Fraud Pentagon in Detecting Fraudulent Financial Reporting

• Main Authors: Intan Lailatun Navila, Ardianto
• Format: Article PeerReviewed
• Language: English; Indonesian; English
• Published: Primrose Hall Publishing Group 2020
• Subjects: H Social Sciences; HG Finance; HG4001-4285 Finance management. Business finance.Corporation finance
• Online Access: http://repository.unair.ac.id/105329/1/Ardianto_Karil%2006_Fraud%20Pentagon%20in%20Detecting.pdf; http://repository.unair.ac.id/105329/2/Ardianto_Peer%20Review006.pdf; http://repository.unair.ac.id/105329/3/Ardianto_Smilarity%2006_Fraud%20Pentagon%20in%20Detecting.pdf; http://repository.unair.ac.id/105329/; https://www.ijicc.net/index.php/volume-13-2020/193-vol-13-iss-8
• Institution: Universitas Airlangga

It is mandatory for public companies to issue financial reports that have been audited by external auditors to be presented to the public as evidence and accountability regarding the company’s performance during the year. This study aims to find out whether elements of pentagon fraud – that is, pressure, opportunity, rationalisation, competence, and arrogance – which are then developed into nine variables – financial stability, financial targets, external pressures, ineffective supervision, change of external auditors, change of directors, auditor opinion, frequency of CEO photo appearance, and politician CEO – significantly influenced the incidence of fraudulent financial statements in the banking and financial sector companies listed on the Indonesia Stock Exchange (IDX) for the year 2014–16. This is a quantitative study that uses secondary data derived from the website www.idx.co.id. The results of the data analysis show that financial stability and the frequency of the appearance of CEO photos in the financial statements significantly influence the incidence of fraudulent financial reporting.