An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Charlotte J. Wright
Oklahoma State University

Christopher J. Skousen
University of Texas at Arlington

Abstract: This study identifies the contemporaneous risk factors empirically related to financial statement fraud. Extant research identifies a number of individual factors related to fraud in various settings. In this study we examine an array of potential fraud risk factors in order to identify a comprehensive set of coexistent factors that are consistently linked to the incidence of financial statement fraud. Further, using the identified fraud risk factors, we construct a robust fraud prediction model. The analysis yields a number of significant factors related to pressure and opportunity. Using the significant fraud risk factors we then construct a fraud prediction model. The model correctly classifies fraud and no-fraud firms approximately 69.77 percent of the time, a substantial improvement over other fraud prediction models.

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