The relationship between financial default and the presence of fraud in the financial statements - an applied study on companies listed on the Egyptian Stock Exchange

There is no doubt that the quality and usefulness of the disclosed accounting information supports the investor's confidence in the companies listed on the capital market, where investors and creditors rely on the financial performance information of the company during the accounting period, to predict future performance. The greater the need for users of financial statements, such as current and prospective investors, lenders, creditors, and others, for accounting information for economic decision-making purposes, the greater the importance of the financial accounting response to this requirement (2014).
To be useful and useful, such information must meet a set of key qualitative characteristics, including both; relevance, which means the ability of information to change the decisions of its users, by helping to assess, confirm or correct these decisions about past, present and future events. To be able to make that change, the information must have Predictive Value, Confirmatory Value, or both, and Faithful Representation, which refers to the production of Completeness, Neutrality, and Freedom from Error. Also, to increase the capacity of information to assist its users in making economic decisions, information must be characterized
As a result of developments in the business environment and increased competition, some have pointed out (Purnanandam, 2008; Pindado et al., 2006; Outecheva, 2007; Pindado et al., 2008; Mccarthy, 2011; Aziendale et al., 2012; Mardiana, 2015; Sawal et al., 2015; Hussain et al., 2016; Ozcan, 2016) to the possibility of facing a recession, which may adversely affect its ability to pay its obligations, which indicates that the value of the company's obligations exceed the value of its assets, which is known The financial distress of the company, which may reflect negatively on misleading the financial statements, and thus reduced the credibility and reliability of the accounting information contained in it, ie, reduced the property of honest representation.
Some (Mccarthy, 2011; Aziendale et al., 2012; Mardiana, 2015; Sawal et al., 2015; Hussain et al., 2016; Ozcan, 2016) agree that financially troubled companies, whose managers seek more immediate exit from default Financial, whether through ethical and / or unethical behavior, in the desire to achieve financial stability, even if only temporarily, for fear that the negative effects of financial default, which inevitably lead to the bankruptcy of the company, may worsen rapidly.
In that regard, some agreed (Ata and Seyrek, 2009; Chen et al., 2010; Ujal et al., 2012; Khaliq et al., 2014; Mardiana, 2015; Sawal et al., 2015; Hussain et al., 2016 ; Ozcan, 2016) on the possibility of managers of financially troubled companies committing frauds in financial statements, so that the negative effects of financial default could be postponed for future periods, including; loss of future career opportunities, negative impact on
The company's reputation, delisting, loss of market share, deteriorating financial conditions, and inability to meet the expectations of financial analysts.
As a result of the recent recurrence of fraudulent financial statements, which led to the collapse of many companies in some countries, the loss of confidence of stakeholders in the capital market (Goodwin and Wu, 2015; Zaki, 2016), and the agreement of some (Mardiana, 2015; Sawal et al. (2015; Hussain et al., 2016; Ozcan, 2016) On the possibility of financial default as one of the main drivers of fraud in financial statements, the need to verify the relationship between financial default and the presence of fraud in financial statements has increased, so that auditors' ability to detect And report fraud, by tracking the motivation for its occurrence and trying to eliminate it, or at least And thus prevent it from being committed in the financial statements, so that the information it contains can be trusted and more reliable (Goodwin and Wu, 2015; Hussain et al., 2016; Zaki, 2016), which was supported by the Abdul Latif study, In the Egyptian business environment and professional practice, regarding the need to increase the ability of auditors to detect and report fraud.
We conclude from the foregoing that in order to restore the confidence of stakeholders in the capital market and reduce the unethical behavior of managers through fraudulent financial statements, the causes of fraud must be verified so that managers can mislead users of accounting information, By committing fraud cases. Accordingly, there is a question about the validity of the relationship between the financial default and the presence of fraud in the financial statements in the companies listed on the Egyptian Stock Exchange? This will be verified in theory and in practice.