Understanding investor perceptions of financial statement fraud and their use of red flags: evidence from the field

• 成果类型: Article
• 署名作者: Brazel, Joseph F.; Jones, Keith L.; Thayer, Jane; Warne, Rick C.
• 署名单位: North Carolina State University; George Mason University; University of Virginia; University System of Ohio; University of Cincinnati
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-015-9326-y
• 发表日期: 2015
• 页码: 1373-1406
• 关键词: risk-aversion; self-protection; Cash flows; insurance; accruals; GENDER

摘要

We surveyed 194 experienced, nonprofessional investors to examine the relations between their perceptions of the frequency of financial reporting fraud, their use of financial statement information, the importance they place on conducting their own fraud risk assessments, and their use of fraud red flags. We find that investors' perceptions of the frequency of fraud and their use of financial statement information positively influence the importance they place on conducting their own fraud risk assessments. Investors who place importance on assessing fraud risk make greater use of fraud red flags to avoid fraudulent investments. Red flags commonly relied upon include SEC investigations, pending litigation, violations of debt covenants, and high management turnover. Investors rely less on company size and age, the need for external financing, and the use of a non-Big 4 auditor. We also find evidence of positive associations between the use of specific red flags and investors' portfolio returns.