• Cash Flow Pattern Analysis of Fraud and Non-Fraud Firms: A Comparison and Contrast

      Runger, Shannon; Knox School of Accountancy (Augusta University, 2016-05)
      Companies may exhibit one of eight possible cash flow patterns on their Statement of Cash Flows. By pair-matching 30 firms that were known to have issued fraudulent financial statements with 30 non-fraud firms of similar size and industry, a comparison and contrast of the cash flow patterns can be made and the results analyzed. In my research, I examine and analyze the cash flow patterns of fraud and non-fraud firms as reported on the Statement of Cash Flows to determine whether or not the patterns provide some indication of fraudulent activity. I hypothesize that the fraud firms would be more likely to show a cash flow pattern during the year prior to fraud that indicated the firm was struggling and that alternatively, the pattern during the fraud year would be one that indicates a firm is stable and profitable. My findings not only do not support this hypothesis, they also indicate that this method of cash flow pattern analysis does not provide a reliable indication or prediction of fraudulent activity.