Search Results (2)

This article examines illicit financial flows (IFFs) perpetuated in financial statements to develop a framework to curb IFFs. IFFs create opacity, impeding economic progress through investment deterrents and financial uncertainty. Through a comprehensive literature review and the synthesis of sets of qualitative propositions, the researchers previously developed a conceptual framework to address IFFs, and the purpose of the present article is to strengthen and validate the framework among stakeholders in the financial and audit sectors. Following a mixed inductive and deductive research approach and a qualitative methodological choice, the researchers conducted interviews among practitioners to enhance the framework, followed by a focus group to validate the framework. IFF challenges that emerged are tax evasion, for example, investments in untraceable offshore accounts, harming the economy, and bitcoins not being subject to regulation everywhere in the world and being used by cryptocurrency criminals to transfer IFFs to nations with lax regulations. Internationally, IFF risks are also determined by geographical position, trade links, and porous borders among countries that emerged as further challenges, calling for entities to execute existing policies, improve tax enforcement methods, apply cross-border coordination, and practice financial reporting transparency aimed at combatting IFF practices. On the strength of these, the industry surveys significantly enhanced the conceptual framework. Full article

This article develops a conceptual framework, based on a comprehensive literature review, to address illicit financial flows (IFFs), characterised by the illegal move of monies or capital across country borders. IFFs compromise transparency through complex transactions and incur harmful effects for both developing and developed economies. Financial opacity creates a conducive environment for IFFs to flourish, as a challenge to good financial practices. Following an interpretive philosophy, an inductive research approach, qualitative methodological choice, cross-sectional time horizon all through data collection through review of scholarly literature, and framework were developed to analyse the said IFFs. Our framework encourages good corporate governance and provides insights, as well as the identification of possible characteristics of IFFs perpetuated in the financial statements of entities, which would discourage entities to engage in IFFs. Specifically, practitioners should be able to identify characteristics of IFFs and use the framework to address these. Within the finance dimension, it is important to study the specific mechanisms regarding how IFFs may damage an entity’s reputation, as well as their going concern. In future work, we shall enhance the framework through interviews with auditors, followed by a validation of the enhanced framework through a focus group. The utility of the final framework can be tested through case studies in the industry to analyse IFFs. Full article