Applied Business Research 2022

Running Head: APPLIED BUSINESS RESEARCH
APPLIED BUSINESS RESEARCH
Name of the Student
Name of the University
Author Note

1APPLIED BUSINESS RESEARCH
Table of Contents
Introduction................................................................................................................................2
Literature Review.......................................................................................................................2
Conclusion..................................................................................................................................4
Research Background.................................................................................................................5
Research Objectives and Research Questions............................................................................5
List of Keywords used for Literature Review............................................................................5
Ethical Consideration.................................................................................................................5
Reference....................................................................................................................................6

2APPLIED BUSINESS RESEARCH
Introduction
Accounting fraud is the intentional manipulations of the financial statements for
creating the façade of the financial health of the company. It involves organization itself or
the employees and they are misleading towards the shareholders and the investors. Hence,
under this assignment, analysis will be done on the different aspects of accounting fraud.
Literature Review
Accounting fraud is the deliberate manipulations of the accounting records for making
the condition or the financial performance of the organization to look better than what
actually it is.The business scandal arises from the intentional manipulations of the financial
statements with disclosures of the financial misdeeds by the trusted organization’s executives.
These types of misdeeds involves complex methods for misdirecting or misusing the funds,
overstating values of the corporate assets, overstating the revenues and reporting of the
existence of the liabilities (E. Lokanan2014).
There are wide majority of the companies that provides the financial reports, which
are free from the material misstatements. The fraudulent activities continue to exist that
includes the case of well-publicized frauds of Enron as well as WorldCom. There are
basically two types of fraud that is committing fraud by the top management for maintaining
the illusion of the company’s high performance for raising the capital for their entity and
misleading their investors as well as others.The second type includes fraud committed by the
top or the middle level management for their personal gains in order to earn the enhanced
compensation and bonuses (Mansor2015).
Motivations for Accounting Fraud
The national commission fraud report has revealed that that the accounting fraud
usually occurs because of the result of certain individual, institutional, or environmental

3APPLIED BUSINESS RESEARCH
forces as well as opportunities. These forces as well as opportunities add incentives and
pressures, which encourages the companies and individuals for engaging in the accounting
fraud. The accounting reporting fraud may occur, if there is right mixture of the forces as well
as responsibilities (Kanapickienė and Grundienė2015). The desire for obtaining higher prices
from the stock or the debt offering or for meeting the expectations of the investors that is
pressures of capital market is the frequent incentive for the accounting fraud. The emergence
of the clear themes out of the recent accounting scandals is that the way the compensation of
employee are tied up with the performance of the firm; it provides the incentives for the
accounting fraud (Purdaand Skillicorn2015).
The occurrences of the accounting fraud have led towards looking for enabling and
strengthening the corporate governance in the organization. Corporate governance is
combination of the rules, laws and processes, with the help of which the business are
regulates, operates and controlled (Linet al. 2015). However, the company who does and
indulged in the accounting fraud does not form the mechanism of governance effectively in
the organization. It is because of the ineffective mechanism of governance in the organization
such as lack of the board committees that consists of few or the single member, these types of
fraud occurs in the organization. Moreover, corporate governance failures also occur because
of inadequate qualified members of board committee and ignorance by the regulators, analyst
(Tricker and Tricker2015).
Consequences of Accounting Fraud
The outcome of the accounting fraud leads towards filing for bankruptcy, becoming
defunct, experiencing decline of the significant abnormal stock price, delisting from the
national stock exchange. Moreover, it also results into termination of the significant number

4APPLIED BUSINESS RESEARCH
of the executives or forcing for resigning. Further, it also leads towards taking legal action,
SEC enforcement actions against the fraud perpetrators (Huber 2017).
Conclusion
Hence, it is concluded from the analysis of this paper is that accounting fraud is the
issue of the great concern for the business community that includes investors and the
potential investors, general public, board of the directors, who bears the responsibility to
prepare the financial reports. Moreover, it also includes the auditors who are responsible for
rendering the opinion for whether the financial reports has been reported fairly and it presents
the financial position as well as operational results in conformity with the standard
established. Further, the factors that is responsible for the accounting fraud is the forces as
well as opportunities, which encourages the companies and individuals for engaging in the
accounting fraud. Moreover, the action that can be taken in order for reducing the accounting
fraud occurrence is to apply the framework of corporate governance in the organization.
Therefore, effectiveness of corporate governance will help in reducing the likelihood of
occurrences of scandals and accounting fraud. It encompasses the external and internal
factors, which influence the interest of the organizational stakeholders. Hence, accounting
fraud can be minimized with the help of principles of corporate governance that enables
fairness, accountability, transparency as well as responsibility in the organization. Lastly, the
consequence of the fraud leads towards many actions from bankruptcy to decline of shares to
lawsuits and SEC enforcement actions.

5APPLIED BUSINESS RESEARCH
Research Background
The accounting fraud has increasingly moved from fringes of the financial market
activity for becoming the widespread type of the behavior all throughout of the industry. The
financial crisis, aftermath of 2007-2008 has revealed the great number of accounting fraud
and scandal, under which, the participants of the financial market has infected the market
with the fraudulent information for gaining the personal advantages.
Research Objectives and Research Questions
The main objectives of the proposed study is discuss about accounting fraud, its different
factors that lead towards committing the accounting fraudulent activities, mo and
consequences of the fraud. Moreover, the research questions generated for the analysis of the
paper is as follows:
 How does the accounting fraud can be minimized?
 What actions can be taken for effective implementations of corporate governance?
List of Keywords used for Literature Review
The keywords used in the literature review are business scandals, material
misstatements, corporate governance are SEC enforcement.
Ethical Consideration
In research, ethical consideration is very critical. Ethics are the standards or norms for
the conduct, which is used for distinguishing between the right as well as wrong. In the
assessment of this research paper, all the data used and the information presented is correct as
well as authentic. Further, for the analysis of this research paper, secondary data as well as
published journal articles and other resources are used in order to complete the study.

6APPLIED BUSINESS RESEARCH
Reference
E. Lokanan, M., 2014. How senior managers perpetuate accounting fraud? Lessons for fraud
examiners from an instructional case. Journal of Financial Crime, 21(4), pp.411-423.
Huber, W., 2017. Forensic accounting, fraud theory, and the end of the fraud
triangle. Journal of Theoretical Accounting Research, 12(2).
Kanapickienė, R. and Grundienė, Ž., 2015. The model of fraud detection in financial
statements by means of financial ratios. Procedia-Social and Behavioral Sciences, 213,
pp.321-327.
Lin, C.C., Chiu, A.A., Huang, S.Y. and Yen, D.C., 2015. Detecting the financial statement
fraud: The analysis of the differences between data mining techniques and experts’
judgments. Knowledge-Based Systems, 89, pp.459-470.
Lisic, L.L., Silveri, S.D., Song, Y. and Wang, K., 2015. Accounting fraud, auditing, and the
role of government sanctions in China. Journal of Business Research, 68(6), pp.1186-1195.
Mansor, N., 2015. Fraud triangle theory and fraud diamond theory. Understanding the
convergent and divergent for future research. International Journal of Academic Research in
Accounting, Finance and Management Science, 1, pp.38-45.
Purda, L. and Skillicorn, D., 2015. Accounting variables, deception, and a bag of words:
Assessing the tools of fraud detection. Contemporary Accounting Research, 32(3), pp.1193-
1223.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.