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Predicting Risk of and Motives behind Fraud in Financial Statements of Jordanian Industrial Firms Using Hexagon Theory

Author

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  • Ahmad Ahed Bader

    (Department of Financial and Administrative Sciences, Aqaba University College, Al-Balqa Applied University, Aqaba 77110, Jordan)

  • Yousef A. Abu Hajar

    (Department of Financial and Administrative Sciences, Aqaba University College, Al-Balqa Applied University, Aqaba 77110, Jordan)

  • Sulaiman Raji Sulaiman Weshah

    (Department of Accounting and Accounting Information System, Amman University College for Financial Administrative Sciences, Al-Balqa Applied University, Amman 11831, Jordan)

  • Bisan Khalil Almasri

    (Accounting Department, Business School, Applied Science Private University, Abu Nussair, Amman 11937, Jordan)

Abstract

This study intends to identify the motives that lead to increasing or fighting the fraud risk in the Financial Statements (FSs) of industrial companies whose shares are traded in regulated and unregulated markets at the Amman Stock Exchange (ASE) based on the Hexagon theory, which divides the motives for fraud into six factors. The study relied on secondary data to collect and measure the study variables by extracting them from the annual reports that were published by those companies on the website of the ASE during the period of 2012–2017. The collected data were analyzed using the logistic regression model on the SPSS program. The results confirmed that the return on assets (ROA), percentage of independent members in audit committees, and tone-related party transactions had a statistically significant relationship with predicted fraudulent FSs, where these three variables belong to pressure, opportunity, and collusion fraud motives, respectively. Thus, it is worth mentioning that this study is distinguished from previous studies that examined the issue of fraud in Jordanian companies by detecting the motives of fraud according to the Fraud Hexagon theory. Moreover, some of the fraud motives were measured using new variables such as a change in inventory, the age of auditing committee’s members, and tone-related party transactions.

Suggested Citation

  • Ahmad Ahed Bader & Yousef A. Abu Hajar & Sulaiman Raji Sulaiman Weshah & Bisan Khalil Almasri, 2024. "Predicting Risk of and Motives behind Fraud in Financial Statements of Jordanian Industrial Firms Using Hexagon Theory," JRFM, MDPI, vol. 17(3), pages 1-27, March.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:3:p:120-:d:1357824
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    References listed on IDEAS

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    1. Lisa A. Owens‐Jackson & Diana Robinson & Sandra Waller Shelton, 2009. "The Association Between Audit Committee Characteristics, the Contracting Process and Fraudulent Financial Reporting," American Journal of Business, Emerald Group Publishing Limited, vol. 24(1), pages 57-66, April.
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