Using Economic Links between Firms to Detect Accounting Fraud

• 成果类型: Article
• 署名作者: Li, Chenchen; Li, Ningzhong; Zhang, Frank
• 署名单位: Nanjing University; University of Texas System; University of Texas Dallas; Yale University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0313
• 发表日期: 2023
• 页码: 399-421
• 关键词: information externalities; supply chain; earnings; disclosure; customers; COMPETITION; QUALITY; sales

摘要

We explore whether accounting fraud can be detected using the information of firms economically linked to a focal firm. Specifically, we examine whether customer information disclosed by a supplier firm, combined with customers' accounting information, helps to detect the supplier's revenue fraud. We first confirm the economic link between the supplier and customers by showing a strong positive correlation between the supplier's sales growth and the growth rate of total customer purchases. We then introduce two variables based on customer accounting information-the discrepancy between supplier sales growth and customer purchase growth and customer excess purchases-and show that they are predictive of supplier revenue fraud. We conduct a battery of cross-sectional tests and generally find results to vary cross-sectionally in a predictable way. Finally, the out-of-sample tests indicate that adding the two variables to Dechow, Ge, Larson, and Sloan (2011) model increases fraud prediction accuracy.