Black sheep on green pastures-prevention and disclosure of accounting fraud in the federal republic of germany- a study on the effectiveness of the legal guidelines for preventing and disclosing accounting fraud

Abstract

According to a study of KPMG in 2010 the share of companies regarding white collar crime as a serious problem for economy increased by nine percent in 2006 to 2010. Blue chips companies even valued this problem at ninety percent. It was assumed that the extend of economy crimes will increase further. The German Federal Office of Criminal Investigation stated that white collar crime is responsible for more than 4 Billion €, which exceeds fifty percent of the total damage for the year 2011. Criminal offences in financial statements, the topic of this investigation started in spring 2011, are mainly carried out without being realised. Therefore it is impossible to furnish reliable figures in undetected crimes; however according to appropriate literature it is estimated up to 80 percent. The reasons for this are seen in insufficient regulations of legal guidelines by a number of authors. The focus should especially be directed to the question how the measures of detection and prevention of accounting fraud are presented by the government and how their efficiency is estimated. Therefore the ¿Catalogue of Measures to Strengthen Companies¿ Integrity and to Protect Investors¿ of 2003 and the resulting legitimation are the central point. The issue of this investigation is to find out how the companies registered in the DAX, MDAX, SDAX and Tec-DAX estimate the efficiency of the Catalogue of Measures of the government in regard to its intention. Hereby the estimation of the efficiency of individual points is reflected and is listed in a ranking by the companies. In addition companies are asked for the estimation of further appropriate and possible measures and the evaluation of the cost-benefit-ratio of the measures taken by the companies. The results of the investigation presented in the following are based on the evaluation of questionnaires sent to 160 companies registered in the four DAX segments in the time of the end of April to the beginning of December 2012. The results show that the representatives of the companies assess the legal regulations concerning the disclosure and prevention of accounting fraud on the whole as helpful. The majority of the companies claim that the legal implementation of the ¿10-Point-Program¿ of the government can be considered sufficient for their own company with regard to disclosure and prevention of accounting fraud. Only one of five possible suggested measures for the prevention and disclosure of accounting fraud was accepted. Concerning the cost-benefit ratio the majority of the companies state that the costs overweigh the benefits. Whereas the effect of legal measures is differently discussed in the literature, the evaluation by big companies can be defined as sufficient concerning legal regulations but companies even criticise them with regards to the costs. The given results of the survey correspond to KPMG¿s research dated 2012, which state, that concerning white-collar-crime-affected companies the number of falsifications of annual statements respectively financial information decreased during spring 2010 and summer 2012 from 13 percent to 3 percent.