Studies on Earnings Management and Financial Statement Fraud in Corporate Firms

Abstract

The purpose of this paper is to explain the transformation of earnings management into financial statement fraud. Related papers on earnings management and financial statement fraud were intensively reviewed. Although there are some overlaps in both concepts, application of earnings management is not always related to financial statement fraud. Earnings management can occur for a number of reasons, including unintentional errors and legitimate disagreement over GAAP. Results of this study indicate that accounting records are allowed to be managed up to certain hedge. Crossing the hedge would lead the organization to be convicted in illegal financial reporting.

The Effect of Hexagon Fraud on the Potential Fraud Financial Statements with the Audit Committee as a Moderating Variable

“…However, based on the results of this study, shows that related party transactions do not affect the risk of financial statement fraud. The third hypothesis is not supported because there is a dividing line that distinguishes the nature between earnings management and financial statement fraud, namely generally accepted accounting standards (Md Nasir et al, 2019).…”