The Corona epidemic, as a global crisis, and the Islamic State of Iraq and Syria) ISIS (war, as a regional crisis in Iraq, have significantly impacted the atmosphere of companies and the continuation of their activities. The present study examines the role of these crises in creating incentives for fraudulent reporting and reducing or improving audit quality. It also compares the results of these two relationships with each other. In other words, the current paper sought to answer these issues: What effect did the ISIS war and the COVID-19 pandemic have on the fraudulent reporting motives of companies, and how did it affect the quality of their audits? In the end, the answer to this question was addressed: What are the differences and similarities between the study results of the impact of COVID-19 and ISIS on fraudulent financial reporting and audit quality? For this purpose, the data of 33 companies from 2008 to 2021 (462 observations) were collected to examine six formulated hypotheses, and the hypotheses were tested using the method of structural equations and analysis of variance. Interviews with experts were also used to determine quality indicators of auditing and fraudulent financial reporting so that indigenous indicators were selected and finalized. The results showed no significant relationship between the epidemic of the COVID-19 crisis and the motives of fraudulent reporting and audit quality and between the crisis of the ISIS war and the motives of fraudulent reporting. However, the ISIS war crisis has negatively and significantly impacted audit quality. Finally, the results indicated no significant difference between the impact of the epidemic crisis of COVID-19 and ISIS on the motives of fraudulent reporting. Still, there is a significant difference in the impact of the epidemic crisis of COVID-19 and ISIS on the audit quality. The knowledge enhancement of the present study is the development of literature on the impact of the Corona and ISIS crises on corporate financial reporting and auditing. The current paper, by studying the consequences of COVID-19 and ISIS, showed that further investigations in this field, especially regarding the capital market environment and A company, can obtain essential results based on which practical suggestions can be made for possible future crises.

Abdelhak EE, Hussainey K, Albitar K (2023). Covid-19 disclosure: Do internal corporate governance and audit quality matter? International Journal of Accounting & Information Management 31(1): 170–194. doi: 10.1108/IJAIM-05-2022-0108

Adeyemi SB, Okpala O, Dabor EL (2012). Factors affecting audit quality in Nigeria. International Journal of Business and Social Science 3(20): 198–209.

Aggarwal R (2006). Terrorism and financial management. Corporate Strategies Under International Terrorism and Adversity. Edward Elgar Pub. pp. 95–108.

Albitar K, Gerged AM, Kikhia H, Hussainey K (2020). Auditing in times of social distancing: The effect of COVID-19 on auditing quality. International Journal of Accounting & Information Management 29(1): 169–178. doi: 10.1108/IJAIM-08-2020-0128

Al-Khaddash H, Al Nawas R, Ramadan A (2013). Factors affecting the quality of auditing: The case of Jordanian commercial banks. International Journal of Business and Social Science 4(11): 206–222.

Al-Masoodi HA, Al-Kawaz SM, Abbas AA (2020). Accounting readings during the time of COVID-19. International Journal of Multicultural and Multireligious Understanding 7(5): 158–166. doi: 10.18415/ijmmu.v7i5.1673

Al-Qadasi A, Baatwah SR, Omer WK (2023). Audit fees under the COVID-19 pandemic: Evidence from Oman. Journal of Accounting in Emerging Economies 13(4): 806–824. doi: 10.1108/JAEE-08-2021-0269

Arifian FD, Januarti I (2023). Fraudulent financial reporting indications in banking before and during the COVID-19 pandemic. Jurnal Akuntansi 27(3): 505–524. doi: 10.24912/ja.v27i3.1701

Badawi IM (2008). Motives and consequences of fraudulent financial reporting. In: Proceedings of 17th annual convention of the global awareness society international; May 2008; San Francisco, CA, USA. pp. 110–123.

Bajary AR, Shafie R, Ali A (2023). COVID-19 pandemic, internal audit function and audit report lag: Evidence from emerging economy. Cogent Business & Management 10(1): 2178360. doi: 10.1080/23311975.2023.2178360

Bazrafshan A, Makarem N, Hesarzadeh R, SalmanAbbood W (2021). Managerial ability, earnings quality and ISIS: Evidence from Iraq. International Journal of Emerging Markets, ahead-of-print. doi: 10.1108/IJOEM-08-2020-1012

Beyer A, Cohen DA, Lys TZ, Walther BR (2010). The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics 50(2–3): 296–343. doi: 10.1016/j.jacceco.2010.10.003

Block SB, Hirt GA, Danielsen BR (2018). Foundations of Financial Management. McGraw-Hill Education.

Chang A, Budiman J (2023). Analysis of the influence of pentagon fraud on fraudulent financial reporting in Indonesian manufacturing companies with the role of Covid-19 as a moderating variable (Indonesian). Management Studies and Entrepreneurship Journal (MSEJ) 4(1): 211–225. doi: 10.37385/msej.v4i1.1264

Chouhan V, Sharma RB, Goswami S, Ali S (2021). Factor affecting audit quality: A study of the companies listed in Bombay Stock Exchange (BSE). Academy of Accounting and Financial Studies Journal 25(2): 1–9.

Cunningham LA (2003). The appeal and limits of internal controls to fight fraud, terrorism, other ills. Journal of Corporation Law 29(2): 267–336.

El-Chaarani H, Ismail TH, El-Abiad Z, El-Deeb MS (2022). The impact of COVID-19 on financial structure and performance of Islamic banks: A comparative study with conventional banks in the GCC countries. Journal of Economic and Administrative Sciences, ahead-of-print. doi: 10.1108/JEAS-07-2021-0138

Folger-Laronde Z, Pashang S, Feor L, ElAlfy A (2022). ESG ratings and financial performance of exchange-traded funds during the COVID-19 pandemic. Journal of Sustainable Finance & Investment 12(2): 490–496. doi: 10.1080/20430795.2020.1782814

Fornell C, Larcker DF (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research 18(1): 39–50. doi: 10.1177/002224378101800104

Fung MK (2015). Cumulative prospect theory and managerial incentives for fraudulent financial reporting. Contemporary Accounting Research 32(1): 55–75. doi: 10.1111/1911-3846.12074

Gong S, Ho N, Jin JY, Kanagaretnam K (2022). Audit quality and COVID-19 restrictions. Managerial Auditing Journal 37(8): 1017–1037. doi: 10.1108/MAJ-11-2021-3383

Guliyev V, Hajiyev N, Guliyev F (2019). Factors affecting audit quality in corporate sector. In: Proceedings of the Economic and Social Development: Book of Proceedings; 14–15 February 2019; Baku, Azerbaijan. pp. 812–820.

Hamawandy NM, Ali R, Bewani HAWA, et al. (2021). The financial Impacts of (COVID-19) on financial reporting quality airlines companies: British airlines. Journal of Contemporary Issues in Business and Government 27(2): 5264–5271. doi: 10.47750/cibg.2021.27.02.535

Hasnan S, Rahman RA, Mahenthiran S (2013). Management motive, weak governance, earnings management, and fraudulent financial reporting: Malaysian evidence. Journal of International Accounting Research 12(1): 1–27. doi: 10.2308/jiar-50353

Hay D, Shires K, Van Dyk D (2021). Auditing in the time of COVID—The impact of COVID-19 on auditing in New Zealand and subsequent reforms. Pacific Accounting Review 33(2): 179–188. doi: 10.1108/PAR-09-2020-0155

Hazaea SA, Tabash MI, Abdul Rahman AA, et al. (2022). Impact of the COVID-19 pandemic on audit quality: Lessons and opportunities. Emerging Science Journal 6: 71–86. doi: 10.28991/esj-2022-sper-06

Hills R, Kubic M, Mayew WJ (2020). SEC disclosure regulation of state sponsors of terrorism and financial reporting oversight. Available online: https://www.herbert.miami.edu/_assets/pdfs/faculty-research/academic-departments/accounting/sec-disclosure-april17.pdf (accessed on 7 November 2023).

Hills R, Kubic M, Mayew WJ (2021). State sponsors of terrorism disclosure and SEC financial reporting oversight. Journal of Accounting and Economics 72(1): 101407. doi: 10.1016/j.jacceco.2021.101407

Jabbar AK, Almayyahi ARA, Ali IM, Alnoor A (2020). Mitigating uncertainty in the boardroom: Analysis to financial reporting for financial risk COVID-19. The Journal of Asian Finance, Economics and Business 7(12): 233–243. doi: 10.13106/JAFEB.2020.VOL7.NO12.233

Kim T, Shawn H (2022). Conservative financial reporting and resilience to the financial crisis. Sustainability 14(14): 8535. doi: 10.3390/su14148535

Kizil C, Akman V, Muzır E (2021). COVID-19 epidemic: A new arena of financial fraud? In: Proceedings of the Karabagh International Congress of Modern Studies in Social and Human Sciences; 17 June 2021; Karabagh, Azerbaijan.

Lassoued N, Khanchel I (2021). Impact of COVID-19 pandemic on earnings management: Evidence from financial reporting in European firms. Global Business Review 1–25. doi: 10.1177/09721509211053491

Levy HB (2020). Financial reporting and auditing implications of the COVID-19 pandemic. The CPA Journal 90(5): 26–33.

Martins O, Ventura Júnior R (2020). The influence of corporate governance on the mitigation of fraudulent financial reporting. Revista Brasileira de Gestão de Negócios 22(1): 65–84. doi: 10.7819/rbgn.v22i1.4039

Nure G (2022). The COVID-crisis could make financial statements implode. Available online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4033690 (accessed on 7 November 2023).

Pacheco Paredes AA, Wheatley C (2020). The effect of changing fiscal year-ends on audit fees and audit quality. Journal of Financial Economic Policy 12(3): 365–382. doi: 10.1108/JFEP-07-2019-0140

Rajgopal S, Srinivasan S, Zheng X (2021). Measuring audit quality. Review of Accounting Studies 26(2): 559–619. doi: 10.1007/s11142-020-09570-9

Rashwan AR, Alhelou E (2020). The effects of the COVID-19 pandemic on the company’s sustainability under International Accounting Standards. International Journal of Academic Accounting, Finance & Management Research (IJAAFMR) 4(7): 34–51.

Rezai Pitehnoi Y, Safari Graili M (2017). Legibility of financial reporting and the possibility of fraudulent financial reporting. Financial Accounting Research 10(4): 43–58.

Rivard S, Raymond L, Verreault D (2006). Resource-based view and competitive strategy: An integrated model of the contribution of information technology to firm performance. The Journal of Strategic Information Systems 15(1): 29–50. doi: 10.1016/j.jsis.2005.06.003

Ryan SG (2012). Financial reporting for financial instruments. Foundations and Trends® in Accounting 6(3–4): 187–354. doi: 10.1561/1400000021

Sabrina OZ, Fachruzzaman F, Midiastuty PP, Suranta E (2020). Pengaruh koneksitas organ corporate governance, ineffective monitoring dan manajemen laba terhadap fraudulent financial reporting. Jurnal Akuntansi, Keuangan, dan Manajemen 1(2): 109–122. doi: 10.35912/jakman.v1i2.11

Salehi M, Ajel RA, Zimon G (2022). The relationship between corporate governance and financial reporting transparency. Journal of Financial Reporting and Accounting, ahead-of-print. doi: 10.1108/JFRA-04-2021-0102

Salehi M, Maalah AZ, Nazaridavaji H (2021). The ISIS impacts on the political connections, board interlock, and quality of financial reporting. Contemporary Review of the Middle East 8(4): 460–476. doi: 10.1177/23477989211032446

Salehi M, Ali Mohammed Al-Msafir H, Homayoun S, Zimon G (2023). The effect of social and intellectual capital on fraud and money laundering in Iraq. Journal of Money Laundering Control 26(2): 227–252. doi: 10.1108/jmlc-12-2021-0142

Sallal F, Bagherpour Velashani MA, Saei MJ (2021). Fraudulent financial reporting motivations in emerging markets. Journal of Financial Crime 28(3): 892–905. doi: 10.1108/JFC-09-2020-0188

Sangster A, Stoner G, Flood B (2020). Insights into accounting education in a COVID-19 world. Accounting Education 29(5): 431–562. doi: 10.1080/09639284.2020.1808487

Sari MP, Pramasheilla N, Suryarini T, Pamungkas ID (2020). Analysis of fraudulent financial reporting with the role of KAP big four as a moderation variable: Crowe’s fraud’s pentagon theory. International Journal of Financial Research 11(5): 180–190. doi: 10.5430/ijfr.v11n5p180

Song J, Xia S, Vrontis D, et al. (2022). The source of SMEs’ competitive performance in COVID-19: Matching big data analytics capability to business models. Information Systems Frontiers 24(4): 1167–1187. doi: 10.1007/s10796-022-10287-0

Sulanjaku M, Shingjergji A (2015). An overview of factors affecting auditing quality in Albania. Academic Journal of Interdisciplinary Studies 4(3 S1): 223. doi: 10.5901/ajis.2015.v4n3s1p223

Sultana R, Ghosh R, Sen KK (2021). Impact of COVID-19 pandemic on financial reporting and disclosure practices: Empirical evidence from Bangladesh. Asian Journal of Economics and Banking 6(1): 122–139. doi: 10.1108/AJEB-09-2021-0110

Sun J, Kent P, Qi B, Wang J (2019). Chief financial officer demographic characteristics and fraudulent financial reporting in China. Accounting & Finance 59(4): 2705–2734. doi: 10.1111/acfi.12286

Šušak T (2020). The effect of regulatory changes on relationship between earnings management and financial reporting timeliness: The case of COVID-19 pandemic. Zbornik Radova Ekonomski Fakultet u Rijeka 38(2): 453–473. doi: 10.18045/zbefri.2020.2.453

Suyono E (2012). Determinant factors affecting the audit quality: An Indonesian perspective. Global Review of Accounting and Finance 3(2): 42–57.

Widuri R, Jevera I, Zerlinda J (2019). Tax fraud reporting: The effect of envious motive and financial reward. In: Advances in Economics, Business and Management Research, Proceedings of the International Conference on Tourism, Economics, Accounting, Management, and Social Science (TEAMS 19); 10–11 October 2019; Bali, Indonesia. Atlantis Press. pp. 68–73.

Xiao T, Geng C, Yuan C (2020). How audit effort affects audit quality: An audit process and audit output perspective. China Journal of Accounting Research 13(1): 109–127. doi: 10.1016/j.cjar.2020.02.002

Zhang Y, Zhang Y, Yao T (2022). Fraudulent financial reporting in China: Evidence from corporate renaming. Journal of Contemporary Accounting & Economics 18(1): 100283. doi: 10.1016/j.jcae.2021.100283