Determinants of Financial Statement Fraud: Political Connections as Moderation

Abstract

Financial statement fraud is a significant issue that negatively affects the company's external customers. Many studies regarding factors that influence fraud financial statements have been carried out. The purpose of this study is to examine and gather empirical data regarding the impact of financial targets, effectiveness monitoring, auditor switching, and political connections of financial statement fraud with political connections as a moderating variable. This study is anticipated to assist users of financial statements in making decisions and serve as a resource for other research. The data in this study were obtained from the annual reports of transportation companies listed on the Indonesia Stock Exchange (IDX) for the period between 2017 and 2019. The sampling technique in this research was purposive sampling which produced 25 companies with the total analysis unit to 75 units. Data analysis methods used are descriptive statistical analysis and statistical analysis with absolute difference regression analysis and using the IBM SPSS 25 program. The results of this research indicated that financial target and effectiveness monitoring affected on financial statement fraud, while auditor switching and political connections had no effect on financial statement fraud. In addition, political connections is able to weaken the effect of effectiveness monitoring on financial statement fraud and political connections is not able to moderate independent variables; financial targets and auditor switching on the financial statement fraud. This research is expected to be able to contribute in determining the policies of users of financial statements as well as being a reference for further research development. To ensure that the financial reports presented are correct and serve as a basis for decisions and policies as well as a form of information transparency for businesses and other stakeholders, organizations must enhance their vigilance in responding to financial statement fraud