Impact of Opportunities on Fraud Risk Detection in Financial Statements

Abstract

This study examines whether fraud opportunities, as conceptualized by the fraud triangle and the International Standard on Auditing (ISA) 240, influence the detection of fraud risk in financial statements. Using a sample of 250 financial reports from Tunisian listed companies, excluding financial institutions, over the post-revolution and pre-COVID period (2012–2019), we estimate logistic regression models to assess the effect of selected opportunity-related factors. The findings indicate that CEO duality—defined as the concentration of the Chief Executive Officer and Chairperson roles—significantly increases the likelihood of fraud risk detection. In contrast, subjective inventory valuation, complex transactions, and board independence do not show statistically significant associations with detected fraud risk. By providing evidence from post-revolution Tunisia, this study extends the limited literature on fraud detection in emerging markets. The results underscore the importance of corporate governance structures, particularly managerial power concentration, in shaping auditors’ assessment of fraud risk in accordance with ISA 240.