Fraud and corruption in companies is a serious problem in this day and age. One only needs to
think of Enron, Parmalat and Macmed. Companies are constantly identifying new and ingenious
ways to defraud their customers, investors, the government and others.
For this reason it is important for stakeholders with an interest in a company to devise ways of
detecting and identifying fraud to protect their interests. Managers are primarily responsible for
the prevention and detection of financial statement fraud. However, they may be the primary
perpetrators of fraud. The responsibility to detect and identify financial statement fraud should
also not rest solely with the auditors, as they cannot be expected to provide absolute assurance
that all material misstatements are detected and identified.
This research set out to find whether there are any characteristics and behavioural aspects in a
company by means of which accounting risk and possible financial statement fraud can be
detected and identified. Numerous authors gave their insight on the topic in the past, but few
came to a clear-cut conclusion of fraud indicators.
The article commences with an explanation of financial statement fraud. It further analyses
various authors' statements on the characteristics and behaviours displayed by companies with a
higher accounting risk and a propensity for financial statement fraud. The study confirmed that
there are behavioural characteristics which can identify the risk of financial statement fraud in
companies. Parties with an interest in a company, notwithstanding managers and auditors, can
observe and measure these characteristics to detect and identify such fraud.