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

• Published in: Asian Journal of Accounting Research
• Main Author: Madah Marzuki M.; Nik Abdul Majid W.Z.; Abu Bakar H.; Abdul Wahab E.A.; Mohd Sanusi Z.
• Format: Article
• Language: English
• Published: Emerald Publishing 2024
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85188103134&doi=10.1108%2fAJAR-01-2022-0017&partnerID=40&md5=50330631acf544a72434a3128ec1f329

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. © 2024, Marziana Madah Marzuki, Wan Zurina Nik Abdul Majid, Hatinah Abu Bakar, Effiezal Aswadi Abdul Wahab and Zuraidah Mohd Sanusi.