Corporate fraud and relationships: a systematic literature review in the light of research onion
| DOI | https://doi.org/10.1108/JFC-09-2020-0190 |
| Published date | 11 November 2020 |
| Date | 11 November 2020 |
| Pages | 741-764 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial crime |
| Author | Caroline de Oliveira Orth,Antônio Carlos Gastaud Maçada |
Corporate fraud and relationships:
a systematic literature review in
the light of research onion
Caroline de Oliveira Orth
Department of Accounting and Actuarial Sciences, Faculty of Economic Sciences,
Universidade Federal do Rio Grande do Sul, Porto Alegre, Brazil, and
Antônio Carlos Gastaud Maçada
Department of Administrative Science, School of Management,
Universidade Federal do Rio Grande do Sul, Porto Alegre, Brazil
Abstract
Purpose –This paper aims to investigatehow the literature has been addressingthe relationships between
corporatefraud and executive behavior and corporate fraud and informationtechnology (IT) controls.
Design/methodology/approach –A systematic literature review was performed following the planning
phases proposed by Levy and Ellis (2006), illuminated by theresearch onion, developed by Saunders et al. (2007).
Findings –The main findings of the studies analyzedrefer basically to models to assess the risk of fraud.
These risks originate from the market, from the organization itself or from individuals and also from their
relationship networks. Subsequently, the main risks identified by the authors were classified according to
their origin, the main theories approached and the “solutions”forthe risks presented by the authors as the
productof their work.
Research limitations/implications –It should be noted that this study is not free of limitations, of which
two stand out: the full body of articles on the subject was certainly not evaluated. Although the search has been
systematic and judicious both by the combination of keywords for the searches, as well as by the use of the main
databases and also by the rigor in the description of the procedures and the analysis of the articles in the l ight of
Research Onion was based on the authors’knowledge that may have been limited in some respect.
Practical implications –As a practical implication, there is the relationship of red flags and their
classificationby origin, as they canbe very useful for planning thework of internal and externalauditors.
Social implications –It is consideredthat this work can be a starting point for scholarswho are interested
in the corporatefraud phenomenon,given that the data was collectedand organized systematically.
Originality/value –The analysis of the articles in relation to Research Onion shed light on the main
philosophical and methodological characteristics of the studies. Also, regarding the relationships between corporate
fraud and IT controls, existing scientific research appears to be limited. Searches for the terms information
technology and information systems were extended , as well as search strings tested with the terms data governance
and IT governance without results. This fact demonstrates that there may be (a s far as the results have reached) a
vast area of research on corporate fraud in the field of systems knowledge and information technology.
Keywords Corporate fraud, Accounting fraud, Financial statement fraud, Fraud scandals,
Financial fraud, Executive behavior, IT controls, Research onion, Systematic literature review,
Red flags
Paper type Literature review
The authors are greatful for the support provided by CAPES (Coordenação de Aperfeiçoamento de
Pessoal de Nível Superior) and CNPq (Conselho Nacional de Desenvolvimento Científico e
Tecnol
ogico), research agencies, Brazil. Nível Superior) and CNPq (Conselho Nacional de
Desenvolvimento Científico e Tecnol
ogico), research agencies, Brazil.
Corporate
fraud and
relationships
741
Journalof Financial Crime
Vol.28 No. 3, 2021
pp. 741-764
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-09-2020-0190
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
1. Introduction
Corporate fraud is defined as “deliberate management fraud that injures investors and
creditors through misleading financial statements”(Dong et al.,2018). What is aggravating
is that fraud has crossed financialmarket boundaries to become a widespreadindustry-wide
phenomenon (Reurink, 2018).Fraud perpetrated by top executives has become a worldwide
problem like the great scandals that rocked the USA such as Enron and WorldCom, whose
consequences werefelt globally (Zahra et al., 2007).
Corporate fraud is the cause of the highest financial losses, and internal control failures
are reported in almost half of known fraud cases. The most efficient controls, both in
detecting and reducing the cost of fraud, are the so-called information technology (IT)
controls, but they are the least used. Also, all cases of financial statement fraud were
perpetrated by the main executivesof the companies (ACFE, 2018). Pricewaterhousecoopers
(2018) reveals that since2001 the fraud rate has never been as high as in 2018.
In this context, it appears that corporate fraud occurs regardless of the existence of
corporate governance and internal controlsconsidered effective (Warren et al., 2011;Griggs
and Wild, 2009). Thus, prominent literature begins to shed light on executive behavior,
seeking to understand why managers defraud their own companies (Zahra et al.,2007).
Inadequate executive behavior is directlyreflected in lower stock prices, and this executive
profile is more likely to deflect financial statements(Cline et al.,2018;Davidson et al.,2015).
On the other hand, Kamarudin et al. (2013) argue that executives only take the risk of
fraudulent financial reporting as a last resort, when other possible means to increase
earnings are no longer available.
Whatever the situation,corporate fraud should not be an option in the first place because
executives are primarily responsible for accounting information. Second, because this
attitude generates negativeinternal and external externalities beyond eroding value or even
destroying the company (Chen et al.,2011;Firth et al., 2011;Pricewaterhousecoopers, 2018).
On the other hand, Blazovich and Smith (2011) point out that ethicalcompanies have higher
profit margins and use their operating assets more efficiently and are perceived as less
risky.
In this context, we sought to identify how the literature has been addressing the
relationships between corporate fraud and executive behavior and corporate fraud and IT
controls. So:
RQ1. What does recent literatureaddress the relationship between corporate fraud and
executive behavior?
RQ2. What does recent literatureaddress the relationship between corporate fraud and
IT controls?
These two questionswill be analyzed in light of Research Onion:
RQ3. What are the main theoretical contributionsand their relationships?
The main findings are demonstratedthrough a concept map:
RQ4. What are the research gaps identified?
Thus, the objective of this study is to identifyhow recent literature has been addressing the
relationship between corporate fraud and executive behavior and corporate fraud and IT
controls, their main relationships and research gaps. This survey was carried out
systematically, as recommended by Levy and Ellis(2006). It is believed that by identifying
JFC
28,3
742
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