Corporate Fraud Across the Globe

Description

Based on theoretical foundations and evidence-based case studies, this book identifies the fundamental motivations underpinning corporate fraud in both developing and developed countries. The book offers practical solutions in terms of monitoring and potentially preventing future corporate fraud activity.   It is expected that uncovered corporate fraud negatively affects the public reputation, and financial performance of fraudulent firms. However, what is of more importance for fraudulent firms is how to regain the trust of customers, investors, and other stakeholders, as this impacts the long-term sustainability of businesses. Operational strategies, including reform, provide an effective channel for a fraudulent firm’s business sustainability yet this notion remains unexplored in the literature.   This authored research book argues that the choice of appropriate operational strategies is critical as they serve as an effective channel for fraudulent firms to re-gain the trust from customers and markets, re-establish their reputation, and enhance the firm’s long-term value. The authors posit that there is no ‘one-size fits-all’ approach because the choice of effective operational strategies is needed to acknowledge the significance of context such as industry type, economic conditions, legal frameworks as well as the firm’s fraudulent characteristics.   Preface Contents List of Figures List of Tables Part I The Concept of Corporate Fraud 1 What Is Corporate Fraud? 1.1 Introduction 1.2 More Definitions 1.3 The Early Years of Corporate Fraud The South Sea Company Bubble (1720) The City of Glasgow Bank Scandal (1878) Enron Scandal (2001) WorldCom Scandal (2002) Madoff Investment Scandal (2008) Volkswagen Emission Gate Scandal (2015) 1.4 How to Stop History from Repeating Itself? 1.5 Concluding Remarks References 2 Types of Corporate Fraud 2.1 Introduction 2.2 Financial Statement Fraud Types of Accounting Frauds 2.3 Corruption 2.4 Asset Misappropriations 2.5 Concluding Remarks References 3 Theoretical and Empirical Justification of Corporate Fraud 3.1 Theoretical Justification of Corporate Fraud Fraud Triangle Theory Fraud Diamond Theory Corruption and Corporate Fraud Prevention (CCFP) Model Theory of Planned Behaviour 3.2 Empirical Justification of Corporate Fraud Board Composition Audit Matters Ownership Structure Executive Matters External Factors Detection and Prevention 3.3 Concluding Remarks References Part II Corporate Fraud Across Countries and Industries 4 Corporate Fraud in Developing Countries 4.1 Asia Pacific Region 4.2 Latin America and the Caribbean Region 4.3 Africa 4.4 Unique Features in Developing Countries Social Ties State Ownership and Political Connections Quality of Legal System 4.5 Concluding Remarks Appendix: Glossary of Terminology (from 2020 Report to the Nation on Occupational Fraud and Abuse) References 5 Corporate Fraud in Developed Countries 5.1 United States (US) 5.2 West Europe 5.3 Canada 5.4 More Discussion 5.5 Unique Features in Developed Countries Media Short Selling 5.6 Concluding Remarks References 6 Corporate Fraud Comparison Across Industries 6.1 Introduction 6.2 Percentage of Fraud Across Industries 6.3 Fraud Severity Across Industries 6.4 Industries with Most Corruption Cases 6.5 Industries with Most Asset Misappropriations Banking and Financial Services Industry Manufacturing Industry Government and Public Administration Sector 6.6 Industries with Most Financial Statement Fraud 6.7 Concluding Remarks References 7 Corporate Fraud Trends 7.1 Introduction 7.2 Evolution of Fraud 7.3 Cyber Fraud 7.4 Cybersecurity: Past and Future 7.5 Reasons for Rapid Growth of Cybercrime 7.6 How to Stop Cybercrime 7.7 Concluding Remarks References Part III How to Prevent Corporate Fraud 8 External Factors: Legal Framework and the Business Environment 8.1 Introduction 8.2 Business Environment Culture and Fraud Power Distance Individualism vs Collectivism Uncertainty Avoidance Masculinity vs Femininity Long-Term Orientation (LTO) vs Short-Term Orientation (STO) Indulgence vs Restraint Religion and Fraud 8.3 Legal Framework Investor Protection Ownership Concentration and Fraud Legal Enforcement and Fraud Private Enforcement and Fraud 8.4 Revisit the Theoretical Models 8.5 Concluding Remarks References 9 Internal Factors: Organisational Culture and Governance 9.1 Introduction 9.2 Why Internal Factors Matter 9.3 Organisational Culture and Fraud 9.4 Leadership and Fraud 9.5 Internal Control and Fraud 9.6 Management Incentives and Fraud 9.7 Ownership Types and Fraud 9.8 Stakeholders and Fraud 9.9 Concluding Remarks References Part IV Bring New Hope to the Business 10 Trust Repairing Post-scandal Priority 10.1 Introduction 10.2 Theories of Crisis Management 10.3 Types of Post-Scandal Organisation The Redemptive Organisation The Rouge Organisation The Tread Water Organisation 10.4 Right Crisis Management Good Preparation Long Term Focused Quick Response Accurate and Transparent Recovery High Ethical Standard Performance Evaluation 10.5 Concluding Remarks References 11 Internal Reform During the Post-scandal Period 11.1 Introduction 11.2 Where to Start? 11.3 Observable Warning Signals 11.4 Perpetrators’ Department 11.5 Internal Control What is Internal Control? Internal Control Approaches Internal Controls: Prevent Fraud Before it Happens Internal Controls: Accounting-Related Matters Internal Controls: Anti-Corruption Campaign Internal Controls: Asset Misappropriation Controls Internal Control: Cyber Security 11.6 The Design of Internal Controls 11.7 Concluding Remarks References References Index