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Risk Management practices and potential fraudulent financial reporting: evidence from Malaysia

Author

Listed:
  • Marziana Madah Marzuki
  • Wan Zurina Nik Abdul Majid
  • Hatinah Abu Bakar
  • Effiezal Aswadi Abdul Wahab
  • Zuraidah Mohd Sanusi

Abstract

Purpose - This paper investigates the relationship between risk management practices and potential fraudulent financial reporting in Malaysia by considering recent regulatory reforms of the Malaysian government on risk management practices. Design/methodology/approach - The sample of this study was based on 257 firm-year observations during the 2012–2017 period. This study employed panel-least square regressions with period fixed effects. Findings - This study found a significant association between risk management activities in the disclosure and potential fraudulent financial reporting. Nevertheless, this study found there is insignificant effect of the risk-management committee in reducing potential of fraudulent financial reporting. Originality/value - This study is a pioneer research that relates firms’ risk management practices with potential fraudulent financial reporting measured by F-score. Thus, this study provides an insight to regulators on the extent of risk-management practices in deterring potential fraudulent financial reporting which can be used as an input for greater enforcement of risk-management regulations.

Suggested Citation

  • Marziana Madah Marzuki & Wan Zurina Nik Abdul Majid & Hatinah Abu Bakar & Effiezal Aswadi Abdul Wahab & Zuraidah Mohd Sanusi, 2024. "Risk Management practices and potential fraudulent financial reporting: evidence from Malaysia," Asian Journal of Accounting Research, Emerald Group Publishing Limited, vol. 9(2), pages 116-126, March.
    • Handle: RePEc:eme:ajarpp:ajar-01-2022-0017
    DOI: 10.1108/AJAR-01-2022-0017
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    More about this item

    Keywords

    Risk management; Fraudulent financial reporting; F-score; Corporate governance; G34; G38; M41; M48;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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