Financial Statement Fraud Risk Factors of Fraud Triangle: Evidence From Indonesia

Hasni Yusrianti,Etna Yuyetta,Eka Meirawati,Imam Ghozali,Aryanto Aryanto

doi:10.5430/ijfr.v11n4p36

Abstract

The purpose of this study is to examine the risk factors that influencing financial statement fraud. Especially, it examines the influence of rationalization, pressure, and opportunity on the fraudulent financial statements and also examines the interaction effect of industry risk and company size on the relationship between rationalization, pressure, and opportunity on financial statement fraud. Secondary data were collected from Bloemberg Data Base, IDX and OJK RI. The population in this study is companies listed on the Indonesia Stock Exchange in the moving year from 2011 to 2017 and the sample was selected by companies that indicated financial statement fraud and those that did not indicate financial statement fraud. The company indicated by Fraud was collected from Bapepam and OJK RI. Data were tested using logistic regression analysis and different T-tests of 28 committed fraud companies and 28 companies that did not commit fraud. The results showed that only some variables had a significant effect on financial statement fraud, namely financial stability (ACHANGE), Financial Target (ROA), and the Nature of Industry (ARCHANGE). The results also show that company size and industry risk do not moderate the fraud factors on financial statement fraud. These results support the fraud triangle theory in explaining the phenomena of financial statement fraud.

Highlights

Fraud (Fraud) is still a big problem today
Considering the facts that: fraud factors in developing countries is different in develop countries, the Fraud Triangle is not compatible with all situations and it is contextual, and the rationalization proxy is so limited, this study will develop the factors that influence Financial statement fraud based on the Fraud Triangle in a developing country. Extending this context the main objective of this research is to examine the influence of rationalization, pressure, and opportunity on the fraudulent financial statements and to examine the interaction effect of industry risk and company size on the relationship between rationalization, pressure, and opportunity on financial statement fraud
The purpose of this study is to examine the risk factors that influencing financial statement fraud

Summary

Introduction

The survey results of Pricewaterhouse Coopers (PWC) and The Association of Certified Fraud Examiners (ACFE) indicate that fraud is still high in number. The results of the Global Economic Crime Survey PWC in 2018 showed that 49% of respondents said their company fraud increase of 36% from 2016. The fraud survey 2018 PWC in the Asia Pacific showed high results which increased the percentage of fraud from 30% to 46% in 2018. Report To The Nations 2014 Global study fraud survey in 2014 which was based on 1483 cases of fraud in 2014 in 100 countries indicated that organizations lost 5% of annual revenue or at least $ 3.7 trillion (ACFE, 2016). Report To The Nations 2018 Global Study On Occupational Fraud And Abuse reported that the most common and most expensive form of occupational fraud is financial statement fraud, which occurs in 10% of cases and causes an average loss of USD 800,000

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