Scoring the financial distress and the financial statement fraud of Garuda Indonesia with «DDCC» as the financial solutions

Abstract

Purpose PT Garuda Indonesia (GIAA) Persero Tbk is the one only pride airline of Indonesian sovereignty. Although the bird achieved abundant international awards and certifications, the bird is dying and needs a remedy immediately. The frequent annual turnover of board executives did not make impact to the financial performance; this seems to be tip of the iceberg, peculiar with the number of restatement over the past decade. Therefore, this paper aims to address the issue through the function of five red flags model which known as Altman Z-score, Sprigate S-score, Grover G-score, Beneish M-score and Dechow F-score. Design/methodology/approach This is exploratory study of univariate analysis using financial distress and fraudulent financial statement approach, while the type of data is secondary taken from Indonesia Stock Exchange during 12 years observation from 2007 to 2018. Findings Altman, Springate and Grover produce strong indication of GIAA’s financial distress; all models score the same distress indication by 14 times. All distress models agreed that only 2011 and 2012 classify to the safe zone when GIAA performed the corporate actions. Beneish scores fraud indication by eight times. Dechow scores slightly higher by nine times. The number of fraud predictions in this research are in line with the number of restatement, which proves the assumption that restatement can be used as a signal of the financial statement fraud. When GIAA categorized in safe zone, both Beneish and Dechow score no to fraud, this indicates the fraud occurence during health period is lower. Research limitations/implications The motivation behind the financial statement fraud is not discuss through this research but from the primary theory of the fraud triangle. Financial distress possesses strong relationship with pressure factor; therefore, exit from financial crisis is one of the best solution to mitigate the financial statement fraud. Practical implications The average of Beneish score is −2,26, slightly above the manipulator threshold which is −2,22. This must be marked as an ample conjecture of GIAA’s fraud inclination and been a highlight for the auditor both internal and external when performing control testing, attestation and other assurance services. Social implications All models in this study can apply to any other corporate issues, especially for evaluating the government company who has loosen the public trust recently in Indonesia such as PT Asuransi Jiwasraya and PT Asabri. Moreover, the pandemic COVID-19 has brought the world to the new unprecedented risk, especially the economic turmoil which lead the possibilities of corporate distress and fraud. By applying these scores, public might have tools as pre-elemenary assessment to serve a decision where to put trust in a company. Originality/value This paper reveals a combination from various models of financial distress and financial statement fraud in order to generate the financial solutions named « DDCC » Debt Restructuring, Debt Conversion, Capex Management and Cost Cutting.

Determinan Fraudulent Financial Statement Melalui Perspektif Fraud Hexagon Theory Pada Perusahaan Pertambangan

“…Syahria (2019) dan Lastanti (2020) menunjukkan hasil bahwa auditor change berpengaruh positif signifikan terhadap fraudulent financial statement tetapi Sihombing et al (2014) dan Septriyani dan Handayani (2018) menunjukkan hasil yang sebaliknya. Penelitian Pamungkas et al (2018) dan Aviantara (2021) menunjukkan director change berpengaruh positif dan signifikan terhadap fraudulent financial statement, sedangkan Faradiza (2019) menunjukkan hasil yang sebaliknya. Penelitian Yang et al (2017) menunjukkan CEO duality berpengaruh positif dan signifikan terhadap fraudulent financial statement, namun berlawanan dengan hasil penelitian dari Akbar (2017).…”

Keyakinan Hukum Karma Memoderasi Pengaruh Hedonisme Pada Kecurangan Dalam Pelaporan Keuangan

“…Konsep kecurangan dalam pelaporan keuangan didasarkan pada model fraud triangle Aviantara (2021), Dashtbayaz et al (2022), Akgun (2021), Orth & Macada (2021), dan Lee & Ha (2021) . Fraud triangle menjelaskan tiga faktor yang hadir dalam setiap situasi fraud berupa faktor -faktor yang mempengaruhi seseorang melakukan kecurangan.…”

Bonds Between Earnings Management and Corporate Financial Stability in the Context of the Competitive Ability of Enterprises

“…Furthermore, Beneish et al (2012) insist that analyzing the earnings management behavior of distressed enterprises may increase the power of realized tests. Aviantara (2021) found that the occurrence of fraud is lower during periods of financial health, applying five of the most important research models -Altman Z score, Springate S-score, Grover G-score, Beneish M-score, and Dechow F-score -to study the relationship between financial distress and fraudulent financial statements over a 12-year period. The issuance of new debt provides a major impetus for bankrupt enterprises to engage in earnings manipulation, as confirmed in the research of Kramolis & Dobes (2020) or Xu et al (2021).…”