Audit and risk committee in financial crime prevention

Date07 January 2019
Publication Date07 January 2019
AuthorWan Nailah Abdullah,Roshima Said
SubjectAccounting & Finance,Financial risk/company failure,Financial crime
Audit and risk committee in
nancial crime prevention
Wan Nailah Abdullah and Roshima Said
Universiti Teknologi MARA Cawangan Kedah Kampus, Merbok, Malaysia
Purpose This empirical studyaims to examine two areas: rst, the characteristics of the audit committee
and their relationship with corporate nancial crime so as to ensure that their effectiveness as a corporate
governance mechanism is still relevant; and second, the effectiveness of having a risk committee which is
separatedfrom the audit committee in the prevention of corporate nancial crime.
Design/methodology/approach This empirical research wascarried out by using a Web-based data
collectionfor corporate nancial crime cases.
Findings While the results for audit committee characteristics are not supported, the ndings, however,
indicate a signicant relationship between the existence of a stand-alone risk committee with corporate
nancialcrime incidences.
Practical implications The result of the study servesas an empirical indicator of a rms consideration
in decidingon the implementation of a stand-alone risk committee fromits audit committee.
Originality/value Both the descriptive and correlation analyses produced by this paper provide new
insights into the extent of corporate nancial crime,as well as the empirical evidence of the effectiveness of
having a stand-alonerisk committee.
Keywords Audit committee, Corporate nancial crime, Stand-alone risk committee
Paper type Research paper
1. Introduction
The widespread development of corporationsover the past three decades and more has had
inuence over and in our daily lives, involving a whole load of economic activities and
service provisions such basicutilities, transportation, telecommunication and so on (Minkes
and Minkes, 2008). This rise of corporations and their inuence has inherently brought
along the dark side of the organisation that affects us, the people, the economy and the
environment. They carry along their offspring, the so called corporate nancial crime. As
much as its carrier, the ubiquity of corporate nancial crime, too, has been vast, but it has
been painting the ugly side of the corporation. Corporate nancial crime is nothing new to
the worldsnancial market. The economicdownturn in the recent years has seen the word
nancial crimeas a recurring subject in the media coverage. It relates to a wide range of
criminal activities involving money laundering, fraud, bribery, tax avoidance and evasion,
corruption, etc. (International Monetary Fund [IMF, 2001]). Corporate nancial crime has
received less attention as compared to its counterparts. In spite of getting less attention,
corporate nancial crime may have a serious and huge impact on the worlds economy.The
risks associated with corporatenancial crime have threatened to undermine the stability of
the international nancialsystem (Atbani, 2007). Consequently, the worldsnancial system
has made considerableefforts to ght all aspects of corporate nancial crimes. The downfall
of many giant companies, such as Pharmalat, Enron and WorldCom, together with their
highly reputable auditor, Arthur Anderson, has been the indication of the existence of
corporate nancial crime. The truth is that no country in this world is absolutely free from
Journalof Financial Crime
Vol.26 No. 1, 2019
pp. 223-234
© Emerald Publishing Limited
DOI 10.1108/JFC-11-2017-0116
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