Prevention is Better than Cure: Forecasting Future Misreporting
17 Jan 2024
15:00 -16:15
Times are shown in local time.
Open to: All
Room W4.03 (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our Accounting seminar
Professor Joanne Horton, Warwick Business School
About the seminar topic
This paper develops a model to forecast future misreporting providing decision-makers with crucial insights to enable them to take actions to prevent it from occurring. Utilising deviations from Benford’s Law, we do not predict the misreporting year but track patterns of escalating human intervention in the financial statements prior to misreporting occurring.
These patterns reflect the previously identified ‘slippery slope’ towards misreporting which we incorporate into a proportional hazard model enabling us to forecast those firms at high-risk of misreporting in the future. Our model accurately forecasts on average 90.58% of misreporting events one year ahead, 83.61% two years prior and 75.71% three years before occurrence. Our model is the first to offer stakeholders, particularly board members and auditors, an early warning signal, offering a window of opportunity to prevent misreporting before it occurs, contrasting with existing models that only offer rectification only after misreporting has occurred.
Speaker bio
Professor Jo(anne) Horton holds the position of Professor of Accounting and Head of the Accounting Group at Warwick Business School (WBS). Before her tenure at WBS, she served as a Professor at Exeter Business School and as an Associate Professor at the London School of Economics (LSE). Her research spans several critical areas of accounting, including audit and corporate governance, academic and accounting fraud, financial reporting and the role of equity analysts.
Her scholarly work is widely recognised, with publications in prestigious academic journals such as the Journal of Accounting and Economics, Review of Accounting Studies, Contemporary Accounting Review, Research Policy, and the Harvard Business Review, among others. One of her recent papers titled ‘Executive pay: Board reciprocity counts’ was honoured as the joint winner of the 2023 European Academy of Sociology Prize for Best Article. Before embarking on an academic path, Jo accumulated practical experience working for KPMG.
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No registration required. If you have any questions about this seminar, please email Nigel Low.