MEASURING THE POTENTIAL FOR FINANCIAL REPORTING FRAUD IN A HIGHLY REGULATED INDUSTRY

Abstract

Fraud in financial reporting is an intentional misstatement of financial statements to mislead the users. It caused huge losses to the organizations, erodes accounting profession’s image and affects the public confidence on published financial statements. This paper aims to examine the relevance of the theory of reasoned action in measuring the intention towards fraud in financial reporting in a highly regulated industry. Partial least squares structural equation modelling was used for data analysis. Findings indicate that the attitude and subjective norms influencedintention for fraud in financial reporting among the participants in financial reporting process,controlling for the effect of firm type. The findings expand the applicability of the theory of reasoned action to the highly regulated industry and provide better understanding on the factors influencing fraud in financial reporting to the top management within the industry. This paper concludes with limitations and avenues for future research.