Financial statements describe the company's financial condition. There are many gaps in the financial reports that enable management to commit fraudulent financial reporting. This study purpose to analyze the pentagon fraud, namely the pressure that is proxied by the financial target, the opportunity that is proxied by the effectiveness of monitoring (ineffective monitoring); Rationalization which is proxied by change in auditor; Competence which is proxied by the change of company directors; and Arrogance which is proxied by the number of CEO images that appear (number of CEO's picture), detects fraudulent financial statements measured using the Altman Z Score. The sample used in this study were 24 pharmaceutical sub-sector manufacturing companies registered on the Indonesia Stock Exchange during the period 2015 until 2017. The type of data used is secondary data obtained from annual reports and company financial statements for the 2015-2017 period. The analysis of the data used is multiple regression using the SPSS version 16. This study found that financial stability and ineffective monitoring influence fraudulent financial statements. Whereas auditor turnover, change of directors and the number of CEO photos that appear do not affect fraudulent financial statements.
This study was conducted to test the effect of premium income, underwriting results, investment income and risk based capital on general syariah insurance companies’ profit. The method applied in this study was quantitative method. The population included the insurance companies registered at Otoritas Jasa Keuangan ( OJK) in 2011-2015. The samples of this study were 1 syariah insurance companies and 14 unit syariah Insurance companies selected using purposive sampling technique. The types of data used on this study was secondary data. The method of data collection applied was documentation method and panel data regression using a computer program Eviews 7.0. The results of the analysis showed that: (1) premium income had significant positive effect on insurance profit, (2) underwriting results had significant negative effect on insurance profit, (3) inverstment income had negative significant effect on insurance profit, (4) risk based capital had positive significant effect on insurance profit.
Objective – The massive and broad impact caused by fraud has made it widely discussed by researchers. Several theories have been developed to explain the cause of fraud. The most recent theory that attempts to explain fraud is pentagon fraud. This study attempts to explain the effect of pentagon fraud on the detection of financial statement fraud in 624 companies listed on the Indonesian stock exchange.
Methodology/Technique – Data from financial statements published in 2018 were analyzed using multiple regression analysis.
Findings – The results of data analysis using E-Views have proven that Pressure, Opportunity, Arrogance and Rationalization have a negative effect on fraudulent financial reporting. However, competence is known to have no significant effect on fraudulent financial reporting.
Novelty – The results suggest that human factors such as pressure, arrogance and rationalization encourage fraudsters to produce fraudulent financial reports. These findings imply that human factors such as pressure arrogance and rationalization are important to be considered in designing any anti-fraud strategy.
Type of Paper: Empirical
Keywords: Fraud Pentagon; Fraudulent Financial Report; Opportunity, Pressure.
Reference to this paper should be made as follows: Nanda; S, T; Zenita R; Salmiah N; 2019. Fraudulent Financial Reporting: A Fraud Pentagon Analysis, Acc. Fin. Review 4 (4): 106 – 113. https://doi.org/10.35609/afr.2019.4.4(2)
JEL Classification: M40, M41, M49.
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