Financial Crime World

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Financial Statement Manipulations: A Survey of Auditors’ Experiences

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Step 1: Identifying the Main Research Question

The main research question of this study is to determine the types of financial statement manipulations that auditors most often encounter when performing the audit process.

Step 2: Summarizing the Results from the Survey

The survey results show that auditors most often encountered irregularities regarding accounts receivable and inventories, and least often regarding cash. The results also indicate that balance sheet items were more manipulated than income statement items.

Key Findings:

  • Auditors most often encounter irregularities in accounts receivable and inventories.
  • Cash is the least often manipulated financial item.
  • Balance sheet items are more frequently manipulated than income statement items.

Step 3: Identifying the Most Effective Test for Detecting Irregularities

The in-depth test of transactions was identified as the most effective test for detecting irregularities in financial statements, with 44.44% of respondents indicating its effectiveness.

Most Effective Test:

  • In-depth test of transactions is the most effective method for detecting irregularities.

Step 4: Examining Statistically Significant Differences Between Countries

The Kruskal–Wallis test revealed that there are statistically significant differences between countries regarding groundless overstatement of revenues and misrepresentation of inventories item.

Country-Specific Findings:

  • Groundless overstatement of revenues shows statistically significant differences between countries.
  • Misrepresentation of inventories also shows statistically significant differences between countries.

Step 5: Determining the Country with the Highest Mean Value of Ranking and Median

For groundless overstatement of revenues, the Republic of Serbia had the highest mean value of ranking and median. For misrepresentation of inventories, the Republic of Serbia also had the highest mean and median values.

Country-Specific Rankings:

  • The Republic of Serbia has the highest rankings for both groundless overstatement of revenues and misrepresentation of inventories.
  • The country has the highest mean value of ranking and median for both items.

Step 6: Examining Statistically Significant Differences Between Years of Experience in Auditing

The Kruskal–Wallis test revealed that there are no statistically significant differences between years of experience in auditing regarding groundless overstatement of revenues, but there is a statistically significant difference for misrepresentation of inventories item.

Year-Specific Findings:

  • There are no statistically significant differences in years of experience for groundless overstatement of revenues.
  • Years of experience have a statistically significant impact on misrepresentation of inventories.

Step 7: Determining the Year(s) of Experience with the Highest Mean Value of Ranking and Median

No conclusions can be drawn from this step as the problem statement does not provide sufficient information to answer it.

Conclusion:

  • The study aimed to investigate financial statement manipulations experienced by auditors.
  • Key findings include the most effective test for detecting irregularities, country-specific differences, and year-specific variations.