Statement Fraud Research Articles

Detecting frauds in financial statements: a comprehensive literature review between 2019 and 2023 (June).

Purpose- The purpose of this study is to determine studies on detecting different types financial frauds, financial statement frauds and methods used in these studies. Financial statement fraud is one of the most common types of white-collar crime that has plagued various industries worldwide. It involves manipulating financial information in order to deceive stakeholders, such as investors and regulators, for personal gain or advantages. Financial statement fraud has significant implications for stakeholders, including investors, regulators, and the general public. Detecting fraudulent activities in financial statements is crucial for ensuring transparency, reliability, and trust in financial reporting. Methodology- This paper presents a comprehensive literature review of studies focused on detecting frauds in financial statements in between 2019 and first half of 2023 inclusive on Science Direct. Findings - The review encompasses a range of research articles, providing insights into various methodologies, techniques, and advancements in fraud detection. The findings of this review contribute to the understanding of fraud detection mechanisms in financial statements and inform future research directions in this critical area. Conclusion - This paper presents a comprehensive literature review on the topic of detecting financial statement fraud, focusing on current trends and approaches employed in the field. By examining a wide range of scholarly articles, research studies, and industry reports, this review aims to provide an overview of the existing knowledge, methodologies, and tools utilized in the detection of financial statement fraud. In recent years, it has been observed that studies using machine learning in the field of fraud detection have increased. Keywords: Fraud detection, machine learning, data mining literature review, financial statements JEL Codes: M42, M21, M41

ANALISIS PENGARUH PRESSURE DAN OPPORTUNITY UNTUK MENDETEKSI TERJADINYA KECURANGAN LAPORAN KEUANGAN

Financial statement analysis is the process to identify company’s information based on company’s condition. However, in recent years there have been accounting scandals or what is commonly referred to as financial statement fraud, which is a deliberate omission that results in material misstatements in financial statements. The purpose of this study was to determine the effect of pressure and opportunity to detect fraud in the financial statements. The sample of this study were 14 companies with purposive sampling technique from 47 mining companies listed on IDX 2017-2020. Secondary data in this study is accessed through www.idx.co.id and each company's website. The analytical technique used in this study uses multiple linear analysis. The results of the analysis show that ineffective monitoring has a positive effect on financial statement fraud, while external pressure and auditor opinion have no effect on financial statement fraud.

The Ability of the Beneish M-Score To Detect the Trends of Fraud in the Indonesian Sharia Stock Index

The purpose of this study is to determine the level of ability of the Beneish M-Score in detecting financial statement fraud tendencies. This study uses a quantitative approach with logistic regression analysis techniques. The results of this study provide empirical evidence that is different from research on manufacturing companies, state-owned companies, banking, mining, non-financial companies, property companies, real estate and building construction. The contribution of the empirical results of this study shows that overall the Beneish M-Score model is unable to detect the tendency of fraudulent financial statements in Islamic companies. DSRI, GMI, AQI, SGI, DEPI, SGAI, LVGI, and TATA has no effect on fraudulent financial statements in sharia companies.

PENGARUH ELEMEN FRAUD PENTAGON TERHADAP DETEKSI KECURANGAN LAPORAN KEUANGAN

This research aims to examine the influence of the fraud pentagon on fraudulent financial reports in startup companies listed on the Indonesia Stock Exchange. This research uses quantitative methods. The data collection used was purposive sampling from 8 startup companies listed on the IDX for the 2019-2023 period with a 5 year financial reporting period. Hypothesis testing was carried out using multiple linear regression using SPSS 29. The results of this study show that financial stability, ineffective supervision, change of auditor, change of director and CEO image have no effect on financial statement fraud

Implications Fraud Diamond in Fraudulent Financial Statements on Property, Real Estate and Building Construction Industries

Fraudulent financial statements involve intentional actions of manipulating or hiding information in financial reports to deceive users. Understanding the factors behind such fraud can be explored through the Diamond Scheme Theory, consists of four materials: opportunity, rationalization, ability, and pressure. The aim of this research analyze the impact of each component of the Fraud Diamond on fraudulent financial statements. The quantitative research methodology focuses on industries in the real estate, construction and property sectors listed on the Indonesia Stock Exchange starting 2020 to 2022. The sample includes 69 companies selected through purposive sampling. Utilizing multiple linear regression analysis using SPSS 26 is employed for analysis. The study results reveal that, individually, only the capability variable within the Fraud Diamond has a significant negative impact on fraudulent financial statements. Pressure, opportunity, and rationalization variables do not show a significant influence. Additionally, when considered collectively, there is no discernible impact of the Fraud Diamond components on fraudulent financial statements.

Fraud Pentagon in Detecting Financial Statement Fraud

Purpose: This study aims to prove the influence of the fraud pentagon on the existence of fraudulent financial statements.
 Methodology/approach: This research approach is quantitative with secondary data in the form of company annual reports in the manufacturing sector with the food & beverage sub-sector listed on the IDX for the 2016-2020 period. Purposive sampling as sampling with a total of 12 companies for 5 periods and a total sample of 60. The analysis technique uses multiple linear regression assisted by SPSS 26.
 Findings: The findings prove that there is an influence of the variables of pressure, opportunity, rationalization, competence, and dualism position on financial statement fraud, while the variable frequent number of CEO's picture does not affect the existence of fraudulent financial statements.
 Practical implications: The findings of this study have an impact on the company's stakeholders and stake holders to detect fraud in the financial statements.
 Originality/value: This research has the novelty of adding a dualism position proxy variable to the arrogance element.

The Effect of the Fraud Pentagon on Fraudulent Financial Statements and Their Impact on Funding Decisions

The purpose of this study is to test whether financial targets, ineffective monitoring, change in auditors, change in directors, frequent number of CEO's pictures affect fraudulent financial statements and their impact on funding decisions in all non-financial companies listed on the Indonesia Stock Exchange (IDX) and sanctioned by OJK for violating regulation No. VIII.G.7 from 2010 to 2021. The data used in this study are secondary data derived from financial reports published by the company. A total of 54 companies became the population in the study. The sample selection in this study used a purposive sampling technique with certain criteria and 9 companies were selected as research samples. The data analysis technique in this study is using panel data regression with the help of Eviews software version 12. The results of this study indicate that simultaneously financial targets, ineffective monitoring, change in auditors, change in directors and frequent number of CEO's pictures have no effect on fraudulent financial statements in all companies listed on the Indonesia Stock Exchange (IDX) from 2010 to 2021. Furthermore, fraudulent financial statements affect funding decisions. Partially, financial targets, changes in directors, and frequent numbers of CEO's pictures have no significant effect on fraudulent financial statements. Meanwhile, change in auditor and ineffective monitoring have a negative and significant effect on fraudulent financial statements in all companies listed on the Indonesia Stock Exchange (IDX) from 2010 to 2021.

Pengaruh Kepemilikan Manajerial, Dewan Komisaris, dan Komite Audit terhadap Fraudulent Financial Statements

This research aims to obtain empirical evidence and analyze the influence of managerial ownership, board of commissioners and audit committee on fraudulent financial statements in pharmaceutical manufacturing companies listed on the Indonesia Stock Exchange 2018-2022. The population in this study were 12 pharmaceutical companies, while the sample in this study was 45 companies. This research uses secondary data obtained from the official website of the Indonesia Stock Exchange (BEI), namely www.idx.co.id, the BEI corner (Indonesia Stock Exchange) and company websites using the logistic regression analysis method. The results of this research conclude the managerial ownership, board of commissioners and audit committee have no effect on fraudulent financial statements.

THE EFFECT OF FRAUD DIAMOND ON FRAUDULENT FINANCIAL STATEMENTS IN FOOD AND BEVERAGE SUB-SECTOR COMPANIES LISTED ON THE INDONESIAN STOCK EXCHANGE

The research aimed to analyse the effect of fraud diamond components on the occurrence of fraudulent financial statements in food and beverage subsector companies listed on the Indonesia Stock Exchange (BEI). The components of fraud diamond which include as financial stability, ineffective monitoring, change in auditors, and change in directors 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 2021-2022 taken through purposive sampling as many as nineteen companies. The sampling technique in this research was purposive sampling. The data analysis used is descriptive statistics, classic assumption tests using the normality test, autocorrelation test, multicollinearity test and heteroscedasticity test, multiple linear regression analysis, and hypothesis testing using the partial test (t) and simultaneous test (f). The partial results of the research are that the variables financial stability, ineffective monitoring, change in auditor, and change in director have no effect on fraudulent financial statements. The results of the research simultaneously show that the variables financial stability, ineffective monitoring, change in auditor, and change in director have no effect on financial statement fraud.

Analisis Bibliometrik Pada Kecurangan Laporan Keuangan: Publikasi Tiga Dekade Terakhir

Purpose of the research is to determine the growth of research publications regarding fraud in financial reporting by examining bibliometric analysis from the Scopus database from 1993 to 2022. This research method uses a bibliometric analysis approach. The application system for data visualization uses VOSviewer and Microsoft Excel to perform data frequency analysis. The results of this research indicate that the issue of financial statement fraud is a topic that continues to attract the attention of researchers. Authors contribute to the literature by analyzing publications and authors by year, country, journal, author, and organization. This research can help increase the understanding of other researchers to plan future research to detect and prevent financial statement fraud for the sustainability of an organization. The author tries to conduct a comprehensive review of research on financial statement fraud conducted over three decades. This study makes a significant contribution and provides new insights into financial statement fraud.

Application of Beneish M-Score to Detech Fraudulent Financial Statements in State-Owned Company in Indonesia

Introduction/Main Objectives: This study aims to determine which State-Owned Company are included in the manipulator, non-manipulator, and gray company groups. Background Problems: According to a study conducted in 2016 by the Association of Certified Fraud Examiners, the majority Fraud cases involved 81.2% of government agencies, 8.1% of State-Owned Enterprises, and 2.3% of private companies. The businesses designated by of State-Owned Company caused the most losses to the industrial sector due to fraud at 58.8%. Research Methods: This research uses a quantitative descriptive method. The objects in this study are State-Owned Company companies in Indonesia in 2018-2021. The research sample used a purposive sampling technique. Data analysis was performed using seven types of financial ratios contained in the Beneish M-score method. Finding/Results: The results showed that in 2018 there was 1 company that was included in the manipulator group, 22 companies were included in the non-manipulator group, and no company was included in the gray company group in 2018. Then in 2019 there were 3 companies that were included in the manipulator group, 17 companies are included in the non-manipulator group, and 3 companies are included in the gray company group. In 2020 there were 5 companies included in the manipulator, 16 non-manipulator companies, 2 companies included in the gray company group. And in the last year, namely 2021, there will be 1 company that is included in the manipulator group, 22 non-manipulator companies, and no company that is included in the gray company group in 2021.

The Effect of Hexagon Fraud Theory in Detecting Financial Statement Fraud

Purpose – The purpose of this research is to determine the effect of hexagon fraud theory in detecting financial statement fraud.
 Methodology/approach – This research uses a sample of insurance companies listed on the Indonesia Stock Exchange during the 2018-2022 period. The sampling technique used in this research was a side purposive technique, the samples obtained were 15 insurance companies or 75 data observations. The analytical method used is logistic analysis using SPSS.24.
 Findings – Based on the results of this research, it shows that External Pressure has a significant effect on Financial Report Fraud, Political Connection has a significant effect on Financial Report Fraud, Nature of Industry has a significant effect on Financial Report Fraud, and Effective Monitoring has a significant effect on Financial Report Fraud, while Financial Stability does not have a significant effect on Financial Report Fraud, Financial Target does not have a significant effect on Financial Statement Fraud, Personal Financial Need does not have a significant effect on Financial Report Fraud, Capability does not have a significant effect on Financial Report Fraud, Rationalization does not have a significant effect on Report Fraud Finance, Arrogance does not have a significant effect on Financial Statement Fraud.

Financial Statement Fraud of Indonesian Islamic Banks

Objective: Financial statement fraud (FSF) in Islamic institutions is considered unethical due to its production of inaccurate information for stakeholders. In this study, we examine some institutional characteristics, particularly those pertaining to corporate governance, that have the potential to regulate the occurrence of financial statement fraud (FSF). Methodology: Data was gathered quantitatively. Thel study utilizeld a samplel including 11 commelrcial Islamic banks opelrating in Indonelsia. Thel obselrvation pelriod spanneld from 2019 to 2022. Result: Through an examination of Islamic banks in Indonesia, it was observed that some characteristics of the Sharia Supervisory Board (SSB) of these banks, including their level of knowledge, the size of the board, and the frequency of their meetings, had the potential to mitigate Financial Statement Fraud (FSF). In addition, the composition of the audit committee and the perceived credibility of the external auditors can also contribute to the effective management of financial statement fraud. This study does not identify any significant impact of the board of commissioners' structure on the financial stability of the firm (FSF). One additional discovery pertains to the three SSB traits examined in this study, with the most significant impact on regulating FSF being the specialised knowledge and proficiency in accounting, finance, or economics possessed by each SSB. Conclusion: It is recommended that each Sharia Supervisory Board (SSB) be equipped with professionals in relevant disciplines, in addition to their experience in Islamic jurisprudence.

THE EFFECT OF NATURE OF INDUSTRY, FINANCIAL STABILITY, INEFFECTIVE MONITORING, AND CHANGES IN COMPANY DIRECTORS ON INDICATIONS OF FRAUDULENT FINANCIAL STATEMENTS

Fraudulent financial statements are part of corporate management fraud. It is conducted based on the financial condition of the organization for the purpose of misleading users of financial statements by omitting values or amounts in the disclosure of financial statement documents. Therefore, it will mislead the stakeholders who are investing in the company. This study aims to analyze the effect of the nature of the industry, financial stability, ineffective monitoring, and changes in company directors on indications of fraudulent financial statements. The research population is manufacturing sector companies listed on the Indonesia Stock Exchange (IDX) for the 2017–2019 period, which are listed on the website www.idx.co.id. There are as many as 183 companies. The sampling method used is the purposive sampling method. The companies that meet the sampling criteria are 76. The analysis tool uses multiple linear regression tests. The results of this study indicate that the nature of the industry has a positive effect on indications of fraudulent financial statements, financial stability has a positive effect on indications of fraudulent financial statements, and ineffective monitoring has a positive effect on indications of fraudulent financial statements. Meanwhile, the changes in company directors has no effect on indications of fraudulent financial statements.

Analysis of Factors Influencing Financial Statement Fraud With Company Size As An Intervening Variable In The Stock Exchange of Thailand

This study aimed to analyze the factors that influence financial statement fraud with company size as an intervening variable. The data that used were financial statements (annual report) during 2015-2019. The sample method was purposive sampling. The whole samples consisted of 13 property and construction company that listed in Stock Exchange of Thailand. Data analysis technique that used was path analysis. The result showed that financial target and quality of external auditor have significant effect to company size, while ineffective monitoring, change of company director and the number of photos CEO have no significant effect. Quality of external auditor, change of company director and company size have significant effect to financial statement fraud, while financial target, ineffective monitoring and the number of photos CEO have no significant effect. Company size can be intervening variable between financial target, quality of external auditor and the number of photos CEO in financial statements to financial statement fraud.

THE INFLUENCE OF CORPORATE GOVERNANCE ON FINANCIAL REPORT FRAUD WITH COMPANY SIZE AS A MODERATING VARIABLE IN INFRASTRUCTURE, UTILITIES, AND TRANSPORTATION COMPANIES LISTED ON THE INDONESIAN STOCK EXCHANGE DURING THE PERIOD 2019-2021

The primary objective of this research is to examine the impact of corporate governance, as indicated by the board of commissioners, audit committee, and institutional ownership, on financial statement fraud. Additionally, this study aims to investigate the moderating role of company size in this relationship. The target population for this study comprises infrastructure, utilities, and transportation companies that are listed on the Indonesia Stock Exchange during the period of 2019-2021. The sample for this research was selected using a purposive sampling method, resulting in a total sample size of 60 companies. Logistic regression analysis and moderating regression analysis were employed to analyze the data. The findings of this study reveal that both the board of commissioners and the audit committee have a significant influence on financial statement fraud. However, institutional ownership does not exhibit a significant impact on financial statement fraud. Furthermore, the results indicate that company size plays a role in strengthening the relationship between the board of commissioners and the audit committee in terms of financial statement fraud. Conversely, company size weakens the relationship between institutional ownership and financial statement fraud.

Explainable fraud detection of financial statement data driven by two-layer knowledge graph

In modern economic activities, financial statement fraud will seriously mislead the economic decisions of investors and regulators, and will lead to huge investment losses even corporate bankruptcies. Although the powerful abilities have been gained by current machine learning methods in financial statement fraud detection problems, the explainability and the ability of extracting fraudulent patterns are still very scarce. In this study, an explainable Financial Statement data Fraud Detection method is proposed by introducing a Two-Layer Knowledge Graph (FSFD-TLKG) and a fraudulent pattern mining strategy on two-layer knowledge graph. Wherein, a two-layer knowledge graph comprises a semantic layer and a syntactic layer. Concretely, the subordination relationships among financial variables are represented in the semantic layer, and their articulation relationships are represented in the syntactic layer. Moreover, an explainable approach is designed to extract financial statement fraudulent patterns for credible fraud assertion. Experimental results show that, FSFD-TLKG can effectively extract explainable financial statement fraudulent patterns and obtain better detection accuracy than almost all traditional machine learning and deep learning methods except an unexplainable method: Extreme Gradient Boosting (XGBoost). Even for XGBoost, the explainable financial statement fraudulent patterns extracted by our method still can further improve its performance. Clearly, FSFD-TLKG gains the optimal practical performance which is much better than existing methods.

Pentagon fraud model and financial statement fraud: The moderating role of Islamic corporate governance

The study aims to investigate the impact of Pentagon Fraud Model in five key factors, namely Pressure, Opportunity, Rationalization, Capability, and Action, on the risk of Financial Statement Fraud (FSF). Additionally, it explores the moderating role of Islamic Corporate Governance (ICG) in the relationship between these factors and FSF. The research employed a quantitative approach, utilizing survey data from a sample of 270 respondents. The findings support the hypotheses that all five factors significantly influence FSF, with Pressure exerting the highest impact. Furthermore, ICG is found to moderate the relationships between these factors and FSF, underscoring its role in reducing financial fraud risk. Practically, this study offers essential guidance for organizations in managing FSF risks more effectively. Integrating ethical and governance principles, as moderated by ICG, can help strengthen internal controls, ethics training, and a culture of integrity. Policymakers should consider these findings for enhancing regulatory frameworks, and educational institutions can integrate these results into their curriculum. The study's contribution lies in shedding light on the significance of ICG as a risk-mitigating factor in the context of FSF. The findings provide valuable insights for academics, practitioners, and policymakers. They enhance the understanding of FSF and its mitigating measures and offer a foundation for further research in the field.

Determinan Faktor-Faktor Capability sebagai Perspektif Fraud Diamond terhadap Kecurangan Laporan Keuangan

Financial statement fraud is defined as deliberately not following the accepted accounting principles when reporting financial information, which leads to significant omissions or distortions of the facts. The purpose of this study is to determine the effect of capability in detecting fraudulent financial statements. Fraudulent financial statements can occur when a company intentionally violates accounting principles or ignores applicable financial reporting standards. Fraud diamond is one of fraud risk factor, one of which is capability. Many frauds, especially some of the multibillion-dollar ones, would not have occurred without the right person with the right capabilities in place. In this study, capabilities as measured by CEO prestige power, CEO education, CEO experience, CEO horizon, CEO founder, CEO expert power, CEO age similarity, and CEO number executive. The type of data used in this study is secondary data in manufacturing companies listed on the Indonesia Stock Exchange in 2017-2021. Sampling method by purposive sampling, obtained as many as 114 companies as samples. The data analysis method used logistics regression. The results of this study show that CEO age similarity and CEO number executive has a positive impact on fraudulent financial statements, meanwhile the other variables have no impact of fraudulent financial statements. 

Unveiling the Motivation of Fraudulent Financial Statement in ENVY: Fraud Triangle Theory

This study aims to unravel the motivations behind the production of fraudulent financial statements by PT. Envy Technologies Indonesia Tbk. It employs a case study approach and the fraud triangle theory to shed light on this critical issue. This research is of paramount importance because fraudulent financial statements can have severe repercussions, adversely affecting shareholders and the broader capital markets. The primary findings of this investigation indicate that three key factors played a significant role in encouraging fraud within PT. Envy Technologies Indonesia Tbk. These factors are pressure, opportunity, and rationalization. The impetus for such fraudulent actions is traced back to the pressure exerted on maintaining high stock prices. The opportunities for manipulation arise from a deficiency in internal oversight mechanisms, enabling misconduct. Furthermore, rationalizations are formulated to justify the diversion of IPO funds in a manner that aligns with the information disclosed in the prospectus. This research offers a nuanced understanding of the factors that drive financial statement fraud in Indonesian public companies. It highlights that fraudulent activities are often the result of a combination of pressures, opportunities, and rationalizations. Recognizing these factors can be instrumental in implementing preventive measures to mitigate the occurrence of such fraud in the future.