Competition, Cost Analytics, and Offsetting Strategies: Pressures and Opportunities on the Fraud Triangle

This study introduces industry competition factors to fraud models to examine how competition associates with fraud risk. I argue that industry competition eclipses many firm-level determinants in their association with fraud risk, and that the cost of poor information elevates fraud risk as competition increases. I find that fraud risk is higher for firms in industries with 1) more substitutable products and services, 2) greater threats of new entry, and 3) larger incumbent pools of competitors, and that substitution exceeds every firm-level variable except size in its relevance with fraud risk. Cross-sectionally, I provide evidence that industry-wide non-adoption of advanced cost analytics (i.e. using obsolete, distortionary standard costing practices) may exacerbate the fraud-risk effects of competition, especially product substitution: a one standard deviation increase in substitution associates with over double the fraud risk for firms in industries typified by obsolete costing practices. I also find that different strategies vary in their fraud-offsetting associations dependent on the type of competition most prevalent in an industry. Together, these findings shed light on how the effects of industry competition may subsume or surpass most firm-level fraud determinants and provide evidence of previously unidentified drawbacks of obsolete cost accounting systems.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

doctoral

Discipline thesis:degree_discipline

Accounting and Information Systems

Department dc:contributor.department

Accounting and Information Systems

Grantor dc:publisher

Virginia Tech

Year dc:date.issued

2021

Author dc:creator

• Du Pon, Adam Watanabe

Chair dc:contributor.committeechair

• Davidson, Robert H.

Committee members dc:contributor.committeemember

• Easterwood, John C.
• Erickson, Matthew James
• Vance, Marshall David

• product market competition
• fraud
• information environment
• internal information quality
• obsolete costing
• cost analytics

Statement dc:rights

• In Copyright

Licence dc:rights.uri

• http://rightsstatements.org/vocab/InC/1.0/

Language dc:language.iso

en

Dc Identifier Other

vt_gsexam:29653

OAI identifier oai:identifier

oai:vtechworks.lib.vt.edu:10919/102937