Detecting Indications of Financial Statement Fraud: a Hexagon Fraud Theory Approach

Abstract

This study emphasizes on examining the fraud hexagon theory referring to signs of fraud of financial statements, which employs all manufacturing companies listed in the IDX (Indonesia Stock Exchange). However, total selected sample are 153 of the manufacturing industry. The companies are categorized into indicated and not indicated committing fraud in the 2010-2018 period by applying the Beneish M-Score. The findings demonstrated that financial stability, the financial targets, the external pressures, the nature of industry, and CEO duality can be applied to predict fraud of financial statements. Meanwhile, personal financial needs, ineffective monitoring, quality of external auditors, auditor turnover, director turnover, and marginal costs cannot indicate occurrence of the fraud of financial statement. The findings conclude that pressure, ego, and opportunity significantly affect the financial statement fraud. Future research are suggested to consider different proxies for fraudulent financial statements; hence, the accuracy of the proxies can be compared with this study. Moreover, adding other proxies of conspiracy such as bonuses received by managers will be beneficial.

Analisis Teori Fraud Triangle dalam mendeteksi Financial Statement Fraud

“…Nilai koefisien regresi variabel personal financial need (PFN) adalah -3,905, yang berarti variabel personal financial need (PFN) berpengaruh negatif terhadap variabel financial statement fraud (FSF). Hasil penelitian tidak konsisten dengan penelitian sebelumnya yang dilakukan oleh Sabatian dan Hutabarat (2020), begitu pula dengan penelitian oleh Tarjo et al (2021) dan Tiffani dan Marfuah (2015).…”

“…Hasil penelitian konsisten dengan penelitian sebelumnya yang dilakukan oleh Sabatian dan Hutabarat (2020). Hasil penelitian tidak konsisten dengan penelitian yang dilakukan oleh Tarjo et al (2021), Tiffani dan Marfuah (2015), Kurnia dan Asyik (2020).…”

“…(2012). Hasil penelitian tidak konsisten dengan penelitian sebelumnya yang dilakukan oleh Tarjo et al (2021).…”

“…Hal ini berarti variabel auditor change (AC) tidak memiliki pengaruh terhadap variabel financial statement fraud (FSF). Hasil penelitian konsisten dengan penelitian sebelumnya yang dilakukan oleh Tarjo et al (2021). Hasil penelitian tidak konsisten dengan penelitian yang dilakukan oleh Fitri et al (2019); Ulfah et al (2017); Puspitha dan Yasa (2018).…”

Corporate social responsibility, financial fraud, and firm's value in Indonesia and Malaysia

“…Furthermore, fraud can cause the company's reputation ( Dang et al., 2020 ; Devi et al., 2021 ; Haß et al., 2019 ; Hernawati et al., 2021 ) and the company to suffer losses ( Karpoff and Lott, 1993 ). Internal fraud is the leading actor in the firm's value decline ( Eckert et al., 2019 ; Sakti et al., 2020 ; Tarjo et al., 2021 ). In addition to internal factors, the securities fraud scandal can also cause affected companies to lose most of their market value, lowering the Firm's Value.…”