The Japanese Accounting Review
Online ISSN : 2185-4793
Print ISSN : 2185-4785
ISSN-L : 2185-4785
MAIN ARTICLES
Predicting Accounting Fraud: Evidence from Japan
Mingzi SongNaoto OshiroAkinobu Shuto
Author information
JOURNAL FREE ACCESS

2016 Volume 6 Issue 2016 Pages 17-63

Details
Abstract

This study develops a prediction model for identifying accounting fraud by analyzing the accounting information for Japanese firms. In particular, we (1) explore the characteristics of accounting fraud firms by analyzing financial information obtained from annual reports (yukashoken-houkokusho in Japanese) and (2) develop a model for predicting accounting fraud based on the characteristics of Japanese fraud firms. To identify the characteristic of fraud firms, we focus on 39 variables for the eight factors of “accruals quality,” “performance,” “nonfinancial measures,” “off-balance-sheet activities,” “market-related incentives,”“conservatism,” “real-activities manipulation,” and “Japanese-specific factors.” Through our univariate analysis and model building process, we find that “accrual quality,” “market-related incentives,” “real-activities manipulation,” “conservatism” and “Japanese-specific factors” are generally useful for detecting accounting fraud. We also conduct several analyses that test the predictive ability of our models, including (1) the detection rates of fraud firms, (2) Type I and Type II error rates, (3) marginal effect analysis on independent variables, and (4) robustness tests on time periods and industry clustering. We find that our models have generally higher predictive power in detecting accounting fraud. We expect that our models can be used widely in various accounting and finance practices.

Information related to the author
© 2016 Research Institute for Economics & Business Administration - Kobe University
Previous article Next article
feedback
Top