Assessing the Risk of Fraud in Published IFRS and Nigerian GAAP Financial Reports: A Comparative Application of the Beneish Models
The IUP Journal of Accounting Research & Audit Practices, Vol. XIV, No. 1, January 2015, pp. 21-42
Posted: 6 Oct 2015
Date Written: September 28, 2015
With the adoption of IFRS on January 1, 2012, the publicly listed companies in Nigeria had their existing financial reporting frameworks that were based on Nigerian GAAP (SASs) alternated with the IASB’s new accounting standards. Although the manufacturing sectors of the Nigerian economy had, prior to the adoption, shared in the after-effect of the global economic distress that was chiefly engineered by a series of corporate failures and financial scandals, the advent of the new principle-based international accounting guidelines appears to have successfully re-engaged the interest and confidence of users of financial statements in the stewardship of listed companies in Nigeria. Thus, comparatively deploying and applying the Beneish 8-factored and 5-factored variables within relevant items of the financial reports of 11 selected manufacturing companies in Nigeria for the period 2008-2013, was considered adequate to ascertain the financial reporting quality of the post IFRS published financial statements in comparison with those of the Nigerian GAAP within the weightings of ‘material misstatement’. Although the study found that the 5-factored variables (Beneish 1997 model version) appear to be more effective in predicting genuine existing risks of material misstatement and provide promises for the effective avoidance of the Type II error among users of the two models, the 8-factored variables seem to have revealed more incidence of possible risk of material misstatement among the companies studied.
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