Audit and risk committee in financial crime prevention
| DOI | https://doi.org/10.1108/JFC-11-2017-0116 |
| Date | 07 January 2019 |
| Pages | 223-234 |
| Publication Date | 07 January 2019 |
| Author | Wan Nailah Abdullah,Roshima Said |
| Subject | Accounting & Finance,Financial risk/company failure,Financial crime |
Audit and risk committee in
financial crime prevention
Wan Nailah Abdullah and Roshima Said
Universiti Teknologi MARA –Cawangan Kedah Kampus, Merbok, Malaysia
Abstract
Purpose –This empirical studyaims to examine two areas: first, the characteristics of the audit committee
and their relationship with corporate financial 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 financial crime.
Design/methodology/approach –This empirical research wascarried out by using a Web-based data
collectionfor corporate financial crime cases.
Findings –While the results for audit committee characteristics are not supported, the findings, however,
indicate a significant relationship between the existence of a stand-alone risk committee with corporate
financialcrime incidences.
Practical implications –The result of the study servesas an empirical indicator of a firm’s 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 financial crime,as well as the empirical evidence of the effectiveness of
having a stand-alonerisk committee.
Keywords Audit committee, Corporate financial crime, Stand-alone risk committee
Paper type Research paper
1. Introduction
The widespread development of corporationsover the past three decades and more has had
influence 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 influence 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 financial crime. As
much as its carrier, the ubiquity of corporate financial crime, too, has been vast, but it has
been painting the ugly side of the corporation. Corporate financial crime is nothing new to
the world’sfinancial market. The economicdownturn in the recent years has seen the word
“financial crime”as 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 financial crime has
received less attention as compared to its counterparts. In spite of getting less attention,
corporate financial crime may have a serious and huge impact on the world’s economy.The
risks associated with corporatefinancial crime have threatened to undermine the stability of
the international financialsystem (Atbani, 2007). Consequently, the world’sfinancial system
has made considerableefforts to fight all aspects of corporate financial 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 financial crime. The truth is that no country in this world is absolutely free from
Financial
crime
prevention
223
Journalof Financial Crime
Vol.26 No. 1, 2019
pp. 223-234
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-11-2017-0116
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