Electronic Theses and Dissertations




Irana Scott



Date of Award


Document Type


Degree Name

Doctor of Philosophy


Business Administration



Committee Chair

Carolyn Callahan

Committee Member

David Spiceland

Committee Member

James Lukawitz

Committee Member

David Kemme


In an attempt to predict financial statement fraud, prior accounting research has considered the characteristics of firms that manipulate their financial statements. The aforementioned studies have included various fraud types and often focus on accruals manipulations of the financial statements. In contrast, this study concentrates on a specific type of fraud, revenue manipulations, and the effect of this fraud type on the firm's cash flows. This is an important issue as fraud (and related cash flow) is directly related to the firm's ability to remain viable. This three-paper dissertation contributes to existing literature by separating revenue manipulations from other types of fraud and looking at cash flows instead of accruals as an indicator of the fraud. The first paper investigates cash flows from operationsto see if they are abnormally low duringthe period when firms are fraudulently increasing revenues. The second paper examines whether management will decrease discretionary expenditures in order to increase the abnormally low cash flows and hide the manipulation. Asset sales are explored in the third paper. Management may sell assets when manipulating revenues since cash flows are low and external financing is harder to obtain. Results indicate that cash flows are abnormally low during a period of revenue manipulation, but discretionary expenditures are not decreased to hide the manipulation. In addition, asset sales are more likely when firms manipulate revenues. Taken together, this research suggests that revenue manipulation and cash flow analysis is important in the early detection of fraud, governed by the Securities and Exchange Commission. The results of this study can benefit auditors, investors, regulators, and creditors as they examine the quality of revenue recognition practices by management. The results could also support discussion of the value of the cash flow statement in predicting financial statement fraud. Accountants are currently debatingthe validity of the appropriate financial statement that best represents the firm's future operational viability.


Data is provided by the student.

Library Comment

dissertation or thesis originally submitted to the local University of Memphis Electronic Theses & dissertation (ETD) Repository.