Page 20 - Azerbaijan State University of Economics

Nina Poyda-Nosyk, Serhii Lehenchuk, Victoriia Makarovych, Iryna Polishchuk, Tetiana Zavalii: Analytical
Procedures in Audit As A Tool For Predicting The Risks Of Financial Statement Fraud In Marketing Companies

The study contributes to the literature on forensic accounting by validating the
applicability of these models in emerging markets under crisis conditions and provides
practical insights for auditors and regulators in enhancing financial oversight.

Key words: financial reporting fraud, Beneish model, Roxas model, audit analytics,
marketing companies, Ukraine.

JEL Classification: G32, G34, L84, M42.

INTRODUCTION
Audit confirmation of financial statements does not guarantee the complete absence
of fraud and manipulation in the reflection of assets, liabilities, financial results, and
cash flows. International practice demonstrates numerous cases when companies
whose reporting received a positive audit opinion soon after went bankrupt or showed
signs of financial fraud.
One of the most resonant and widely cited examples is the collapse of the Enron
Corporation in 2001. Despite receiving a positive audit opinion from Arthur
Andersen, the company concealed billions of dollars in losses through complex
financial schemes. Such cases emphasize the critical need to improve methods for
detecting fraud risks in financial reporting.
Despite substantial regulatory reforms and the implementation of stricter legislation in
financial accounting and auditing for public corporations - intended to enhance
transparency, strengthen control and prevent fraud - the issue of financial statement
falsification remains unresolved (Erdoğan and Erdoğan, 2020). Earnings manipulation
continues to be a widely studied phenomenon among both academic researchers and
industry professionals (Svabova et al., 2020). A notable example is the 2018 high-profile
bankruptcy of the British construction company Carillion, which attracted significant
scrutiny not only toward the company itself, but also toward its external auditor - the
international audit firm KPMG, as well as Deloitte PPL, which provided outsourcing
services to KPMG. This situation is particularly concerning given that the audit firms were
involved in preparing Carillion’s long-term development report, which asserted the
absence of any risks to the company’s future performance. In light of such cases, scholars
emphasize the urgent need to develop tools that enhance the current accounting and
auditing framework in order to restore trust in the profession and ensure its alignment
with the public interest (Alkaraan et al., 2024). It will allow eliminating such features of
financial reporting that are frequently described - both in academic discourse and in public
opinion - as fraudulent, manipulated, or misleading.

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