Detecting fraud of financial reports through fraud hexagon theory and financial distress elements

Abstract

The purpose of this study is to prevent fraud by detecting financial reports listed on the Indonesia Stock Exchange (IDX). The fraud detection tools used in this study are elements of the Fraud Hexagon Theory and Financial Distress. The fraud hexagon elements consist of Stimulus, Capability, Collusion, Opportunity, Rationalization, and Ego which are supporting variables in detecting fraudulent financial statements. The population of this study is all State-Owned Enterprises listed on the IDX for the 2017-2021 period. Purposive sampling technique was used to determine the research sample and obtained a sample of 100 observations. The research method used is multiple linear regression analysis method. The results of the study show that stimulus, capability, collusion, opportunity, rationalization, ego and financial distress simultaneously influence financial statement fraud. Partially, stimulus, collusion, and ego effect detecting fraudulent financial statements, while capability, opportunity, rationalization, and financial distress have no effect on detecting fraudulent financial statements. This research has implications for the government as a regulator, or parties who use information in financial statements as a material consideration in assessing the opportunities for fraudulent acts to occur in company financial reports.