Fraud Risk Factor and the Likelihood of Fraudulent Financial Reporting: Evidence from Statement on Auditing Standards No. 43 in Taiwan

YAO-TSUNG CHEN2018-09-102018-09-102008-01http://scholars.lib.ntu.edu.tw/handle/123456789/343647This research examines risk factors of the fraud triangle, core of all fraud auditing standards, for assessing likelihood of fraudulent financial reporting. Significant variables, including analyst&rsquo;s forecast error, debt ratio, directors&rsquo; and supervisors&rsquo; stock pledged ratio, percentage of sales related party transaction, number of historical restatements, and number of auditor switch, belong to pressure/incentive, opportunity and attitude/rationalization. Results indicate fraudulent reporting positively correlated to one of the following conditions: more financial pressure of a firm or supervisor of a firm, higher percentage of complex transactions of a firm, more questionable integrity of a firm&rsquo;s managers, or more deterioration in relation between a firm and its auditor. A simple logistic model based on examples of fraud risk factors of ISA 240 and SAS 99 gauges the likelihood of fraudulent financial reporting and can benefit practitioners.[SDGs]SDG16Fraud Risk Factor and the Likelihood of Fraudulent Financial Reporting: Evidence from Statement on Auditing Standards No. 43 in Taiwanconference paper10.19030/jber.v7i2.2262