Abstract
Auditors in carrying out fraud detection do not always get a bright spot, because the perpetrators have many ways to commit fraud and various underlying motivations. This reason strengthens government auditors, and it is important to understand or recognize indicators or red flags in determining fraud risk assessments. The aim of this article is to gather empirical evidence on how public sector auditors perceive fraud detection. Partial Least Square analysis is the method used. The number of samples in this study was 96 government auditors consisting of 48 BPKP auditors and 48 BPK auditors. The findings demonstrate that gender, duration of employment, and education and training of auditors at BPKB have an impact on the effectiveness of red flags, whereas auditors at BPK have a different impact, with job position, education, and training having an impact on red flag effectiveness. The results of this study give attention to BPKP and BPK to provide opportunities for auditors to participate in continuing education and participate in training that supports auditors in carrying out their work, especially related to training in the use of IT to detect fraud. The perception theory can explain the usefulness of red flags in detecting fraud, according to the findings of this study. This means that in determining the ability to use red flags, it is influenced by individual characteristics (gender, position, length of employment), and the capacity of auditors (education and training).
Highlights
The manifestation of transparency and accountability in financial statements, both in the public and private sectors, is conducted by the audit of finance by independent bodies
Experience in both BPKP and BPK does not affect the effectiveness of red flags
The results of this study have implications for Government Agencies, i.e., BPK and BPKP in that these results can be used as models in anticipating fraud in auditing practices
Summary
The manifestation of transparency and accountability in financial statements, both in the public and private sectors, is conducted by the audit of finance by independent bodies. The audit of public sector editors in Indonesia is carried out by the Audit Board of the Republic of Indonesia (BPK) as external auditors, as well as the National Development and Financial Supervisory Agency (BPKP). If BPK's auditors discover an initial fraud signal, known as red flags, they can take action by proposing an audit with a specific objective in the form of an investigative audit conducted by BPKP [2]. The red flag approach is a technique for detecting fraud that is endorsed by the majority of audits [3]. Internal and external auditors both have a role in detecting fraud using red flags. Internal auditors employ red flags to prevent, discover, investigate, and report fraud, whereas external auditors use red flags to make decisions about delivering financial report opinions [4]
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