Fraudulent Financial Reporting: A Fraud Pentagon Analysis

Acc. Fin. Review 4 (4) 106–113 (2019)

8 Pages Posted: 2 Mar 2020

See all articles by Satria Tri Nanda

Satria Tri Nanda

Universitas Lancang Kuning, Pekanbaru, Indonesia

Raisya Zenita

Universitas Riau, Pekanbaru, Indonesia

Neneng Salmiah

Universitas Lancang Kuning, Pekanbaru, Indonesia

Date Written: December 31, 2019

Abstract

Objective - The massive and broad impact caused by fraud has made it widely discussed by researchers. Several theories have been developed to explain the cause of fraud. The most recent theory that attempts to explain fraud is pentagon fraud. This study attempts to explain the effect of pentagon fraud on the detection of financial statement fraud in 624 companies listed on the Indonesian stock exchange.

Methodology/Technique - Data from financial statements published in 2018 were analyzed using multiple regression analysis.

Finding - The results of data analysis using E-Views have proven that Pressure, Opportunity, Arrogance and Rationalization have a negative effect on fraudulent financial reporting. However, competence is known to have no significant effect on fraudulent financial reporting.

Novelty - The results suggest that human factors such as pressure, arrogance and rationalization encourage fraudsters to produce fraudulent financial reports. These findings imply that human factors such as pressure arrogance and rationalization are important to be considered in designing any anti-fraud strategy.

Type of Paper - Empirical.

Keywords: Fraud Pentagon; Fraudulent Financial Report; Opportunity, Pressure

JEL Classification: M40, M41, M49

Suggested Citation

Nanda, Satria Tri and Zenita, Raisya and Salmiah, Neneng, Fraudulent Financial Reporting: A Fraud Pentagon Analysis (December 31, 2019). Acc. Fin. Review 4 (4) 106–113 (2019), Available at SSRN: https://ssrn.com/abstract=3528327

Satria Tri Nanda (Contact Author)

Universitas Lancang Kuning, Pekanbaru, Indonesia

Jl. Yos Sudarso Km. 8 Rumbai
Pekanbaru, Riau
Indonesia

Raisya Zenita

Universitas Riau, Pekanbaru, Indonesia ( email )

Bina Widya Campus
Pekanbaru, ID Riau 28293
Indonesia

Neneng Salmiah

Universitas Lancang Kuning, Pekanbaru, Indonesia

Jl. Yos Sudarso Km. 8 Rumbai
Pekanbaru, Riau
Indonesia

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