The strategic factors affecting accounting manipulation risk: An application on the business listed in Istanbul Stock Exchange

Accounting manipulation refers that enterprises misstate purposely on their financial reports. This intervention can be made both within the accounting standards and non-standard applications. The aim of the study is to identify the strategic factors affecting the accounting manipulation risk. In order to determine these factors, the accounting manipulation risk of the enterprises listed in Istanbul Stock Exchange has been determined. In order to determine the accounting manipulation risk, academic risk measurement models in the literature were used, and it was determined that the model with the best explanations was Larcker - Richardson model. Secondly, in order to determine the strategic factors that are thought to be effective on the accounting manipulation risk, fraud triangle theory and organizational business strategies were utilized. The data regarding the variables representing "the pressure and opportunity factors" of fraud triangle factors and organizational business strategies, were obtained from annual reports. The Organizational Ethical Climate Scale was used in order to represent the "Rationalization" factor, which is the third component of the fraud triangle. The survey technique was used for the Organizational Ethical Climate scale and it was able to be obtained feedback from 99 public enterprises. As a result of the study, it has been concluded that 10 variables out of 44 financial and non-financial variables increase the accounting manipulation risk and 7 variables reduce the accounting manipulation risk and increase the quality of financial reporting. It is determined that the most important of these variables is the bonus plan and the cash flow variable, and that a one-unit increase in these variables will increase the accounting manipulation risk by 0.87 and 0.6, respectively. In addition, at the end of the survey related to rationalization factor, it was found that the egoist climate dimension, which takes into account only the interests of the enterprise, increases the accounting manipulation risk and as a result it has been found to be an effective factor in accounting manipulation in the ethical climate structure. When observed analysis of organizational business strategies it was found that though various variables of fraud triangle factors and organizational business strategies were related to each other, no impact on accounting manipulation risk was found. As the results of the study are significant in nine years panel data, it is important for the reliability of the results. Therefore, it is recommended for the auditors to take into account the findings of our study while determining the red flags on the enterprises they auditee. Keywords: Academic Risk Measure, Accounting Manipulation Risk, Organizational Business Strategy, Organizational Ethics Climate, Fraud Triangle