RESEARCH ARTICLE
Accounting fraud detection through textual risk disclosures in annual reports: From the perspective of SEC guidelines
Xiaoqian Zhu,
Huidong Wu,
Yanpeng Chang,
Jianping Li,
Xiaoqian Zhu
School of Economics and Management, University of Chinese Academy of Sciences, Beijing, China
MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS, Beijing, China
Search for more papers by this authorHuidong Wu
Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China
Search for more papers by this authorYanpeng Chang
Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China
Search for more papers by this authorCorresponding Author
Jianping Li
School of Economics and Management, University of Chinese Academy of Sciences, Beijing, China
MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS, Beijing, China
Correspondence
Jianping Li, School of Economics and Management, University of Chinese Academy of Sciences, No.3 Nanyitiao Alley, Zhongguancun, Haidian District, Beijing 100049, China.
Email: [email protected]
Search for more papers by this authorXiaoqian Zhu,
Huidong Wu,
Yanpeng Chang,
Jianping Li,
Xiaoqian Zhu
School of Economics and Management, University of Chinese Academy of Sciences, Beijing, China
MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS, Beijing, China
Search for more papers by this authorHuidong Wu
Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China
Search for more papers by this authorYanpeng Chang
Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China
School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China
Search for more papers by this authorCorresponding Author
Jianping Li
School of Economics and Management, University of Chinese Academy of Sciences, Beijing, China
MOE Social Science Laboratory of Digital Economic Forecasts and Policy Simulation at UCAS, Beijing, China
Correspondence
Jianping Li, School of Economics and Management, University of Chinese Academy of Sciences, No.3 Nanyitiao Alley, Zhongguancun, Haidian District, Beijing 100049, China.
Email: [email protected]
Search for more papers by this authorAbstract
This study investigates the use of textual risk disclosures in annual reports to detect accounting fraud. We developed an indicator system based on Securities and Exchange Commission (SEC) guidelines to evaluate the quality of risk disclosures. An analysis of 41,343 financial reports from US listed companies revealed that textual risk disclosures enhance fraud detection accuracy and function as an early warning system. The performance of these disclosures surpasses traditional analyses of the Management Discussion and Analysis section. Our findings highlight the value of textual risk disclosures in identifying accounting fraud and underscore the crucial role of regulatory guidelines in ensuring financial integrity.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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