What's the consequence of exam cheating to honest students?5 answersCheating on exams has consequences for honest students. It can result in lower grades for honest students compared to cheaters, affecting their chances of graduating with honors and obtaining scholarships. Additionally, the reputation of academic institutions can be harmed if they are known for having a high incidence of cheating. This can lead to employers being less willing to hire students from these institutions, putting honest students at a disadvantage in the job market. Furthermore, cheating undermines the central purpose of a university and corrupts the meaning of grades as a measure of subject matter mastery, which ultimately devalues the hard work and effort put in by honest students.
Different types of financial statement fraud?5 answersFinancial statement fraud can appear in various forms such as hiding assets, exaggerating assets, sales and profits, understating liabilities and costs. Companies create fraudulent financial statements for a variety of reasons, including financial challenges and debt payment delays. The fraud pentagon theory explains the elements that cause fraud through five elements: pressure, opportunity, rationalization, ability or potential, and arrogance. Previous studies have attributed financial statement fraud to reasons such as proposed unrealistic goals, lack of controls, unethical financial decisions, complexity of information technology, desire to achieve goals and objectives, unhealthy competition, fear of losing job/bonuses, criminal collaboration, and challenges in meeting financial targets. The theories and determinants of financial statement fraud include the Fraud Triangle Theory, Fraud Diamond Theory, Fraud Scale Theory, and Fraud Pentagon Theory, which highlight factors such as nature of industry, total accrual, capability, personal integrity, competence, and rationalization.
What are the effects of accounting fraud on the third parties?2 answersAccounting fraud has significant effects on third parties. It can lead to problems regarding the future of the business and impact the country's economy, affecting partners, employees, investors, the state, and society as a whole. In the product market, fraudulent accounting can distort the allocation of resources among firms, leading to suboptimal actions and pricing decisions that negatively impact social welfare. The damage caused by accounting fraud is catastrophic to economic development, resulting from the pursuit of interests and illegal actions for economic benefits. Fraudulent accounting can also lead to the misallocation of real resources, with bad managers hiring and investing excessively, further distorting resource allocation. Additionally, accounting fraud can affect the monitoring of managers and may result in disciplinary actions for directors in the managerial labor market.
What are the effects of accounting fraud on society?2 answersAccounting fraud has significant effects on society. It undermines public confidence in institutions such as stock markets, auditors, bankers, corporate executives, and government. Fraud and corruption in government, financial institutions, corporations, NGOs, and religious institutions impact the legitimacy of these institutions and how economic, political, and social life is organized. Accounting fraud also has a catastrophic impact on economic development. It can lead to serious problems regarding the future of businesses and can damage the country's economy. Additionally, fraud can result in the loss of investor confidence, damage to reputation, and increased costs of goods and services for the wider public. Therefore, it is crucial to take precautions, implement proper safeguards, and have effective accounting fraud control measures in place.
What are the consequences of accounting fraud for suppliers?2 answersAccounting fraud can have significant consequences for suppliers. When customer firms engage in unethical behavior such as fraud, it can distort suppliers' investment decisions. Suppliers tend to invest more during the cheating period when their customers are involved in frauds, compared to unaffected suppliers. The severity of the customers' misreporting also influences the magnitude of suppliers' investment distortions. These overinvestments caused by customers' misreporting can lead to inferior future performance for suppliers and subsequent negative market reactions. However, the distortion effect on suppliers can be mitigated by factors such as more industry peers' voluntary disclosures and analyst coverage, lower sales volatility, and lower relationship-specific investments. Therefore, it is crucial for suppliers to have access to credible supply-chain information to make informed investment decisions and minimize the negative consequences of accounting fraud.
What are the specific consequences of accounting fraud for employees?3 answersAccounting fraud has specific consequences for employees. Employees at fraud firms experience a significant loss of wages, with about 50% of cumulative annual wages being lost compared to a matched sample. The separation rate is also much higher after periods of fraudulent financial reporting. Fraud firms tend to overbuild and hire new, lower-paid employees as part of the fraud, resulting in positive employment growth during fraud periods. However, when the fraud is revealed, firms shed workers, leading to most of the negative wage consequences. Low-wage employees, who are unlikely to have perpetrated the fraud, experience more severe wage losses. Negative wage effects are larger in thin labor markets and for fraud firms that go bankrupt.
