An Examination of the Relative Deterrent Effects of Legislated Sanctions on Attitudes About Financial Statement Fraud : A Policy Capturing Approach

To advance knowledge about fraudulent financial reporting and the value of recent legislation, this study examines the relative deterrence effects of three types of legislated sanctions for fraudulently reporting financial data. Specifically, the study tests the relative effects of threats of incarceration, fines and professional censure on attitudes about committing financial statement fraud using a policy capturing methodology which is useful for developing an understanding of multi-criteria decisions. The results show that the threat of incarceration is less salient than threats of fines and professional censure in the formulation of attitudes about committing financial statement fraud. Reasons for that are tested and the findings suggest that individuals believe that the enforcement of jail sentences is less certain and less likely to be enforced to the maximum as compared to fines and professional censure, making incarceration less effectual in the formulation of attitudes. The results should be of interest to policy makers and regulators aiming to curb fraudulent financial reporting