Auditors’ Perception of Red Flag: Indian Evidence
Deepa Mangala, Pooja Kumari · SSRN Electronic Journal · 2016
Incessantly increasing fraud is a matter of concern for regulators, business community as well as investors. Red flag is a tool against corporate fraud and a new area to be focused by practitioners and researchers. The present study aims to investigate accounting practitioner’s awareness about the concept of red flag in India. Further, it aims to explore their perception about effectiveness of red flag as a potential fraud detection and prevention instrument. Findings reveal that practitioners are aware about red flag. Moreover, they consider it as an effective tool in fraud detection and prevention. Fraud triangle categorises red flags into three parts that induce a person to commit fraud, namely, ‘pressure’, ‘rationalisation’ and ‘opportunity’. Rationalisation has been judged as most important category of red flags followed by opportunity and pressure in line. A significant correlation was found among awareness level and their perception about effectiveness of red flag in fraud detection and prevention.