Statement Fraud Research Articles

Moderation of Corporate Governance in Financial Statement Fraud Investigation with the Sccore Model

Objective: The purpose of this study was to determine the effect of stimulus, capability, collusion, opportunity, rationalization, and ego on financial statement fraud moderated by the effectiveness of the board of commissioners which essential of corporate governance structure. This study also seeks to develop recommendations based on the analysis of financial statement fraud detection and empirically demonstrate the effectiveness of appropriate supervision in preventing financial statement fraud. Theoretical Framework: Management fraud in the context of the misstatement of financial information that can harm other parties for the sake of certain personal or group interests is referred to as a financial statement fraud. In recent years, the theory of financial statement fraud has developed, starting with the fraud triangle, fraud diamond, fraud pentagon, and fraud hexagon. The fraud hexagon theory expanded the previous theory by including the components of stimulus, capability, collusion, opportunity, rationalization, and ego. Furthermore, the model derived from the hexagon theory is known as the SCCORE model. Method: Quantitative research was developed to test the hypothesis in this study. The data observed is secondary data derived from the annual reports of publicly listed companies in the non-financial sector industry on the Indonesia Stock Exchange, which is the target population of the study. The sample was determined using the total sampling technique, and based on this, the observed data amounted to 529. The data were analyzed using multiple linear regression methods and moderated regression analysis methods processed with the SPSS program. Results and Discussion: The findings suggested that corporate governance could moderate the relationship among the SCCORE model and financial statement fraud. Additionally, according to the research findings, stimulus, collusion, opportunity, and ego affect financial statement fraud, even though capability and rationalization accomplish not. Research Implications: The theoretical implication of this research is to provide additional empirical evidence of fraud theory development into hexagon fraud, whereby collusion, which is proposed as an addition to the pentagon fraud theory, is proven to have an effect on financial statement fraud. The other theoretical implication is to empirically verify the relevance of agency theory to the oversight mitigation of the corporate governance structure. The practical implication of this research is to broaden the insights of practitioners in the accounting and finance fields in order to detect the likelihood of financial statement fraud based on historical financial data, which ultimately can assist in the financial decision-making process. Originality/Value: This study advanced to the state of knowledge on financial statement fraud through an inquiry into the interaction between the fraud hexagon theory's elements and corporate governance moderation, particularly the effectiveness of its oversight. The effectiveness of corporate governance in preventing financial statement fraud through appropriate oversight illustrates the study's relevance and value.

Pengaruh Financial Stability, Nature Of Industry, Dan Change In Auditor Terhadap Financial Statements Fraud

Fraud is an illegal activity that harms the company and benefits the perpetrator. According to the understanding of many experts, fraud refers to intentional misrepresentation for a specific purpose. Original research or studies on important scientific research or topics. Basic research or research activities involve verifying ideas and facts that show relationships or influences between variables. This article examines the factors that influence Financial Statements Fraud: Financial Stability, Nature of Industry, and Change in Auditors, which is a study of investigative audit literature. The purpose of writing this article is to create a hypothesis that will be used in further research regarding the influence between variables. The findings from this literature review are: 1) Financial Stability influences Financial Statements Fraud, 2) Nature of Industry influences Financial Statements Fraud, and 3) Change in Auditor influences Financial Statements Fraud.

Peran Kepemilikan Institusional Sebagai Pemoderasi Pada Determinan Fraudulent Financial Statement: Analisis Fraud Diamond Model

This study employs a fraud diamond model analysis that consists of four factors: pressure, opportunity, rationalization, and capability to examine and analyze those effects on fraudulent financial statements, with institutional ownership as a moderating variable. Purposive sampling was used to choose the study`s sample, which consists of state-owned enterprises (BUMN) that meet the requirements. Regression analysis was employed as an analytical method using a quantitative approach, and this study contained 96 samples. WarpPLS version 8.0 software was used to help with the statistical data analysis needed to test the hypothesis. This study found that pressure, opportunity, and rationalization have a positive effect on fraudulent financial statements, while capability has no effect on fraudulent financial statements. In addition, institutional ownership is able to moderate the relationship between pressure on fraudulent financial statements and opportunity on fraudulent financial statements.

Pengaruh Diamond Theory Terhadap Fraudulent Financial Statements Dengan Komisaris Independen Sebagai Variabel Pemoderasi

This research uses a fraud diamond model analysis which consists of four factors, namely pressure, opportunity, rationalization, and cability, aiming to test and analyze the influence of pressure, opportunity, rationalization, cability on Fraudulent Financial Statements with the Independent Commissioner as a moderating variable. The sample for this research was selected using purposive sampling, namely BUMN companies for the 2019-2022 period that met the criteria. Using a quantitative analysis approach, regression was used as an analysis method and a total of 96 samples were included in this research. Statistical data analysis to test the hypothesis was carried out with the help of WarpPLS software version 8.0. This research shows that pressure, opportunity and ability have a positive effect on Fraudulent Financial Statements, while rationalization has a negative effect on Fraudulent Financial Statements. Apart from that, the Independent Commissioner only moderates the relationship between capability and Fraudulent Financial Statements.

Pengaruh Corporate Governance terhadap Kemungkinan Kecurangan Laporan Keuangan: Studi Empiris pada Perusahaan BUMN Tahun 2018-2021

This research aims to determine the influence of corporate governance on the possibility of fraudulent financial reports in state-owned companies in 2018-2021. This type of research is causative research with a quantitative approach. This type of research data uses secondary data. Secondary data was obtained from the official website of BUMN companies. The sample used in this research was 26 companies with data for 2018,2019, 2020 and 2021. The sample in this research was 21 companies. Researchers used logistic regression analysis. The results of this research indicate that managerial ownership, board of commissioners, audit committee and institutional ownership have no effect on the possibility of financial statement fraud.

Determinants of financial statement fraud: the perspective of pentagon fraud theory (evidence on Islamic banking companies in Indonesia)

Purpose The purpose of this study was to determine the determinants of financial statement fraud: the perspective of pentagon fraud theory. Design/methodology/approach This study used quantitative methods with an explanatory research design by applying secondary data on Islamic banking companies listed on the Indonesia Stock Exchange (IDX). Findings External pressure affects financial statement fraud, ineffective monitoring affects financial statement fraud, external auditor quality affects financial statement fraud, change in auditor affects financial statement fraud, frequent number of CEO’s picture affects financial statement fraud, external pressure affects firm size, ineffective monitoring affects firm size, external auditor quality affects firm size, change in auditor affects firm size, frequent number of CEO’s picture affects firm size, firm size affects financial statement fraud, firm size mediates the relationship between external pressure on financial statement fraud, firm size mediates the relationship between ineffective monitoring on financial statement fraud, firm size mediates the relationship between external auditor quality and financial statement fraud, firm size mediates the relationship between change in auditor and financial statement fraud, firm size mediates the relationship between frequent number of CEO’s picture and financial statement fraud. Research limitations/implications The limitations of this research were found during the research process and can be used as input for further research and related parties in conducting the research to obtain better research results. The limitations of this study are as follows: this study only focused on Islamic banking, so it cannot be generalized to other sectors. Besides, this study only tested five independent variables, one dependent variable and one mediating variable. Practical implications For external auditors, financial statement fraud by management might be caused by many factors and is a social as well as an economic problem that must be addressed immediately. Therefore, in carrying out the duties and roles as an external auditor, they must have an attitude of independence (not taking sides) in the mental attitude that must be maintained by the auditor related to the assignment. Auditors must have sufficient technical expertise and training as auditors. In carrying out the audit, the auditor should use their professional skills in responding carefully and thoroughly. Moreover, in carrying out audit work, the auditor must have a plan, must know adequate internal control and obtain sufficiently competent audit evidence. Originality/value To the best of the authors’ knowledge, very few studies in Indonesia have applied the Beneish model. There is only one study that implemented the Beneish model, and the study examined only a few companies listed on the IDX. The findings of the present study have important implications not only for banks but also for users of financial statement accounts in Indonesia, especially for investors, auditors, regulators, taxation and other state authorities.

Identifying Fraud Financial Reports Based on Signs of Income Management Using Machine Learning Technology: The Case of Listed Companies in Vietnam

This study aims to use a measure of earnings management to predict companies whose financial statements have problems. This is an identification measure other than common measures to predict financial statement fraud such as measuring by the M-Score or the Z-score model that many previous studies have applied. In the income management measure, the author uses a measure of abnormal cash flow and abnormal expense flow to consider whether the corporate financial statements have problems or not. To do this, the author uses data from listed non-financial enterprises in the period from 2018 to 2022, with machine learning and deep learning algorithms, of which we focus on three main algorithms: ANN, SVM and RF. The results show that identifying problematic financial statements based on abnormal cash flows is quite effective with an accuracy of over 78% for the SVM method, while if using the RF method, the accuracy reaches over 82% but it is required to accept an increased processing time.

Pengaruh Tekanan, Kesempatan, dan Rasionalisasi Terhadap Kecurangan (Fraud) Laporan Keuangan

This study aims to determine the effect of pressure, opportunity, and rationalization on fraud on financial statements. The type of data in this study is secondary data obtained from the Indonesian Brsa Efek (IDX) website. The population of this study is in transportation sub-sector companies listed on the IDX. The sampling method uses purposive sampling with the number of samples obtained, which is 9 samples in this study. The population of this study is in transportation sub-sector companies listed on the IDX. The sampling method uses purposive sampling with the number of samples obtained, which is 9 samples in this study. The analysis technique used is panel data regression. The results of this study show that pressure has a positive effect on financial statement fraud, opportunity has a positive effect on financial statement fraud, and rationalization has a negative effect on financial statement fraud.

Does Financial Distress Contribute as an Intermediary Factor in Detecting Financial Statement Fraud ?

This study aims to investigate whether financial distress acts as an intermediary factor in detecting fraudulent financial statements in manufacturing companies listed on the Indonesia Stock Exchange. The purposive sampling method was used to select 105 manufacturing companies during the period 2017-2021. The analysis was conducted using the Outer Smart PLS model to evaluate the relationship between auditor turnover, board turnover, financial targets, ineffective supervision, capability, and financial distress on financial statement fraud. The results confirmed that there was no significant influence between capacity, board turnover, financial targets, ineffective supervision, and financial distress on financial statement fraud. In addition, financial distress also does not mediate the effect of other variables on financial statement fraud. This approach reflects the ethical philosophy in the study that emphasizes honesty, integrity, and transparency in corporate financial reporting. These results highlight the importance of effective supervisory strategies and strong internal controls in preventing and detecting financial statement fraud, regardless of the company's financial distress. This study contributes by exploring the role of financial distress in detecting financial statement fraud. For future research, it is important to investigate additional factors that influence fraud and develop more effective monitoring strategies. Contingency theory emphasizes the importance of contextual factors in organizational management, while Fraud theory pays attention to the motives and driving factors behind fraudulent behavior.

NON-CYCLICAL INDUSTRIAL PERFORMANCE IN INDONESIA: THE MODERATION OF AUDIT QUALITY

This study aims to analyze the factors of hexagon fraud in detecting financial statement fraud in non-cyclical sector companies listed on the Indonesia Stock Exchange (IDX) for the 2020-2022. Based on the purposive sampling method, the number of companies sampled in this study was 33 research criteria of non-cyclical companies with a total of 66 observations. The results of this study found that the element of pressure proxied by government projects had a significant effect on fraudulent financial statements. Meanwhile, financial targets, financial stability, changes in directors, ineffective monitoring, change in auditors, frequent number of CEO's pictures, political connections, state-owned enterprises, and audit opinions have no significant effect on fraudulent financial reports in non-cyclicals sector companies listed on the IDX 2020-2021.

Audit Committee as a Moderation Variable of Fraud Triangle Effect on Fraudulent Statement

One of the indicators of a company's achievement is the presentation of financial reports. It becomes a problem that is detrimental to the state and the company itself while the company modifies its financial reports to attract investors. This research is aimed at exploring the relationship between fraud triangle theory (stimulus/stability, opportunity, rationalization) which influences financial report fraud (f-score) with audit committee moderation variables which are still inconsistent, as well as reminding investors to be more careful in investing funds. Additionally, it aims to caution investors to be more careful in investing their funds. A total of 165 manufacturing sector companies listed on the Indonesia Stock Exchange in the 2019-2022 research period were used as the population and sample data was obtained using a purposive sampling technique of 52 units (208 observation data) in this research. The research data analysis method is processed in the SmartPLS application in processing sample data. Testing the validity of the research model was carried out using convergent validity & discriminant validity and research hypothesis testing was used by bootstrapping. The research results showed that only the stimulus/stability variable had significant implications for fraudulent statements. However, the opportunity and rationalization variables have no influence and are not significant. Then the audit committee as a moderating variable succeeded in strengthening the influence of opportunity on fraudulent statements. Meanwhile, the audit committee has not been able to strengthen or weaken the relationship between stimulus/stability and rationalization variables in the tendency for fraudulent financial statements to occur.

Data mining algorithm in the identification of accounting fraud by smart city information technology

The identification of accounting fraud is an important measure to safeguard the interests of stakeholders and ensure the long-term development of the company. The current traditional methods for identifying accounting fraud rely on manual review and judgment, lacking objectivity and accuracy. In order to improve the accuracy of accounting fraud identification, improve identification efficiency and objectivity, this article combines smart city information technology to conduct in-depth research on data mining algorithms for accounting fraud identification. This article first provides a brief overview of smart cities and information technology, then introduces the basic theory of accounting fraud identification, and finally implements accounting fraud identification through k-means clustering mining algorithm. The data is divided into k clusters, and abnormal clusters are identified by checking the characteristics and attributes of each cluster. Compared with traditional rule-based and pattern based methods, this approach can more flexibly adapt to different types and forms of fraud, and can discover unknown patterns of fraud. In the experiment, this article used electronic data collection, analysis, and retrieval systems on the websites of the Shanghai Stock Exchange and Shenzhen Stock Exchange to collect 641 annual reports and financial characteristics from 62 listed companies that engaged in financial statement fraud and 84 companies that were not reported to have financial statement fraud from 2012 to 2021 as test samples. The results were tested and analyzed from several aspects, including the number of misjudgments, misjudgment rate, and ROC curve. The final test results show that compared to traditional accounting fraud identification methods, the comprehensive misjudgment rate of data mining algorithms based on smart cities has decreased by 3 %. The conclusion indicates that data mining algorithms used in smart city information technology to identify accounting fraud can help improve the accuracy of accounting fraud, improve audit objectivity and effectiveness.

The information content of financial statement fraud risk: An ensemble learning approach

This study aims to assess the financial statement fraud risk ex ante and empirically explore its information content to help improve decision-making and daily operations. We propose an ex-ante fraud risk index by adopting an ensemble learning approach and a theoretically grounded framework. Our ensemble learning model systematically examines the fraud process and deals effectively with the unique challenges in the financial fraud setting, which yields superior prediction performance. More importantly, we empirically examine the information content of our estimated ex-ante fraud risk from the perspective of operational efficiency. Our empirical results find that the estimated ex-ante fraud risk is negatively correlated with sustaining operational efficiency. This study redefines fraud detection as an ongoing endeavor rather than a retrospective event, thus enabling managers and stakeholders to reconsider their operation decisions and reshape their entire operation processes accordingly.

Effect of Hexagon Fraud Against Financial Statement Fraud with Company Size as Moderation

This research aims to determine the effect of hexagon fraud with company size moderating its effect on financial statement fraud. Hexagon fraud is measured through six components, namely, stimulus, capability, collusion, opportunity, rationalization and ego. Meanwhile, company size is measured through total assets and financial statement fraud is measured through the Beneish M-Score model. This research is included in descriptive quantitative research. Through purposive sampling, 35 companies were determined as samples for a 5-year observation period from a total population of 113 non-cyclical consumer sector companies as of 2022 listed on the Indonesia Stock Exchange. Data were processed using multiple linear regression. Based on the results of data analysis, it is known that partially hexagon fraud has a significantly positive effect on financial statement fraud, while company size has no effect on financial report fraud. As a moderator, company size can strengthen the influence of hexagon fraud on financial statement fraud. Simultaneous testing shows that hexagon fraud and company size influence financial statement fraud. However, both of them were only able to explain 9% of financial statement fraud with the rest explained by other variables.

FRAUD HEXAGON THEORY AND FRAUDULENT FINANCIAL STATEMENTS IN BASIC INDUSTRIAL AND CHEMICAL SECTOR COMPANIES LISTED ON THE IDX

Financial statement fraud (FSF) is the act of reporting inaccurate or distorted financial information to manipulate company performance or gain illegitimate personal gain. This research examines the influence of elements in the Hexagon Fraud on financial statement fraud. The analytical method used in this research is multiple linear analysis using purposive sampling technique to select the research sample. The sample for this research was 19 companies in the basic industrial and chemical sectors listed on the IDX from 2021 to 2022 with a 2-year observation period, totaling 38 sample companies. The results obtained are as follows: (X1) Financial stability as an element of Stimulus measurement in the fraud hexagon theory, (X2) frequent number of CEO Picture as an element of Ego measurement in the fraud hexagon theory, (X3) Change in auditor as an element of Rationalization measurement in the hexagon fraud theory, (X4) nature of industry as an element of Opportunity measurement in the hexagon fraud theory, (X5) change of directors as an element of Capability measurement in the fraud hexagon theory, and (X6) government projects as elements of Collusion measurement in the hexagon fraud theory. Simultaneously, they influence fraud in financial statements, while Stimulus, Ego, Rationalization, and Opportunity have no influence on financial statements. Capability and Collusion influence financial statement fraud

THE IMPACT OF FINANCIAL STATEMENT FRAUD THROUGH THE FRAUD HEXAGON ON CONSUMER CYCLICALS SECTOR COMPANIES ON THE INDONESIA STOCK EXCHANGE IN 2020-2022

The objective of this study is to collect empirical evidence regarding the Factors in the Fraud Hexagon Theory that can be used to detect financial statement fraud. The case study of the Consumer Cyclical Sector on the IDX in the range of 2020-2022 is used in testing the Fraud Score model. In this analysis, 89 Consumer Cyclicals companies serve as samples, purposeful sampling is used to select samples, in this study, financial statement fraud (KLK) is the dependent variable. The independent variables used are financial targets, financial stability, external pressure, CEO education, political connections, state-owned enterprises, external auditors, rationalization, and CEO duality. EViews version 13 testing software was used for data analysis of multiple linear regression analysis. This study shows that financial statement fraud is significantly influenced by external pressure and rationalization. There is no statistically significant correlation between financial objectives, financial stability, and rationalization.

Pengaruh Fraud Pentagon Terhadap Fraudulent Financial Statement dengan Umur Perusahaan Sebagai Variabel Moderasi

This research aims to analyze and provide empirical evidence of the influence of the fraud pentagon which consists of the components of pressure, opportunity, rationalization, ability and arrogance on fraudulent financial statements, moderated by company age. The research was conducted using a purposive sampling method on 63 industrial sector companies listed on the Indonesia Stock Exchange in 2018-2022. A sample of 24 companies was obtained, then outliers were carried out for 8 companies, resulting in the final sample data remaining in this study being 80 data. The research results concluded that pressure had an effect on fraudulent financial statements, while opportunity, rationalization, ability and arrogance had no effect. The moderating variable company age cannot weaken the influence of pressure, opportunity, rationalization, ability and arrogance on fraudulent financial statements. Meanwhile, simultaneously it shows that the variables as a whole have an influence on fraudulent financial statements.

Crowe's Fraud Pentagon Theory Review Of Fraudulent Financial Statements With Audit Committee Moderation

Purpose—This study aims to analyze the Pentagon fraud theory for detecting fraud in financial statements, with the audit committee as a moderating variable. Design/methodology/approach — This study's population is manufacturing companies listed on the Indonesia Stock Exchange in 2018-2020. The research sample is 198, comprising 66 company annual reports for three years. The analysis technique used in this study is multiple linear regression and uses the MRA (Moderating Regression Analysis) method through IBM SPSS version 26 software. Findings—The results showed that the variables of pressure and arrogance influenced fraud in financial statements, while the variables of opportunity, rationalization, and competence did not. The pressure and opportunity variables affect fraud in financial statements after being moderated by the audit committee variable, while the rationalization, competency, and arrogance variables have no effect. Practical implications — Practical benefits for stakeholders as a source of information regarding factors that can be detected as a cause of fraud in financial statements. That is expected to avoid or minimize fraud and fraudulent financial statements, which can later develop and harm many parties, especially business people. Originality/value — The difference between this study and previous research lies in using variables, research objects, research periods, and measurements that previous researchers have not carried out. Paper type — Research paper

Beyond Expectations: Corporate Governance's Insufficiency in Fraud Prevention

Objective –The specific objectives to be achieved in this research are to (1) test the Beneish model (1999) as a predictor of reliable manipulation or indicator to reveal signals or symptoms of financial reporting fraud. (2) Test whether corporate governance effectiveness reduces financial statement fraud.Design/Methodology –The research analyzed publicly listed non-financial firms listed in Indonesia's stock exchange (IDX) from 2017 to 2022. Simple random sampling was used to select 86 companies per year, resulting in 617 year-firm observations. Data analysis was carried out by logistic regression multiple with panel data. The test was carried out by adopting the Beneish benchmark index (Z-score) model which is effective for predicting indications of fraudulent financial statements. Results –The test results show that there is 99.8% of incidents indicated financial statement fraud and the other 0.2% did not indicate financial statement fraud. Corporate governance mechanisms consisting of institutional ownership, audit committees, and audit quality does not mitigate fraud. It is anticipated that the research's contribution will serve as a practical guide and reference for the examination of indicators of fraud in corporate finances. The findings of this study are expected to provide valuable insights for policymakers and regulators seeking to improve corporate governance practices.Research limitations/implications –This research does not incorporate the competency and capability specifications of governance structures such as the board of commissioners, audit committees, and external auditors. Future investigations are anticipated to delve more profoundly into the internal and external corporate governance capabilities and specifications.Novelty/Originality –This study reveals that, on the whole, a significant proportion of companies are implicated in fraudulent activities, while corporate governance mechanisms are deemed inadequate in overseeing management activities conducive to fraud. The outcomes of this research challenge the prevailing paradigm of corporate governance as an effective deterrent against fraudulent behavior.

Financial Statement Fraud Detection: The Hexagon Fraud Model Approach

The purpose of this study is to examine the likelihood of financial statement fraud using the fraud hexagon model, including pressure (financial stability), opportunity (ineffective monitoring), rationalization (auditor change), capability (director change), arrogance (frequent CEO pictures), and conspiracy (connection with government projects) on financial statement fraud. The sample of this study is manufacturing companies listed on the Indonesian Stock Exchange from 2019 to 2021, with a total of 73 companies. The data was processed using SPSS 22 software. The results of this study indicate that financial stability has a positive effect on financial statement fraud. However, ineffective monitoring, change of auditor, change of directors, frequent number of CEO pictures, and connection with government projects do not affect financial statement fraud.