Author(s) :

Harish kumar and Pinki .

Volume/Issue :

Abstract :

The objective of this study is to present a systematic literature review by analyzing the existing literature on corporate governance and forensic accounting and thereby identifying the existing gap in the respective fields. By using the scientific method of systematic literature review (SLR) on high quality articles published in English language from Scopus database during 2002-2021, the study highlights that forensic accounting (FA) practice has become very critical in unravelling the complex accounting exercise that has muddled financial reports and the acceptance of new rules and regulations regarding corporations’ governance in the world has transformed the Corporate Governance (CG) framework. This study presents framework for future research using forensic accounting as a preventive and investigative measure for fraud control. Results reveal that forensic accounting is the application of financial and investigative skills conducted to resolve the unresolved issues, thus strengthening corporate governance. Forensic Accounting can assist corporate governance by removing potential fraud risks and supplementing internal controls.

No. of Downloads :

121

KEYWORDS:

Forensic Accounting, Corporate Governance, Corporate Fraud, Fraudulent Financial Statements

INTRODUCTION & OBJECTIVES:

Recent corporate frauds and ensuing furore to improve genuineness, honesty, and accountability in corporations’ financial reporting have developed two diverse but logical outcomes, one is forensic accounting (FA) practice has become very critical in unravelling the complex accounting exercise that has muddled financial reports and another is, acceptance of new rules and regulations regarding corporations’ governance in the world has transformed the Corporate Governance framework. Therefore, the key managerial personnel who are coming under scrutiny , are increasing with time. Indeed, both have shared objectives, to safeguard investors by producing “true and transparent financial reports” and corporate sustainability. The objective of this study is to present a systematic literature review by analyzing the existing literature on corporate governance and forensic accounting and thereby identifying the existing gap in the respective fields. According to recent KPMG Fraud survey businesses across the world are being more vulnerable to fraud and corruption than they were before the pandemic. Survey also found that there is sixtyfive percent increased fraud or corruption risk due to working from home. As per PwC’s “Global Economic Crime and Fraud Survey 2020”, on average one company reports six frauds, amounting to around an eye-watering US$42 billion in total. These surveys and recent corporate frauds along with the ensuing call for greater fairness and transparency in financial reporting have given rise to the need for forensic accounting. Also, the role of statutory auditors has been questioned in the ever-increasing corporate frauds and their inefficiency by not providing adequate response gives FA a major role to play in coming times. Credible accounting and quality are very much critical to the usability of financial reports, and FA, which looks beyond adherence to financial reporting formats and standards, can assist reports on policies and principles (Mukherjea, Ranjan, & Desai 2021). Fraudulent reporting practice has also been linked to shaky corporate governance (CG). The probability of financial crime is high among businesses with fragile CG (Dechow, Sloan, & Sweeney 1996). The incidence of fraud is inversely related to the number of independent directors in the audit committee (Beasley 1996). Abbott and Parker (2000) also observed negative relation between fraud and the independence of audit committees. Finally, Dunn (2004) concludes that when power is concentrated in the hands of insiders, fraud is more likely to occur. Even literature exhibits that FA is positioned to explore the redesign of corporate governance because of its skills and knowledge. Researchers have been proposing that forensic accounting should be part of the internal audit and control system so that along with the practices of corporate governance organizations can achieve truth and fairness of financial statements leading to corporate excellence. There are only a few studies available in the literature which stressed that forensic accounting should be a part of corporate governance and there is no study available in India that demonstrates this relationship. This paper attempts to establish the relations between forensic accounting and corporate governance in the case of listed Indian companies and making both part of the internal control system. This study would also lay stress on the good internal control system equipped with forensic accounting that gives a better brand reputation. It takes time to build goodwill and days to vanish. A business that is open to fraud, is difficult to trust, respect, and deal with. It may cause reputational damage that is difficult to rebuild. As a result, the significance of research in the area of forensic accounting cannot be denied. The specific objectives of the study are stated as under: 1. To identify the significance of forensic accounting as a preventive and investigative measure for fraud control. 2. To understand the relationship between corporate governance and forensic accounting and to what extent CG has a bearing on corporate frauds.

DOI:

10.58426/cgi.v4.i1.2022.81-120