Journal Article

The Impact of Using the Fraud Diamond Model on Audit Quality

Abd-Elmageed, Mohamed Hassan, Khudair, Mohammed Mursi Ahmed, القطان، ندا فريد

2024

Overview

Misstatements and concealment of facts about the value of accounts in the financial statements indicate fraudulent financial reporting. Consequently, financial information becomes irrelevant, misleading, and negatively impacts the financial markets, leading to a loss of confidence among investors and raising doubts about the efficiency of the audit process and audit quality. The aim of this study is to examine the impact of using the fraud diamond model in detecting fraudulent financial reporting on the audit quality of companies listed on the Egyptian stock exchange between 2018 and 2022. The results indicate that the fraud diamond model significantly influences audit quality. Specifically, financial stability, external pressure, and financial targets have a positive effect, while the nature of the industry, accrual ratio, and board changes have a negative effect. Effective monitoring, however, does not impact audit quality. The findings suggest that auditors can utilize the fraud diamond model to anticipate and uncover financial statement fraud. The model elucidates the factors that drive individuals to engage in financial statement fraud and manipulate financial information, thereby highlighting the areas that auditors need to focus on during the audit process (red flags) to assess the risk of fraud. By considering all aspects and incorporating additional procedures to predict and detect fraud, auditors can issue audit reports stating that the financial statements are free from material misstatements, thereby reducing the litigation risk associated with issuing a clear report for a company that later collapses due to financial statement fraud.

• Publisher: جامعة عين شمس - كلية التجارة - قسم المحاسبة والمراجعة
• Subject: البورصة المصرية / التدقيق الداخلي / الشركات التجارية / القوائم المالية / مراجعو الحسابات