Determinants of Financial Statement Fraud Using the Fraud Hexagon Model

Abstract

This study aims to obtain empirical evidence about the fraud hexagon theory. The research was conducted on manufacturing companies in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) for the 2015-2019 period. The sampling method used was non-probability sampling with purposive sampling technique. There are 42 companies as a population with a total of 35 companies as a sample. The data analysis technique used is multiple linear regression. Based on the results of the analysis, it is stated that financial stability and rationalization have a positive effect on indications of financial statement fraud, while ineffective monitoring, CEO education, political connectivity, and CEO duality have no effect on indications of financial statement fraud. The research has implications for the government as a regulator, or for those who use information in financial statements as a consideration in assessing the opportunities for fraudulent actions to occur on the company's financial statements.

Keywords: financial statement fraud, fraud hexagon, financial stability, ineffective monitoring, CEO education, rationalization, political connectivity, CEO duality

DOI: 10.7176/RJFA/12-23-03

Publication date: December 31^st 2021