Detecting and Predicting Financial Statement Fraud: The Effectiveness of the Fraud Triangle and SAS No. 99

2008 ◽  
Author(s):  
Christopher J. Skousen ◽  
Kevin R. Smith ◽  
Charlotte J. Wright
Keyword(s):  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud

Fraud of Financial Statements at Listed Enterprises on Ho Chi Minh City Securities Department

2018 ◽  
Vol 34 (4) ◽  
Author(s):  
Nguyen Tien Hung ◽  
Huynh Van Sau
Keyword(s):  
New York ◽  
Financial Reporting ◽  
Financial Statements ◽  
Financial Statement ◽  
Viet Nam ◽  
Fraud Triangle ◽  
Fraudulent Financial Reporting ◽  
Financial Statement Fraud ◽  
Corporate Fraud ◽  
Two Factors

The study was conducted to identify fraudulent financial statements at listed companies (DNNY) on the Ho Chi Minh City Stock Exchange (HOSE) through the Triangular Fraud Platform This is a test of VSA 240. At the same time, the conformity assessment of this model in the Vietnamese market. The results show that the model is based on two factors: the ratio of sales to total assets and return on assets; an Opportunity Factor (Education Level); and two factors Attitude (change of independent auditors and opinion of independent auditors). This model is capable of accurately forecasting more than 78% of surveyed sample businesses and nearly 72% forecasts for non-research firms.  Keywords Triangle fraud, financial fraud report, VSA 240 References Nguyễn Tiến Hùng & Võ Hồng Đức (2017), “Nhận diện gian lận báo cáo tài chính: Bằng chứng thực nghiệm tại các doanh nghiệp niêm yết ở Việt Nam”, Tạp chí Công Nghệ Ngân Hàng, số 132 (5), tr. 58-72.[2]. Hà Thị Thúy Vân (2016), “Thủ thuật gian lận trong lập báo cáo tài chính của các công ty niêm yết”, Tạp chí tài chính, kỳ 1, tháng 4/2016 (630). [3]. Cressey, D. R. (1953). Other people's money; a study of the social psychology of embezzlement. New York, NY, US: Free Press.[4]. Bộ Tài Chính Việt Nam, (2012). Chuẩn mực kiểm toán Việt Nam số 240 – Trách nhiệm của kiểm toán viên đối với gian lận trong kiểm toán báo cáo tài chính. [5]. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.[6]. Võ Hồng Đức & Phan Bùi Gia Thủy (2014), Quản trị công ty: Lý thuyết và cơ chế kiểm soát, Ấn bản lần 1, Tp.HCM, Nxb Thanh Niên.[7]. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman independence on corporate fraud. Managerial Finance 26 (11): 55-67.[9]. Skousen, C. J., Smith, K. R., & Wright, C. J. (2009). Detecting and predicting financial statement fraud: The effectiveness of the fraud triangle and SAS No. 99. Available at SSRN 1295494.[10]. Lou, Y. I., & Wang, M. L. (2011). Fraud risk factor of the fraud triangle assessing the likelihood of fraudulent financial reporting. Journal of Business and Economics Research (JBER), 7(2).[11]. Perols, J. L., & Lougee, B. A. (2011). The relation between earnings management and financial statement fraud. Advances in Accounting, 27(1), 39-53.[12]. Trần Thị Giang Tân, Nguyễn Trí Tri, Đinh Ngọc Tú, Hoàng Trọng Hiệp và Nguyễn Đinh Hoàng Uyên (2014), “Đánh giá rủi ro gian lận báo cáo tài chính của các công ty niêm yết tại Việt Nam”, Tạp chí Phát triển kinh tế, số 26 (1) tr.74-94.[13]. Kirkos, E., Spathis, C., & Manolopoulos, Y. (2007). Data mining techniques for the detection of fraudulent financial statements. Expert Systems with Applications, 32(4), 995-1003.[14]. Amara, I., Amar, A. B., & Jarboui, A. (2013). Detection of Fraud in Financial Statements: French Companies as a Case Study. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 40-51.[15]. Beasley, M. S. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review, 443-465.[16]. Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5), 24-36.[17]. Persons, O. S. (1995). Using financial statement data to identify factors associated with fraudulent financial reporting. Journal of Applied Business Research (JABR), 11(3), 38-46.[18]. Summers, S. L., & Sweeney, J. T. (1998). Fraudulently misstated financial statements and insider trading: An empirical analysis. Accounting Review, 131-146.[19]. Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1996). Causes and consequences of earnings manipulation: An analysis of firms subject to enforcement actions by the SEC. Contemporary accounting research, 13(1), 1-36.[20]. Loebbecke, J. K., Eining, M. M., & Willingham, J. J. (1989). Auditors experience with material irregularities – Frequency, nature, and detectability. Auditing – A journal of practice and Theory, 9(1), 1-28. [21]. Abbott, L. J., Park, Y., & Parker, S. (2000). The effects of audit committee activity and independence on corporate fraud. Managerial Finance, 26(11), 55-68.[22]. Farber, D. B. (2005). Restoring trust after fraud: Does corporate governance matter?. The Accounting Review, 80(2), 539-561.[23]. Stice, J. D. (1991). Using financial and market information to identify pre-engagement factors associated with lawsuits against auditors. Accounting Review, 516-533.[24]. Beasley, M. S., Carcello, J. V., & Hermanson, D. R. (1999). COSO's new fraud study: What it means for CPAs. Journal of Accountancy, 187(5), 12.[25]. Neter, J., Wasserman, W., & Kutner, M. H. (1990). Applied statistical models.Richard D. Irwin, Inc., Burr Ridge, IL.[26]. Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education.[27]. McFadden, D. (1974). Conditional Logit Analysis of Qualita-tive Choice Behavior," in Frontiers in Econometrics, P. Zarenm-bka, ed. New York: Academic Press, 105-42.(1989). A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Econometrica, 54(3), 1027-1058.[28]. DA Cohen, ADey, TZ Lys. (2008), “Accrual-Based Earnings Management in the Pre-and Post-Sarbanes-Oxley Periods”. The accounting review.

FRAUD TRIANGLE ANALYSES IN DETECTING FRAUDULENT FINANCIAL STATEMENT USING FRAUD SCORE MODEL

2020 ◽  
Vol 25 (1) ◽  
pp. 29-44
Author(s):  
Mariati ◽  
Emmy Indrayani
Keyword(s):  
Financial Stability ◽  
Linear Regression Analysis ◽  
Financial Statements ◽  
Multiple Linear Regression Analysis ◽  
External Pressure ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Financial Condition ◽  
Score Model

Company’s financial condition reflected in the financial statements. However, there are many loopholes in the financial statements which can become a chance for the management and certain parties to commit fraud on the financial statements. This study aims to detect financial statement fraud as measured using fraud score model that occurred in issuers entered into the LQ-45 index in 2014-2016 with the use of six independent variables are financial stability, external pressure, financial target, nature of industry, ineffective monitoring and rationalization. This study using 27 emiten of LQ-45 index during 2014-2016. However, there are some data outlier that shall be removed, thus sample results obtained 66 data from 25 companies. Multiple linear regression analysis were used in this study. The results showed that the financial stability variables (SATA), nature of industry (RECEIVBLE), ineffective monitoring (IND) and rationalization (ITRENDLB) proved to be influential or have the capability to detect financial statement fraud. While the external pressure variables (DER) and financial target (ROA) are not able to detect the existence of financial statement fraud. Simultaneously all variables in this study were able to detect significantly financial statement fraud.

scholarly journals FRAUD PENTAGON THEORY DALAM FINANCIAL STATEMENT FRAUD PADA PERUSAHAAN TERDAFTAR di JAKARTA ISLAMIC INDEX (JII) PERIODE 2014-2017 (Perspektif F-Score Model)

2019 ◽  
Vol 4 (2) ◽  
pp. 128-138
Author(s):  
Faiz Rahman Siddiq ◽  
Agus Endrianto Suseno
Keyword(s):  
Financial Stability ◽  
External Pressure ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Purposive Sampling ◽  
Auditing Standards ◽  
Score Model ◽  
Financial Need

Financial statement fraud biasa disebut dengan kecurangan laporan keuangan yang merupakan kesengajaan dalam melakukan kelalaian dan kesalahan ketika  membuat laporan keuangan dengan penyajian yang tidak sesuai pada prinsip akuntansi berterima umum. Statement on Auditing Standards (SAS) No.99 menjelaskan tentang salah saji yang berhubungan dengan auditor dalam mengaudit laporan keuangan terhadap fraud diantaranya adalah (1) salah saji dari kesalahan suatu laporan keuangan merupakan suatu  pengungkapan yang direncanakan guna menipu pengguna laporan keuangan, (2) penyalahgunaan aset atau istilah lain pencurian dan penggelapan sering dijadikan sebagai salah saji dalam laporan keuangan. Fraud pentagon theory merupakan pengembangan dari teori fraud sebelumnya yaitu fraud triangle (Cressey, 1953) dan fraud diamond (Wolf and Hermanson,2004). Populasi penelitian ini adalah perusahaan yang tergabung dalam Indeks JII (Jakarta Islamic Index) pada tahun 2014-2017. Teknik pengambilan sampel dengan menggunakan metode purposive sampling. Metode analisis data yang digunakan dalam penelitian ini adalah analisis regresi linear berganda. Financial statement fraud dalam penelitian menggunakan perspektif F-Score Model. Hasil penelitian ini adalah pressure (Financial Stability, dan Financial Target), dan Opportunity (Nature of Industry) berpengaruh terhadap financial statement fraud. Sedangkan Pressure (External Pressure dan Personal Financial  Need), Rationalization (Change in Auditor), Competence (Change of Director) dan Arrogance (Frequent Number of CEO’s Picture dan Dualism Position) tidak berpengaruh terhadap financial statemnt fraud.

scholarly journals FINANCIAL STATEMENT FRAUD DETECTION USING PERSPECTIVE OF FRAUD TRIANGLE ADOPTED BY SAS NO. 99

2016 ◽  
Vol 1 (2) ◽  
pp. 317 ◽  
Author(s):  
Shabrina Prasmaulida
Keyword(s):  
Financial Reporting ◽  
Financial Stability ◽  
Stock Exchange ◽  
Cash Flows ◽  
External Pressure ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Manufacturing Companies ◽  
Financial Statement Fraud ◽  
Financial Need

Financial statements generally aim to provide information about the company’s financial position, performance, and cash flows to the interested parties. The motivation to gain trust from the users, especially investors, shareholders and creditors, leads someone to commit fraud in the financial reporting. This study aims to detect and predict financial statement fraud based on the perspective of fraud triangle adopted by SAS No. 99. The dependent variable in this study is financial statement fraud which is proxied by earnings management, while the independent variables in this study are financial stability pressure, personal financial need, ineffective monitoring, effective monitoring, external pressure, and financial targets.Population of this research is manufacturing companies listed in Indonesia Stock Exchange period 2012 - 2014. Samples are selected using purposive sampling method and obtained 150 companies out of a total population of 162 companies. The results show that financial stability pressure and external pressurehave significant positive effect on financial statement fraud. Meanwhile, personal financial need, ineffective monitoring, effective monitoring, and financial targets do not have significant effect on financial statement fraud.

scholarly journals Peran Fraud Triangle dalam Mendeteksi Financial Statement Fraud di Perusahaan Perbankan ASEAN

2021 ◽  
Vol 31 (3) ◽  
pp. 713
Author(s):  
Yuliana Pertiwi Yuwono ◽  
Maria Assumpta Evi Marlina
Keyword(s):  
Earnings Management ◽  
Financial Stability ◽  
Sampling Technique ◽  
Total Sample ◽  
External Pressure ◽  
Commercial Banking ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Triangle Theory

This research aims to determine the effect of fraud triangle theory toward Financial statement fraud. Financial statement fraud is proxied by earnings management.  Population in this study is non-Islamic commercial banking companies listed on SGX, MYX, SET, PSE and IDX. The sampling technique used purposive sampling. The total sample in the study was 66 non-Islamic commercial banking companies. The data analysis method used is multiple linear regression. The research results proved that Financial targets and change of auditors had a positive effect on Financial statement fraud while external pressure had a negative effect on Financial statement fraud. Financial stability and ineffective monitoring had no effect on Financial statement fraud. This research can be used as a reference by investors, the public, government and users of other financial statement information in order to detect Financial statement fraud through the fraud triangle theory. Keywords: Financial statement fraud; Earnings Management; Fraud Triangle.

Scoring the financial distress and the financial statement fraud of Garuda Indonesia with «DDCC» as the financial solutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ryan Aviantara
Keyword(s):  
Financial Distress ◽  
Stock Exchange ◽  
Univariate Analysis ◽  
Strong Relationship ◽  
Safe Zone ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Content Type ◽  
The Government

Purpose PT Garuda Indonesia (GIAA) Persero Tbk is the one only pride airline of Indonesian sovereignty. Although the bird achieved abundant international awards and certifications, the bird is dying and needs a remedy immediately. The frequent annual turnover of board executives did not make impact to the financial performance; this seems to be tip of the iceberg, peculiar with the number of restatement over the past decade. Therefore, this paper aims to address the issue through the function of five red flags model which known as Altman Z-score, Sprigate S-score, Grover G-score, Beneish M-score and Dechow F-score. Design/methodology/approach This is exploratory study of univariate analysis using financial distress and fraudulent financial statement approach, while the type of data is secondary taken from Indonesia Stock Exchange during 12 years observation from 2007 to 2018. Findings Altman, Springate and Grover produce strong indication of GIAA’s financial distress; all models score the same distress indication by 14 times. All distress models agreed that only 2011 and 2012 classify to the safe zone when GIAA performed the corporate actions. Beneish scores fraud indication by eight times. Dechow scores slightly higher by nine times. The number of fraud predictions in this research are in line with the number of restatement, which proves the assumption that restatement can be used as a signal of the financial statement fraud. When GIAA categorized in safe zone, both Beneish and Dechow score no to fraud, this indicates the fraud occurence during health period is lower. Research limitations/implications The motivation behind the financial statement fraud is not discuss through this research but from the primary theory of the fraud triangle. Financial distress possesses strong relationship with pressure factor; therefore, exit from financial crisis is one of the best solution to mitigate the financial statement fraud. Practical implications The average of Beneish score is −2,26, slightly above the manipulator threshold which is −2,22. This must be marked as an ample conjecture of GIAA’s fraud inclination and been a highlight for the auditor both internal and external when performing control testing, attestation and other assurance services. Social implications All models in this study can apply to any other corporate issues, especially for evaluating the government company who has loosen the public trust recently in Indonesia such as PT Asuransi Jiwasraya and PT Asabri. Moreover, the pandemic COVID-19 has brought the world to the new unprecedented risk, especially the economic turmoil which lead the possibilities of corporate distress and fraud. By applying these scores, public might have tools as pre-elemenary assessment to serve a decision where to put trust in a company. Originality/value This paper reveals a combination from various models of financial distress and financial statement fraud in order to generate the financial solutions named « DDCC » Debt Restructuring, Debt Conversion, Capex Management and Cost Cutting.

scholarly journals Determinants in detecting fraud triangle of financial statements on companies registered in Jakarta Islamic Index (JII) period 2012-2018

2020 ◽  
Vol 2 (1) ◽  
pp. 117
Author(s):  
Iwan Budiyono ◽  
Melati Sari Dewi Arum
Keyword(s):  
Financial Stability ◽  
Secondary Data ◽  
Financial Statements ◽  
External Pressure ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Analysis Model ◽  
Financial Statement Fraud ◽  
External Pressures ◽  
Fraudulent Financial Statements

<p class="IABSSS"><strong>Purpose</strong> - The purpose of study was to examine the effect financial statement fraud based on the fraud triangle with a number of variables such as financial stability, external pressure, financial target, personal financial needs, opportunity and rasionalization in companies listed in Jakarta Islamic Index (JII) period 2012-2018.</p><p class="IABSSS"><strong>Method </strong>- The population are all companies listed in JII period 2012-2018. The sample is 6 companies that were feasible to analyze. The data used in this research is secondary data obtained from the annual report. The data analysis model applied multiple linier regression data panel  using SPSS 25.</p><p class="IABSSS"><strong>Result</strong> - The results showed that the fraud triangle in the categories of financial stability, external pressure, financial targets, personal financial needs, opportunity and rationalization simultaneously affect the fraudulent financial statements. Furthermore financial stability, personal financial needs and opportunity partially negatively related and had no significant effect on financial statement fraud; while external pressures, financial targets and rationalization have positive and significant effects on financial statement fraud on companies listed in JII period 2012-2018.</p><p class="IABSSS"><strong>Implication</strong> - Companies Registered in JII are suggested to improve the financial performance in accordance with sharia principles.</p><strong>Originality</strong> - This research is the first study using multiple linier regression data panel.

scholarly journals THE EFFECTIVENESS OF FRAUD TRIANGLE ON DETECTING FRAUDULENT FINANCIAL STATEMENT: USING BENEISH MODEL AND THE CASE OF SPECIAL COMPANIES

2015 ◽  
Vol 3 (3) ◽  
pp. 786
Author(s):  
Aprillia Aprillia ◽  
Orlin Cicilia ◽  
Rafaela Pertiwi Sergius
Keyword(s):  
Logistic Regression ◽  
Regression Method ◽  
Financial Information ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Real Condition ◽  
Logistic Regression Method ◽  
Total Accrual ◽  
Illegal Action

Fraudulent financial statement is a serious problem and to be a threat to stakeholders, especially for investor. The thing is happened because there is illegal action done intentionally, such as disclosing financial information that doesn’t match with the real condition. The purpose of this research is to acquire a effectiveness of empirical proof of fraud triangle consisting of Pressure, Opportunity, and Rationalization in detecting financial statement fraud that are indicated by using Beneish Model. The sample of this research consists of 39 companies are indicated doing fraud and 57 companies aren’t indicated doing fraud listing at BEI (Bursa Efek Indonesia) in 2012 – 2014. Test of this research uses logistic regression method. Based on the result and conclusion, this research shows that opportunity (independent commissioner ownership) has significant effect to fraudulent financial statement while pressure (AGROW), financial target (ROA), and rationalization (Total accrual) don’t have significant effect to fraudulent financial statement.

scholarly journals DETERMINAN FINANCIAL STATEMENT FRAUD DENGAN MENGGUNAKAN PENDEKATAN FRAUD TRIANGLE

AKUNTABILITAS ◽  
2019 ◽  
Vol 13 (1) ◽  
pp. 1-18
Author(s):  
Yeasy Darmayanti ◽  
Ilham Setiawan ◽  
Ethika Ethika
Keyword(s):  
Regression Analysis ◽  
Financial Stability ◽  
Stock Exchange ◽  
External Pressure ◽  
The Other ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Manufacturing Companies ◽  
Financial Statement Fraud ◽  
Financial Need

The aim of this study is to examine the effects of financial stability, external pressure, personal financial needs, financial targets, nature of industry, ineffective monitoring, and rationalization of financial statement fraud on manufacturing companies listed on the Indonesia Stock Exchange from 2012 to 2016 .From a population of 159 listed manufacturing companies, 72 samples were obtained that met the criteria. Testing using SPSS version 23 for logistic regression analysis. The results of this study indicate that external pressure and nature of industry have a significant influence on financial statement fraud. On the other hand, financial stability, personal financial need, financial targets, ineffective monitoring and rationalization have no effect on financial statement fraud.

scholarly journals Fraud Risk Factors of Fraud Triangle and the Likelihood of Fraud Occurrence: Evidence from Malaysia

2014 ◽  
Vol 6 (1) ◽  
pp. 1-7 ◽  
Author(s):  
Shabnam Fazli Aghghaleh ◽  
Zakiah Muhammaddun Mohamed .
Keyword(s):  
Risk Factors ◽  
Risk Factor ◽  
Logistic Model ◽  
Audit Committee ◽  
Financial Statement ◽  
Fraud Triangle ◽  
Financial Statement Fraud ◽  
Fraud Risk ◽  
Available Information ◽  
Binary Logistic Model

The current research studies the usefulness of Cressey’s fraud risk factor framework adopted from SAS No. 99 to prevent fraud from occurring. In accordance with Cressey’s theory, pressure, opportunity and rationalization are existing when fraud occurs. The study suggests variables as proxy measures for pressure and opportunity, and test these variables using publicly available information relating to a set of fraud firms and a sample of no-fraud firms. Two pressure proxies and two opportunity proxies are identified and suggested to be significantly related to financial statement fraud. We find that leverage and sale to account receivable are positively related to the likelihood of fraud. Audit committee size and board of directors’ size are also linked to decrease the level of financial statement fraud. A binary logistic model based on examples of fraud risk factors of fraud triangle model measures the likelihood of financial statement fraud and can assist experts.

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