Fraudulent Financial Statements and the importance of Red Flags

Abstract

Prior researches have been conducted in order to determine the importance of Red Flags with the use of different sample. Gullkvist & Jokipii (2013) perceived the importance of Red Flags across fraudulent financial reporting and misappropriation of assets. The purpose of this study is to cover the gap in the literature about the importance of red flag among different sample groups. For this reason, a literature review about Financial Statement Fraud is written, so as toinitially deeply understand this field and then a quantitative research with the use ofquestionnaires was carried out. Data analysis revealed the top 10 most important Red Flags. Data analysis also showed that the correlation between only a few red flags and the demographical characteristics is statistically significant and generally the demographical characteristics of the respondents, who currently work in Auditing companies in the Netherlands, do not differentiate the answers based on the importance of red flags.