Peter R. Gillett
Rutgers, The State University of New Jersey
Nancy Uddin
Monmouth University
Abstract: This study investigates factors indicating CFO intention to report fraudulently in the financial statements, using structural equation modeling to analyze survey data obtained from 139 CFOs. It finds that: (a) an extended reasoned action model fits the data well and explains CFO intention to report fraudulently; (b) company size, not usually included among the red flags for fraud, is a good indicator of CFO intention to report fraudulently; and (c) compensation structure, usually considered a red flag for fraud, is not a good indicator of CFO intention to report fraudulently. Informal and formal audit methods for assessing management attitudes towards fraudulent reporting are recommended, as they offer the best opportunity significantly to improve auditors' ability to predict such fraud. Implications for future research and practice development are considered.
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