Title: “Auditors’ Perspective on Financial Fraud in Pakistan: Unraveling the Web of Audacity and Institutional Weaknesses”
Background
In today’s complex financial landscape, the issue of financial fraud has gained significant attention, especially in emerging economies like Pakistan. Understanding the root causes and manifestations of financial fraud is crucial in this context. In this article, we explore the findings from a study conducted by University of Dundee researchers focusing on auditors’ perspectives regarding accounting manipulation techniques in Pakistan (Rashid, et al., 2023).
The Importance of Auditors’ Perceptions
The study highlights the role of auditors, as they play a pivotal part in identifying and reporting financial irregularities to stakeholders, ensuring robust financial disclosure practices. The researchers interviewed 50 Pakistani auditors to understand their views on the prevalence, motivations, and enabling factors behind financial fraud in Pakistan.
Motivations for Financial Fraud
According to the study, the motivation for financial fraud arises from economic pressures and the need to demonstrate corporate strength, overshadowing moral imperatives for honest reporting.
Enabling Factors and Malpractice in Financial Reporting
The research findings reveal widespread malpractice in Pakistani financial reporting, involving deliberate misreporting of underlying financial realities. Some of the techniques used to distort financial figures, according to the auditors interviewed, include:
- Recording false revenue
- Shifting expenses
- Manipulating asset values
Institutional Pillars Dismantled
The investigation also highlighted how each of the three institutional pillars – regulatory, normative, and cultural/cognitive – has been dismantled in Pakistan, leaving a questionable foundation for maintaining legitimacy and adhering to social contracts.
Implications and Future Research
The study’s findings emphasize the need for a stronger understanding of the factors that drive fraud in practice, as contemporary empirical evidence fails to provide clarity regarding theoretical modeling. The researchers tried to address this issue by shedding light on the implications of their findings for the role of the regulatory, normative, and cultural/cognitive institutional pillars in the need for legitimacy from the auditors’ perspective.
Conclusion
Understanding auditors’ perspectives on financial fraud in Pakistan is crucial for stakeholders seeking to navigate the complexities of financial reporting in emerging economies. The study’s findings call for more comprehensive and rigorous approaches to ensure accurate financial reporting and strengthen the institutional foundations that underpin legitimacy and compliance.
References
Rashid, M., Khan, N. U., Riaz, U., & Burton, B. (2023). Auditors’ Perspectives on Financial Fraud in Pakistan – Audacity and the Need for Legitimacy. Journal of Accounting in Emerging Economies, 13(1), 167-194. https://doi.org/10.1108/JAEE-04-2021-0135.