Internal Controls over Financial Reporting (ICFR) and Fraud Prevention: What Works and Why

This review explains how strong internal controls over financial reporting reduce fraud risk by limiting opportunities, increasing detection probability, and strengthening accountability mechanisms. (Doyle et al., ۲۰۰۷) Evidence shows that disclosed ICFR weaknesses are systematically associated with higher likelihood of financial reporting fraud. (Donelson et al., ۲۰۱۷) Research on accounting misstatements indicates that fraud-risk prediction improves when firms are evaluated using structured indicators linked to governance and reporting processes. (Dechow et al., ۲۰۱۱) Whistleblowing research highlights that external and internal reporting channels can be powerful detection mechanisms when credible protection and incentives exist. (Dyck et al., ۲۰۱۰) Capital-market studies suggest that ICFR deficiencies can increase perceived risk and financing costs when investors doubt reporting reliability. (Ashbaugh-Skaife et al., ۲۰۰۹) Market-reaction evidence indicates that investors respond not only to the existence of a weakness but also to its characteristics and perceived severity. (Hammersley et al., ۲۰۰۸) Cost-of-capital evidence suggests that internal control weakness disclosures are associated with higher cost of equity, consistent with increased information risk. (Ogneva et al., ۲۰۰۷) Disclosure research shows that post-SOX reporting about material weaknesses created an empirical foundation for studying which controls fail and how firms remediate them. (Ge & McVay, ۲۰۰۵)

کلیدواژه ها:

ICFR ، fraud prevention ، SOX ۴۰۴ ، audit quality