Fraudulent Financial Reporting Research Articles

Detecting Fraudulent Financial Reporting with Financial Ratios: Case Study on Indonesia Stock Exchange

This study aimed to examine the significant differences in the financial ratios of FFR and non-FFR companies listed on the Indonesia Stock Exchange (IDX) in 2018-2019. It used the difference test of two population means and the Mann-Whitney U test to determine the financial ratios useful in distinguishing the companies. Furthermore, multiple logistic regression was employed to determine significant financial ratios as predictors against Fraudulent Financial Reporting (FFR). The M-Score formula was applied to classify the sample into 19 non-FFR and 59 FFR public companies. The results showed that seven financial ratios effectively differentiate FFR and non-FFR companies. Moreover, one significant financial ratio predicts FFR in public companies listed on the Indonesia Stock Exchange.

Analysis of Measurement of Financial Difficulties and Financial Report Fraud (A Case Study at PT Asabri (Persero) 2010-2018)

This study aims to examine the financial health condition and whether there is an indication of fraudulent financial statements or not at PT ASABRI (Social Insurance for the Armed Forces of the Republic) in 2010-2018 by using the Altman Z-Score, Springate S-Score, Grover G-Score, Beneish M-Score, and Dechow F-Score methods. PT ASABRI became the object of the study due to the result of an audit conducted by the BPK (The Audit Board of the Republic of Indonesia) in 2021 that found fraud in financial management and investment funds at PT ASABRI. To measure financial distress, the researchers used the Altman, Springate, and Grover models. While to examine financial statement fraud, the researchers used the Beneish and Dechow models. The results revealed that each model showed varied results. In the financial distress model, the Altman Z-Score could show financial distress 4 times while the Springate S-Score showed financial distress 5 times in 9 years of observation. Moreover, the other models showed different results. The Grover G-Score model did not indicate any financial distress at PT ASABRI. While in the fraud model, the Beneish M-Score could detect indications of fraudulent statements at PT ASABRI 5 times in 8 years of observation. Different conditions occurred in the Dechow F-Score model that did not show fraudulent financial statements at PT ASABRI in 9 years of observation, from 2010 to 2018.

Efektivitas Corporate Governance dan Fraudulent Financial Reporting

This study aims to examine the role of corporate governance on fraudulent financial reporting. Research with the variables used is rarely studied, especially regarding the skills of the board of commissioners, the number of meetings and the role of women. The research sample is 469 manufacturing companies. Tests were carried out using logistic regression using the SPSS application which tested corporate governance variables represented through the role of the board of commissioners from the point of view of size, independence, expertise, meet, gender diversity towards fraudulent financial reporting. The results of the study show that the board of commissioners (size) and the board of commissioners (gender diversity) have a negative effect on fraudulent financial reporting. Another independence variable, namely the board of commissioners (independence, expertise, meet) is not proven to have an effect on fraudulent financial reporting.
 Keywords: The Board of Commissioner (Size, Independensi, Expertise, Meet, Gender); Fraudulent Financial Reporting

PENDETEKSIAN KECURANGAN LAPORAN KEUANGAN DI TINJAU DARI TEKANAN WAKTU DAN INDEPENDENSI

This study aims to examine the effect of time pressure and independence on the ability to detect financial statement fraud. This research was conducted at an independent prosperous cooperative. The sampling technique used was purposive sampling with predetermined criteria. The data used in this study is primary data in the form of questionnaires distributed to respondents. 60 questionnaires were distributed, 48 questionnaires were returned and were feasible to use and could be processed in this study. The research method used is a quantitative research method. The data were obtained by distributing questionnaires and measured using a Likert scale. The data analysis method uses multiple linear regression analysis which is processed through SPSS software. Based on the analysis that has been carried out, the result is that time pressure and independence have a positive effect on the ability to detect fraudulent financial reports.

Identifying Financial Report Fraud of U.S. Listed Chinese Companies

A key feature of publicly listed companies all over the world is that the people who own the company, its investors, do not typically participate in the day-to-day management of the company. This separation of ownership and control can become a problem when investors and management have different objectives. Disclosure is a primary means through which investors can understand what managers are doing and ensure that managers serve the objectives of the companys owners. However, since management is responsible for preparing the companys financial statements, they could misreport the numbers to mislead investors. Previous research showed managers had discretion in manipulating the numbers in the financial report. In this paper, we collected samples of Chinese companies listed in the United States, such as Luckin Coffee, and assessed whether there were any signs that might help investors identify fraud earlier than they were discovered, and what mechanisms prevented managers from doing so.

Financial Stability, Monitoring, and Replacement Directors on Fraudulent Financial Reporting

An issue of concern is fraudulent financial reporting, which has the potential to cause significant economic losses to investors and the government, as well as a loss of investor trust because it may lead to investors making poor investment decisions. With fraudulent financial reporting as a dependent variable, this study's primary goal is to investigate the empirical financial stability, monitoring, and replacement of company directors, all of which are used as proxies for the pressure, opportunity, and capability elements of fraudulent financial reporting. The banking industry makes up the majority of the study's participants. Purposive sampling was used to select 123 companies for the research sample; panel data regression was used as the statistical method, and EViews 10 was used as the statistical processing software. There was a correlation between fraudulent financial reporting and monitoring in this study, but not between financial stability and the replacement of board members of directors.

Fraud Hexagon Analysis in Detecting Fraudulent Financial Reporting

Fraud Hexagon Analysis in Detecting Fraudulent Financial Reporting

Analysis of Fraudulent Financial Reporting With Fraud Hexagon Theory in Financial Sector Companies Listed on the Indonesia Stock Exchange (IDX) In 2017-2021

Analysis of Fraudulent Financial Reporting With Fraud Hexagon Theory in Financial Sector Companies Listed on the Indonesia Stock Exchange (IDX) In 2017-2021

Kemampuan Beneish M-Score Dalam Memprediksi Fraudulent Financial Reporting

The aim of this research is to determine the ability of the Beneish M-Score model to predict fraudulent financial reporting in banking companies in Indonesia. The research was conducted on all banking companies listed on the Indonesia Stock Exchange (IDX) in 2017-2021. The method of determining the sample using a non-probability method with purposive sampling technique. The data analysis technique used is discriminant analysis. The results showed that the Beneish M-Score was able to predict fraudulent financial reporting. The practical implication of this research is that investors can consider the Beneish M-Score before making economic decisions. The Beneish M-Score analysis can be an indication (red flag) of a company committing fraudulent financial reporting.
 Keywords: Fraudulent Financial Reporting; Beneish M-Score; Discriminant Analysis

Detecting Fraudulent Financial Reporting In State-Owned Company: Hexagon Theory Approach

This study aims to investigate the impact of the hexagonal fraud theory in the detection of fraud in the financial statements of state-owned enterprises (BUMN). This study is a quantitative approach whose data comes from the company's annual financial statements published by the Indonesia Stock Exchange (IDX) using multiple regression analysis techniques. The results of the study explain that simultaneously Financial Stability (Stimulus), External Pressure (Stimulus), Nature of Industry (Opportunity), Auditor Change (Capability), Change of Directors (Rationalization), Number of CEO Images (Arrogance), and Cooperation with Government Projects (Collusion) has a positive effect in detecting fraudulent financial statements of SOEs. Partially Financial Stability, External Pressure, Nature of Industry, Change of Directors, and Cooperation with Government Projects have a positive effect in detecting fraudulent financial statements of SOEs. Changes in Auditors and the Number of CEO Images have no effect in detecting fraudulent financial statements in BUMN for the 2012-2019 period. The results of this study can provide an overview of the factors that may cause fraudulent financial statements in SOEs. It is hoped that the results of this study can provide input to interested parties in strategic decisions.

Related Parties Transactions, Family Firms and Fraudulent Financial Reporting in Malaysian Public Listed Companies

Related Parties Transactions, Family Firms and Fraudulent Financial Reporting in Malaysian Public Listed Companies

An Analysis of Pentagon Fraud Theory to Detect Fraudulent Financial Reporting (a Case Study at Sub Sector Transportation That Listed in Indonesian Stock Exchange 2014-2018)

The aim of this study is to examine the element of fraud in fraud pentagon theory against indications of fraudulent financial reporting. The Fraud pentagon model is a further development of classical fraud triangle theory and fraud diamond theory. It includes pressure on financial targets, financial stability, external pressure, institutional ownership, nature of industry, ineffective monitoring, quality of external auditor, change in auditor, change of directors, and duality CEO. The indication of fraudulent financial reporting as dependent variable. Samples were selected using a purposive sampling method from 175 mining companies listed on Indonesia Stock Exchange during the year period 2014 – 2018, resulting in 70 firm-observations. Data analysis was conducted using the logistic regression method. The results of this study show that the change of directors is significant in detecting the occurrence of fraudulent financial reporting.

Fraudulent Financial Reporting Analyses Using Beneish Model: Evidence from Malaysian Public Companies

Fraudulent Financial Reporting Analyses Using Beneish Model: Evidence from Malaysian Public Companies

The Analysis of Fraudulent Financial Reporting (Case Study during Pandemic Time in Indonesia)

Financial report is communication tools that are part of the accounting process. Financial statements contain information about company's condition and company's performance that needed by investors for economic decision making. In addition, financial statements are prepared by management and management has a tendency to shows that the company's financial condition is well. The financial statements aim to provide information concerning the financial position of an company that is beneficial to a large number of users in economic decision making (Harahap, 2013). Wrong information that publish in financial statement will be affected to all decision maker (management, investor, creditor, etc). However, the are several cases of fraud committed by the management to display a satisfactory financial statement. The American Institute of CPA's or AICPA (2012) defines fraud as a deliberate act of fraud by someone or several people in management, the government, employees, or third parties to obtain illegal benefits. The case of fraudulent financial reporting of go public companies in becomes one of the bad factors for the economy of a country (Apriliana and Agustina, 2017). There are some go public companies in Indonesia are known commit fraud practices of financial statements: PT Kimia Farma Tbk (2001), PT Indofarma Tbk (2001), PT Kereta Api Indonesia (2006), PT Hanson International Tbk (2016), PT Asuransi Jiwasraya (2017), PT Garuda Indonesia (2018), PT Envy Technologies Indonesia (2019). From all of this cases, known that financial statement have been manipulated and make a big losses for investors. Fraudulent Financial Reporting also lying to the public that can affect to the wrong decision making. Keywords: Earnings Management, Financial Performance, Fraudulent Financial Reporting, Fraud Triangle

Detecting Fraudulent Financial Reporting Using the Fraud Hexagon Model: Evidence from the Banking Sector in Indonesia

The purpose of this study was to examine the potential for fraudulent financial reporting using the fraud hexagon theory factors such as stimulus (financial target, financial stability, and external pressure), capability (change in director), collusion (total board of commissioners who have multiple positions), opportunity (ineffective monitoring), rationalization (auditor switching), and arrogance (frequency of the number of photos of the chief executive officer (CEO) in the annual financial statements) affect fraudulent financial reporting. The sample of this study comprises banking companies listed on the Indonesia Stock Exchange (IDX) in 2017–2021, with a total sample of 215 and data processing using SPSS 25 software. The results of this study indicate that external pressure and arrogance affect fraudulent financial reporting. However, financial targets, financial stability, ineffective monitoring, auditor switching, change in director, and collusion do not affect fraudulent financial reporting. Therefore, for a company to have a system for preventing the occurrence of embezzlement, the company has to create a system of detection, monitoring, and systems review policies in the field of human resources (HR).

Saving Product Using Blockchain for E-BMT Platform

Baitul Maal Wa At Tamwil (BMT) is a sharia financial institution that provides savings and loan services in accordance with the social, cultural, and economic needs of rural communities, especially in agricultural and plantation communities. The current data management is still using manual recording and a centralized server which can cause fraudulent financial reports and creates a lack of credibility between BMT and its customers. The research method is to decentralize the application data system by using blockchain technology, then replacing the conventional database to blockchain system. The simulation shows that the e-BMT application are connected to blockchain network as intended, users can use metamask to interact with the Ethereum network, the blockchain implementation on e-BMT application has run according to expectations with a 100% success rate with the average transfer time on two devices of 9.47 seconds and 12.13 seconds. While the results of data entry time on two devices obtained an average of 9.96 seconds and 37.09 seconds. While the blockchain implementation on e-BMT could provide access to every user so that each entity could confirm the validity of the transactions, the size of the transactions, and other data recorded on the blockchain without having to develop an integrated database system. The research contributes in two aspects, first, we develop the distributed blockchain system using public Ethereum blockchain network integrated with with popular e-wallet such as metamask, provides easy access for both customers and BMT parties who are connected to the network so that the recorded data can be accessed by anyone, and second, the application of blockchain technology to BMT is capable to interact with users as it is built on a website platform with RESTful API.

Financial Fraud Detection of Listed Companies in China: A Machine Learning Approach

As the focus of capital market supervision, financial report fraud has shown a development trend of enormous numbers, complex transactions, and hidden means in recent years. To improve audit efficiency and reduce the dependence on non-financial data, the study only uses the structured original data in the financial report to constructs a new fraud identification model, which can quickly detect fraud in China. This study takes the listed companies in China from 1998 to 2016 as research samples and selects 28 sets of raw data from financial reports. Then, this study compares the detection effectiveness of two single classification machine learning algorithms and five ensemble learning algorithms on fraud detection. Compared with single classification machine learning algorithms, the results show that ensemble learning algorithms are generally better at detecting fraud for Chinese listed companies, and the stacking algorithm performs the best. The study results provide direct evidence for rapid fraud detection using financial report raw data and ensemble learning algorithms. The study first proposes a stacking algorithm-based financial reporting fraud identification model for listed companies in China, which provides a simple and effective approach for investors, regulators, and management. It can also provide a reference for the detection of other fraud scenarios.

INFLUENCE OF FRAUD STAR AND DIGITAL BANKING ON FFR IN BANKING SECTOR AND THE MODERATING ROLE OF FOREIGN OWNERSHIP

This study aims to analyze the influence of Fraud Star dimensions consisting of Pressure, Opportunity,Rationalization, Capability, Integrity, and Digital Banking in detecting the occurrence of Fraudulent FinancialReporting (FFR) with the moderating role of Foreign Ownership. This study uses 100 sample datas from bankingcompanies listed on the Indonesia Stock Exchange (IDX) which were selected using purposive sampling method.The analytical methodology used is panel regression analysis. The results of this study indicate that Pressure has apositive and significant effect on FFR. In addition, the moderating role of Foreign Ownership is able to strengthen the positive influence of Pressure on FFR. However partially, Opportunity, Rationalization, Capability, Integrity and Digital Banking have no effect on FFR. Foreign Ownership also cannot moderate the relationship of Opportunity,Rationalization, Capability, Integrity and Digital Banking to FFR. The results of statistical tests indicate that theFraud Star dimension is a unity that can effect the occurrence of FFR. Likewise with Integrity as the last dimension ofFraud Star which is adherence to moral values or code of ethics that must be adhered to and become important basis in the banking sector. This study implies that the occurrence of FFR can be influenced, prevented and minimized by observing the ROA value, the proportion of independent commissioners, auditor and director turnover, stock price performance (MBR), digitization, the proportion of foreign shares, liquidity risk and the size of banking companies simultaneously. In addition, banks are expected to strengthen the control function in line with the increase in performance targets and employee performance bonuses.

Fraud Diamond: An Assessment Of Its Elements On Fraudulent Financial Reporting Of Companies Listed On The Indonesia Stock Exchange

The research aimed to analyse the effect of fraud diamond components on the occurrence of fraudulent financial statements. The components of fraud diamond which include financial stability, external pressure, personal financial need, financial target, nature of industry, ineffective monitoring, auditor change, audit opinion and directior change were independent variables that were suspected to affect the fraudulent financial statement in the company. Population in this research was all financial statements of food and beverage companies listed on the Indonesia stock exchange which have been audited and published. Samples were financial statements of food and beverage companies period 2012-2016 taken through purposive sampling as many as ten companies. Data analysis techniques used were classical assumption test, hypothesis test (Test R2, Test F and Test T) and multiple linear regression analysis test. The results of this research indicated that personal financial need variables measured by the ratio of stock composition owned by the company (OSHIP) affect the occurrence of fraudulent financial statement. While the financial stability, external pressure, financial target, nature of industry, ineffective monitoring, auditor change, audit opinion and director change have no effect on the occurrence of fraudulent financial statement.

Discuss on the Criminal Liability of Accountants for Corporate Fraudulent Financial Reports

Discuss on the Criminal Liability of Accountants for Corporate Fraudulent Financial Reports