IDEAS home Printed from https://ideas.repec.org/a/rbs/ijbrss/v8y2019i4p34-43.html
   My bibliography  Save this article

Relationship between Financial Ratio and Financial Statement Fraud Risk Moderated by Auditor Quality

Author

Listed:
  • Tomy Rizky Izzalqurny

    (Accounting Department, Brawijaya University, Indonesia)

  • Bambang Subroto

    (Accounting Department, Brawijaya University, Indonesia)

  • Abdul Ghofar

    (Accounting Department, Brawijaya University, Indonesia)

Abstract

This study was aimed to prove the research hypothesis that there are effects of financial ratios, which consist of profitability, leverage, and liquidity on the financial statements fraud risk, and the quality of auditors are able to moderate the relationship between financial ratios to financial statements fraud. This study uses a population of manufacturing companies that publish their financial statements on the Indonesian Stock Exchange in 2016-2017 will also be summarized and inferred. This study uses purposive sampling so that the study sample amounted to 275 firm years. The dependent variable uses the financial statements fraud risk with the proxy Dechow F-score. The independent variable in this study consisted of profitability with ROA ratio, leverage using the calculation of the ratio of total liabilities to total assets, and liquidity using the calculation of the ratio of total current assets to current liabilities. The moderating variable in this study is auditor quality as a moderating variable with a dummy variable. The Hypothesis test conducted is using moderated regression analysis (MRA). The results of this study indicate that the financial statements fraud risk is influenced by financial liquidity ratios, while financial ratios of profitability and leverage have not been proven to affect financial report fraud. This study provides a contribution by providing evidence that the quality of auditors can suppress fraudulent actions on financial statements with low profitability. This research provides information to regulators to pay more attention to companies that experience liquidity problems, and become input for regulators to make rules that improve the quality of auditors. Key Words:Profitability, Leverage, Liquidity, Fraud

Suggested Citation

  • Tomy Rizky Izzalqurny & Bambang Subroto & Abdul Ghofar, 2019. "Relationship between Financial Ratio and Financial Statement Fraud Risk Moderated by Auditor Quality," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 8(4), pages 34-43, July.
  • Handle: RePEc:rbs:ijbrss:v:8:y:2019:i:4:p:34-43
    as

    Download full text from publisher

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/281/263
    Download Restriction: no

    File URL: https://www.ssbfnet.com/ojs/index.php/ijrbs/article/view/281
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roshayani Arshad & Sharinah Mohamed Iqbal & Normah Omar, 2015. "Prediction of Business Failure and Fraudulent Financial Reporting: Evidence from Malaysia," Indian Journal of Corporate Governance, , vol. 8(1), pages 34-53, June.
    2. Tulus Suryanto, 2016. "Audit Delay and Its Implication for Fraudulent Financial Reporting: A Study of Companies Listed in the Indonesian Stock Exchange," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 18-31.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nyane Bokang M., 2024. "The Effect of Auditors’ Tenure on Short-Term Financial Liquidity – A Conceptual Framework," HOLISTICA – Journal of Business and Public Administration, Sciendo, vol. 15(2), pages 67-80.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Irena Lacka & Janusz Myszczyszyn & Sylwia Golab & Beata Bedzik & Blazej Supron, 2020. "Correlation between the Level of Economic Growth and Foreign Trade: The Case of the V4 Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 657-678.
    2. Tulus Suryanto & Ridwansyah Ridwansyah, 2016. "The Shariah Financial Accounting Standards: How they Prevent Fraud in Islamic Banking," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 140-157.
    3. Nadiah Amirah Nor Azhari & Suhaily Hasnan & Zuraidah Mohd Sanusi, 2020. "The Relationships Between Managerial Overconfidence, Audit Committee, CEO Duality and Audit Quality and Accounting Misstatements," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 18-30, June.
    4. Veronica Yu. Chernova & Vasily S. Starostin & Galina V. Butkovskaya & Alexander M. Zobov, 2017. "Role of MNCs in Changing Preferences for Food Consumption in Russia under Import Substitution," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 158-166.
    5. Amilin Amilin, 2016. "Measuring the Correlation of Job Satisfaction with Accountants Performance: The Role of Islamic Work Ethics as a Moderator," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 188-201.
    6. Siti Fadilah Bt Mat Zin & Marziana Madah Marzuki & Nik Kamaruzaman Hj. Abdulatiff, 2020. "The Likelihood of Fraudulent Financial Reporting: The New Implementation of Malaysian Code of Corporate Governance (MCCG) 2017," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 84-91, June.
    7. Inta Bruna & Kastytis Senkus & Rasa Subaciene & Ruta Sneidere, 2017. "Evaluation of Perception of Accountant`s Role at the Enterprise in Latvia and Lithuania," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 143-163.
    8. Omar ALHATO, 2023. "The impact of management accounting practices: Comparative analysis study between Jordan and Romania," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(636), A), pages 297-304, Autumn.
    9. Mahjus Ekananda, 2018. "Misinvoicing Analysis in ASEAN-China Free Trade Aggrement (ACFTA)," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 187-205.
    10. Andrei V. Vlasov, 2017. "The Evolution of E-Money," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 215-224.
    11. Hamzah & Aripin Ahmad, 2018. "Capital Market Products and Investor Protection," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 714-727.
    12. Syarifa Yunindiah Lestari & Muhammad Nuryatno, 2018. "Factors Affecting the Audit Delay and Its Impact on Abnormal Return in Indonesia Stock Exchange," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(2), pages 48-56, February.
    13. I.V. Alekseeva & E.M. Evstafyeva & Yu.A. Kruchanova & G.E. Krokhicheva, 2017. "Strategic Reporting Methodology and its Reliability Audit," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 333-341.
    14. K.S. Surnina & A.A. Andrutskaya & E.I. Drobyshevskaya & A.A. Yanovskaya, 2017. "Analytical Monitoring of Entity's Cash Flows as a Guarantee of Financial Security of the Region," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 163-171.
    15. Nguyen Thi Mo & Cao Minh Tien & Tran Thi Lan Anh & Tran Van Hai, 2024. "Human Resource Management Factors in Financial Analysis of Securities Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 154-162, July.
    16. Siti Patimah, 2017. "Leadership Styles, Motivation Achievers and Quality in Cultural Teaching," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 278-290.
    17. Meutia Tubagus Ismail & Ahmad Bukhori, 2017. "The Role of Feedback and Feed Forward Control System to Improve Competitive Advantage of SMEs in Indonesia," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 496-506.
    18. Kharisya Ayu Effendi & Disman Disman, 2017. "Liquidity Risk: Comparison between Islamic and Conventional Banking," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 308-318.
    19. Peter J Baldacchino & Rosalene Caruana & Simon Grima & Frank H. Bezzina, 2017. "Selected Behavioural Factors in Client-Initiated Auditor Changes: The Client-Auditor Perspectives," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 16-47.
    20. Azhar, Nurul Izzaty Hasanah & Lokman, Norziana & Alam, Md. Mahmudul & Said, Jamaliah, 2021. "Factors Determining Z-score and Corporate Failure in Malaysian Companies," OSF Preprints ke8ab_v1, Center for Open Science.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbs:ijbrss:v:8:y:2019:i:4:p:34-43. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Umit Hacioglu (email available below). General contact details of provider: https://edirc.repec.org/data/ssbffea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.