Predicting Fraudulent Financial Statement Risk: The Testing Dechow F-Score Financial Sector Company Inindonesia

Abstract

This study aims to empirically examine the factors that can be used to detect the risk of Fraudulent financial statements. Fraudulent financial statement is an interesting topic to study, because it has a huge impact on business sustainability and the country's economy may become a crisis. The research population is the financial sector companies listed on the Indonesia Stock Exchange in 2018-2021. The sampling technique uses purposive sampling. The number of companies that meet the sample criteria is 76 companies, so there are 228 observations. Data analysis used Moderated Regression Analysis for hypothesis testing. The results show that companies which provide shares for managers and streamline the role of the whistleblowing system and audit committee will prevent companies from committing fraud, because they act as internal controls. Auditor switching and management arrogance are early indicators that can be used for fraud detection, because the strategy of management is to hide crimes. Financial ratios are certainly the easiest indicator to detect fraudulent financial statements risk, profitability, liquidity, and solvency of a company that is small or minus will encourage management to commit fraud so that the company looks good. Also, organizational culture can reduce the risk of fraudulent financial statements if it is properly internalized.

Determinants of going-concern audit opinions: Empirical evidence from listed mining firms in Indonesia

“…This result is inconsistent with a signal theory which explains that information about solvency serves as a helpful signal in determining whether a company will be able to continue operating. The findings of Jalil (2019) and Nurcahyono et al (2021), who also claim that solvency has no impact on going concern audit conclusions, are consistent with this. Even though many assets are funded by debt, the company can still generate profits.…”

Hexagon Fraud: Detection of Fraudulent Financial Statement in Indonesia

“…In this case, e-procurement is designed to work better, is transparent, and is supported by an electronic catalog also published. Several studies from [9,[29][30][31] emphasized that E-Procurement can prevent fraud (conspiracy) and minimize fraudulent financial statements.…”

“…The system is designed to receive complaints against fraudulent acts involving the interests of many people. The violation reporting system is one of the factors in detecting fraudulent financial statements, so it is considered a valuable instrument in corporate governance because it is supposed to help work safety, company profits, and reputation [9]. Companies with significant assets generally need a sound system for detecting fraud electronically.…”

“…Research related to fraudulent financial statements has been widely studied in previous studies using the variable financial stability [9], Change Director [10] Government Ownership [1,11]. Financial stability can be seen from changes in a company's assets affecting fraudulent financial statements [12].…”

“…However, several studies found different results. Study [9,[14][15][16][17] regarding the factors that influence financial statement fraud still show mixed results or results that are inconsistent with the results. Inconsistent.…”