Investigating the Relationship between Transactions with Affiliates and Fraudulent Reporting by Explaining the Moderating Role of Corporate Governance Companies Listed in Tehran Stock Exchange

Abstract

Transactions with related parties have become a common way for fraudulent reporting due to the hiddenness and simplicity of manipulation, and the traditional methods of quantitative analysis have failed to discover the complex relationships of these transactions. Therefore, the detection of fraudulent reporting has attracted the attention of researchers and legislators. This research seeks to examine and test the relationship between transactions with related parties and fraudulent reporting by explaining the role of corporate governance moderation in companies listed on the Tehran Stock Exchange. The statistical population of this research includes 146 companies admitted to the Tehran Stock Exchange during a period of 9 years from 2012 to 2021. Multiple linear regression method has been used to test the research hypotheses. The results of the research showed that there is a positive and significant relationship between transactions with related parties and fraudulent reporting. In fact, the level of fraudulent reporting is higher in companies with related party transactions and fraudulent reporting. Also, the research results showed that there is a negative and significant relationship between corporate governance and fraudulent reporting. In other words, in companies where corporate governance is observed, the level of fraudulent reporting is lower. Examining the effect of corporate governance indicators on fraudulent reporting using unusual transactions with related parties shows that the independence of the board of directors and institutional shareholders has no significant effect on the relationship between transactions with related parties and fraudulent reporting, but the type of auditor has a direct and significant effect on the relationship between transactions with related parties and fraudulent reporting. Therefore, internal and external auditors, regulatory bodies, board of directors, and other professionals should identify this type of fraud and emphasize the importance of prevention approaches to reduce the possibility of committing corporate fraud. Regulators should also pay more attention to loan-based related party transactions and the total number of related party transactions.