The Effect of Corporate Social Responsibility on Fraudulent Financial Reporting

Fraud is a clever manipulation of financial statements by management that misleads users. The accounting literature shows that companies with higher social responsibility are less likely to engage in fraudulent activities. Therefore, the purpose of this study is to determine the effect of corporate social responsibility on fraudulent financial reporting in companies listed on the Tehran Stock Exchange.

The statistical population of this research is the companies listed on the Tehran Stock Exchange. The required data has been extracted from Rahavard Novin database and Codal site. Based on the screening method, 165 companies in the period 1390 to 1398 have been selected. The logit regression was also used to test the research hypothesis.

Findings show that social responsibility reporting has a negative effect on fraudulent financial reporting and as the corporate social responsibility score increases, the likelihood of fraudulent financial reporting decreases.

Based on the research results, it can be stated that socially responsible companies are more inclined to pursue ethical activities to achieve social welfare. So they have less incentive to engage in fraudulent activity. Social responsibility also increases the company's profitability. As a result, good profitability and lack of financial problems reduce the possibility of fraudulent activity.

 Providing evidence to reduce the likelihood of fraudulent reporting by increasing corporate social responsibility scores raises awareness of users of financial statements and legislatures and improves future economic decisions. The results of this study also expand the accounting literature in the field of fraud and social responsibility.