Corporate Governance and Financial Statement Fraud of the Listed Companies in the Stock Exchange of Thailand

Abstract

The purpose of this article is to 1) study the composition and qualifications of independent directors as a factor that may minimize fraud in the financial statement of listed companies 2) to study incidents that indicate a tendency of fraud in listed companies. The qualitative research method is adopted to conduct the research by collecting information from in-depth interviews of 24 informants, from 4 different positions, 6 people for each position, who work closely with the board of directors of a listed company both involving and not involving with fraud on financial statement.
The data was collected by semi-structure interview, and the qualitative analysis was conducted by applying conceptual framework on good corporate governance and fraud and corrupt acts through analytic induction or logical thinking method. The research found that:
1. The composition and qualifications of independent directors that help minimize fraud include (1) the number of independent directors should depend upon the number of subsidiary companies of a listed company; (2) independent directors should not be sourced from friends of Management and Controller; (3) the service term of independent directors should not be longer than 6 years; and
(4) independent directors should not be more than 70 years of age.
2. Incidents that could indicate signs of fraud are delaying in the submission of financial statements; the auditor not certifying the financial statement; news on the resignation of directors; audit committee meetings being held more than 10 times a year; and the name of company has been changed.
Based on research findings, the Stock Exchange of Thailand should establish an independent department composes of people who are qualified to act as independent directors.