Management Fraud Propensity Factors, Governance Interactions and Earnings Manipulation: a Case of Malaysian Public Listed Companies

• DOI: 10.35940/ijrte.c6455.098319
• Publication Date: 2019-10-16T06:28:47Z
• Authors: Mohamad Ezrien Mo...; Mohd Fairuz Md Sa...; ; Azlina Ahmad
• Keywords: Earnings Management; Agency cost

This study aims to determine Management Fraud Propensity Factors of Triangle and International Standards on Auditing no: 240 (ISA 240) relationship with earning manipulation. It also examines potential moderating effect Corporate Governance, measured by index as proxy opportunity between Earning Manipulation. Samples this consisted 504 firm-year observations comprising 252 earnings manipulating firms matched non-earnings based industry, year size. governance disclosure was using corporate (CGI), replicated from ASEAN Governance Scorecard (ACGSC) components. fraud propensity factors (pressure/ incentives, opportunity, rationalization/ attitude) were examined logistical regression assess is unique it utilised CGI for replacing limited numerous attributes commonly used argued deficiency in portraying existing linkage within ecosystem. tested its management incentives; manipulation, line Agency Theory. Results revealed pressure/incentives (recurring negative cash flows operation, rapid growth, unusual profitability, need financing), (corporate index) rationalisation/attitudes (management interest trend) significantly related Contradictory expectation, showed significant positive interaction strengthening pressure-related due recurring operations Possible explanation strong but experiencing weak financial standings are constantly pressured shareholders meet their interests which driven manipulate profit. provides tools regulators stay vigilant characteristics manipulation engagement useful providing insights selecting stocks not prone