Abstract
This study examines the effect of the following factors on financial statement fraud: (1) external pressure, (2) personal financial need, (3) financial targets, (4) the nature of industry, (5) ineffective monitoring, and (6) rationalization. The population in this study consisted of companies listed on the Indonesia Stock Exchange (IDX) over the period 2016-2018. The analysis was conducted with the help of the logistic regression method.The results of this study indicate that external pressure, financial targets and the nature of industry have an effect on financial statement fraud, while personal financial need, ineffective monitoring and rationalization have no effect on financial statement fraud. Thus, this study contributes to the understanding that not all aspects of the fraud triangle can detect fraud.
Highlights
According to the Association of Certified Fraud Examiners (ACFE), fraud is a deliberate act against the law that has a specific purpose, is carried out by people outside or within the organisation to get benefits, and causes direct or indirect losses to other parties.ACFE classifies fraud into 3 types – corruption, misappropriation of assets and financial statement fraud [1]
In 2016, ACFE conducted a survey on fraud in Indonesia by distributing questionnaires to CFE certificate holders as well as practitioners experienced in fraud investigations
The results showed that the highest percentage of fraud in Indonesia in 2016 was due to corruption (77%), followed by the misappropriation of assets (19%) and financial statement fraud (4%)
Summary
ACFE classifies fraud into 3 types – corruption, misappropriation of assets and financial statement fraud [1]. In 2016, ACFE conducted a survey on fraud in Indonesia by distributing questionnaires to CFE certificate holders as well as practitioners experienced in fraud investigations. The results showed that the highest percentage of fraud in Indonesia in 2016 was due to corruption (77%), followed by the misappropriation of assets (19%) and financial statement fraud (4%). In 2018, ACFE conducted another study on 220 cases in the Asia Pacific environment and found that financial statement fraud occurred more rarely than other frauds (a percentage of less than 15%) yet caused the greatest total loss – about US$ 700,000. Corruption caused a total loss of about US$ 500,000 and the misappropriation of assets a loss of about US$ 180,000 [2]
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