An Investigation of the Motivation of Management Accountants to Report Fraudulent Accounting Activity: Applying the Theory of Planned Behavior

• In Event: SESSION 6C: Management Accounting

Abstract

The perpetration of accounting fraud still remains a prevalent and significantly costly issue in today’s business world. The names Enron, WorldCom, HealthSouth, and Madoff are still all too recent reminders of the devastating cost of financial statement fraud. Management accountants, as preparers of these statements, are in the best position to detect such fraud. Yet there exists no current measurement instrument or methodology designed to measure a management accountant’s intention to report fraud. The primary purpose of this study was to investigate the beliefs, concepts, and antecedents that provide the motivation to, or the deterrent from, the reporting of fraudulent accounting activity when witnessed by professional management accountants, and develop an instrument that might measure that motivation.
The theoretical basis that framed this research was the Theory of Planned Behavior. The population studied was the U.S. membership of the Institute of Management Accountants, and grant assistance and support was provided by the Institute’s Research Foundation.
No previous research involving this population with the application of the Theory of Planned Behavior and the investigation of the reporting of fraudulent accounting activity had been conducted. Therefore, the development of an original survey questionnaire to specifically address this research was required.
The results of the data and the findings of the SEM model indicated that professional management accountants form a strong positive intention to report the witnessing of accounting fraud. The positive beliefs that formed the exogenous variables that showed statistically significant effects on the endogenous variable of the formation of a positive intention to report fraudulent accounting activity were: support of the system of internal control, prevention of financial loss, retention of the integrity and ethical values of the profession, perceived support of significant others, and limited impediment due to fear of retaliation. A surprising result was that 32% of all respondents indicated a lack of easy/any access to an anonymous fraud reporting hotline, which is an issue for further research.
This study provides additional insight into the concepts, beliefs, and antecedents that form a professional management accountant’s intention to report fraudulent accounting activity. The study also presents the basis of a preliminary instrument for the measurement of the intention of management accountants to report fraudulent accounting activity. Further research is suggested for the identification of additional concepts, antecedents, and beliefs related to fraud reporting and for the development of an even a more effective measurement instrument.

Authors

• Jerry B Hays, Nova Southeastern University

• Randall Wesley Rentfro, University of Tampa

• Donald Lamar Ariail, Southern Polytechnic State University

• Paul Dion, University of Susquhana