Determinants of Fraud in Financial Report based on the Pentagon theory

Subject Areas : financial reporting quality

Sadegh Akhondzade ¹ , Maryam Emami Mibody ²

1 - MSc. Student, Department of Accounting, ShahinShahr Branch, Islamic Azad University, ShahinShahr, Iran
2 - Assistant Prof., Department of Accounting, ShahinShahr Branch, Islamic Azad University, ShahinShahr, Iran

Received: 2024-11-05 Accepted : 2025-01-25 Published : 2025-02-08

Keywords: Fraud, Financial Report, Pentagon theory.,

Abstract :

In recent years, abuse and fraud in companies, incorrect financial reporting and weakness in the management of companies have been an important factor in the financial crisis of the last decade. On the other hand, financial scandals, in addition to having economic losses such as harming creditors, investors and shareholders, also include political, judicial and social costs. Also, in addition to directly affecting the company, fraudulent financial reporting has an effect on employees, creditors and investors and will weaken the reliability of financial statements and capital markets. Therefore, the main goal of this research is to determine the factors of fraud in financial statements from the Pentagon theory. In the investigation of fraud in financial reporting from the five-dimensional Pentagon theory, respectively; pressure, opportunity, rationalization, competence and arrogance on the financial statements of 105 companies admitted to the Tehran Stock Exchange in 2001-2015 using a multivariate regression model that was examined with the panel fixed effects method, the results of the research showed that The five dimensions of the Pentagon theory include; Pressure, opportunity, rationalization, competence and arrogance have a positive and significant effect on fraudulent financial reporting. This highlights the necessity of creating a targeted anti-fraud strategy by creating awareness about honesty and ethical values ​​for transparent financial reporting, implementing laws and a strong punitive system in the audit department, and improving internal controls.

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