COVID-19 PANDEMIC AND FRAUDULENT ACTIONS IN THE FINANCIAL STATEMENTS: THE CASE OF HOTEL COMPANIES IN THE REPUBLIC OF SERBIA
COVID-19 PANDEMIC AND FRAUDULENT ACTIONS IN THE FINANCIAL STATEMENTS: THE CASE OF HOTEL COMPANIES IN THE REPUBLIC OF SERBIA

Summary/Abstract: The quality of information presented in the financial statements of companies may be impaired due to fraudulent activities. One of the frequently used instruments that indicates that fraud has been committed in the financial statements is the Beneish M-score model. The purpose of the research is to examine the exposure of hotel companies in the Republic of Serbia to the risk of fraud in financial statements, as well as to determine whether there has been a change in that risk due to the COVID-19 pandemic. The research was conducted on a sample of 100 randomly selected hotel companies, and their financial reports for 2019 and 2020 were observed. There was a high risk of fraud based on the recognition of costs of sales, management and administration, and borrowing in both observed years, as well as a high risk of fraud based on the recognition of income and gross margin index in 2020. Further, it was determined that in the year of the COVID-19 pandemic, there was an increase in the risk of fraud in the financial statements based on the gross margin index and recognition of selling, management and administration costs. Microenterprises are exposed to a higher risk of fraud based on the recognition of costs of sales, management and administration compared to medium-sized ones. Limited liability companies are more exposed to risk based on the recognition of sales revenue, accrual item and total risk (measured by the 8-variable model) compared to joint-stock companies. On the other hand, joint-stock companies are more exposed to the risk of fraud based on gross margin and general risk of fraud (measured by the 5-variable model) compared to limited liability companies.

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