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

Author

Listed:
  • Tarmizi Achmad

    (Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia)

  • Imam Ghozali

    (Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia)

  • Monica Rahardian Ary Helmina

    (Faculty of Economics and Business, Universitas Lambung Mangkurat, Banjarmasin 70123, Indonesia)

  • Dian Indriana Hapsari

    (Faculty of Economics and Business, Universitas Dian Nuswantoro, Semarang 50131, Indonesia)

  • Imang Dapit Pamungkas

    (Faculty of Economics and Business, Universitas Dian Nuswantoro, Semarang 50131, Indonesia)

Abstract

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).

Suggested Citation

  • Tarmizi Achmad & Imam Ghozali & Monica Rahardian Ary Helmina & Dian Indriana Hapsari & Imang Dapit Pamungkas, 2022. "Detecting Fraudulent Financial Reporting Using the Fraud Hexagon Model: Evidence from the Banking Sector in Indonesia," Economies, MDPI, vol. 11(1), pages 1-17, December.
    • Handle: RePEc:gam:jecomi:v:11:y:2022:i:1:p:5-:d:1011416
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    References listed on IDEAS

    as
    1. Maylia Pramono Sari & Nindya Pramasheilla & Fachrurrozie & Trisni Suryarini & Imang Dapit Pamungkas, 2020. "Analysis of Fraudulent Financial Reporting With the Role of KAP Big Four as a Moderation Variable: Crowe's Fraud's Pentagon Theory," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 180-190, October.
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