by the standard.
Key Words: Fraudulent Financial Reporting, Pressure, Opportunity, Rationalization.
I. INTRODUCTION
The 21st century is a period where materialistic tendencies affect both corporate and personal life in the society. These tendencies decreases corporate wellbeing, and put unusual and extraordinary pressure on personal resources in a manner that impose unsatisfied hunger for more economic resources in order to sustain an individual modern social status as against what the value were in the 18th century such as integrity, probity and good character in general terms. This modern menace has resulted into pressure for different fraudulent activities in the corporate world, even in our entire society and has resulted into corporate failure (Omoolorun & Abilogun, 2017).
