The Effect of Fraud Pentagon on Financial Statement Fraud Using the Beneish Model With Firm Size As the Moderating Variable

Abstract

This study aims to prove the influence of External Pressure, Ineffective Monitoring, Quality of External Auditor, Change in Auditor and Frequency of CEO’s Picture and Company Size as a moderation on Fraud in the Financial Statements of a company. Purposive sampling is used as a technique in determining the sample of this research. The data used is the company's annual report and the population in this study is a company engaged in manufacturing the textile and garment sub-sector for the period 2017-2019 with a total sample of 33. In this study, two analytical techniques were used, namely the Outer Model which used to determine the validity of valid and reliable research and the Inner Model used to verify the existing hypotheses in this study assisted by the SmartPLS program. This study states that the variables of External Pressure and Change in Auditor have an effect on fraudulent acts in the financial statements, while the variables of Ineffective Monitoring, Quality of External Auditors and Frequency of CEO’s Picture have no effect on fraudulent acts in the financial statements. For the moderating variable in this study, Company Size is not able to moderate the relationship between Ineffective Monitoring and Fraud in Financial Statements.