The results of the hypothesis testing (p. 7) lack several elements, such as the Likelihood Ratio test or the R2 of the model and its diagnostic tests;. Please provide a brief synthesis of the structure of the manuscript at the end of the first section. An explanation of the following terms in the M-score formula is recommended: DSRI, GMI, AQI, SGI, DEPI, SGAI, TATA and LVGI.
Regarding the proofreading service, we recommend that you refer to the Tools for Authors on the previous page of the review result. The results of testing the hypotheses (p. 7) are missing several elements, such as the Likelihood Ration Test or the R 2 of the model and its diagnostic tests; The statistical model does not take the time effect (years) into account. The model feasibility test or goodness of fit test can be performed by observing the outcome of Hosmer and Lemeshow's Goodness of fit test and can be seen in Table 2.
From this, the logistic regression test model is good and fits the data. The coefficient of determination R2 is 0.75 which means that the ability of the independent variables in explaining the variance of financial statement fraud is 75%. 2 Comments: provide a brief synthesis of the structure of the manuscript at the end of the first section.
3 Comments: An explanation of the following terms in the M-score formula is recommended: DSRI, GMI, AQI, SGI, DEPI, SGAI, TATA and LVGI.
Financial Statement Fraud Detection with Beneish M-Score and Dechow F-Score Model: An Empirical Analysis of Fraud
An additional discussion of the research results is made on page 10 (marked in yellow), as follows: 2016) shows the important role of leverage for the protection of shareholders and creditors in different legal systems, namely in common law and in civil law. Language quality has been improved using professional proofreaders as stated in the attached statement.
Pentagon Theory in Indonesia
Abstract
- Introduction
- Literature Review and Hypotheses
- Research Method
- Research Findings and Discussion
- Discussion
- Conclusion
This theory is a renewable theory based on the development of the fraud triangle theory proposed by Cressey (1953) and the fraud diamond theory of Wolfe and Hermanson (2004). This study contributes to the FSF literature by testing the ability of the Beneish model and the F-Score model to detect FSF trends in the Indonesian context. The theory is the development of the fraud triangle theory proposed by Cressey (1953) and the diamond fraud theory of Wolfe and Hermanson (2004).
If the F-Score obtained is less than 1 (<1), this will demonstrate that there is no manipulation of the annual accounts. For this reason, management manipulated the financial statements as a tool to cover the condition of poor stability of the company. Lack of control of internal parties of the company becomes a separate opportunity for some parties to manipulate data in the annual accounts.
Effective internal control can maintain the reliability of the company's financial statements and prevent fraud. In accordance with the research of Lou and Wang (2009) that the deterioration of the relationship between company managers and auditors can be the red flag of the company's fraud tendency. Financial Statement Fraud will be measured using a Dechow F-Score and Beneish M-Score model analysis.
Fluctuating corporate financial stability does not necessarily cause management to cheat to improve the stability of the company (Wispandono, 2010). If the financial stability of the company's economy declines, it is not certain that the company will cheat because the company can still function well. It is also possible that financial stability does not affect financial statement fraud because some of the values in the financial statements have been manipulated by management.
In some companies, a commissioner is occupied by the owner or owner or founder of the company itself. When it is seen that the main function of the general. audit is that it only assesses the fairness of the financial statements. The results of the study showed that pentagon fraud succeeded well in predicting the model as an independent variable against financial report fraud.
The results of the study are in line with and support previous research by Dalnial et. This can be evidenced in the first F score from the analysis results, as well as in relation to the study results.
Literature Review and Hypotheses 1 Pentagon Fraud Theory
FSF is defined by the Association of Certified Fraud Examiners (ACFE) as a deliberate misrepresentation of a company's financial condition through the deliberate misstatement or omission of the amount of information in the financial statements in order to mislead users of the financial statements. The F-Score model developed by Dechow et al. 2011) is a fraud risk assessment tool that produces an output called the F-Score, as an indication of the likelihood of fraudulent financial reporting. 2011) follows a method similar to Beneish to develop scores to predict which companies had material misstatements. If the F-Score exceeds 1 (> 1), it may signal an indication of fraud in the company's accounts.
It may also indicate that the company has changed the company's financial statements. The Pentagon Fraud Theory explains that the existence of pressure can be a motive for fraud. The pressure on the pentagon fraud theory that encourages someone to commit fraud can be in the form of finance.
99 when financial stability is threatened by economic, industrial and other situations, managers face pressure to commit financial reporting fraud (Skousen et al., 2009). Control ineffectiveness can occur due to the dominance of management by one person or a small group, such as the control of the board of directors and the audit committee over the financial reporting process and internal control. Transactions with related parties can be used as an opportunity for management to commit fraud and defraud financial statements.
This type of fraud is usually found in unusually significant transactions, especially near the end of the year. Young (2005) found that related party transactions can be used by actors to manipulate profits and commit fraud. The dominance of the managing director or directors can occur when the managing director or directors as company managers are also shareholders at the same time.
40 of 2007 regarding Limited Liability Companies does not clearly define the prohibition of the CEO or member of the board of directors to become a shareholder in the said company. This is consistent with Rijsenbilt's (2011) research which states that CEO narcissism has a positive effect on the tendency to commit fraud. 2013) also explained that the assessment of fraud risk will be further improved if the auditor knows the narcissistic character of a manager. Schwartz (cited by Amemic & Craig 2010) suggests that accounting as part of the financial system offers greater "narcissistic opportunities" than other management functions such as operations.
Research Method 1 Population and Sample
The coefficient of determination R2 is 0.75, which means that the ability of the independent variables to explain the variance of financial statements fraud is 75%, and there is 25% of other factors that explain the variance of financial statements fraud. Furthermore, in this study it can be concluded that H2, namely financial stability, has no significant effect on accounting fraud. This shows that the higher the financial targets set by company management, the greater the increase in accounting fraud.
This will encourage management to commit fraud so that the company's financial statements will be presented unnaturally. It can be concluded that it has been proven that the company's ability to meet its obligations does not affect the occurrence of fraudulent financial statements. Auditor turnover by the company may not affect financial statement fraud because external auditors rarely disclose the state of a fraud in the company in their fairness opinion report.
The auditor changes made by manufacturing companies are mostly carried out according to the rules, from which it can indicate that the auditor's turnover is only a formality of the application of the applicable rules. The results of auditor changes having no effect on financial reporting fraud are consistent with the research of Skousen et al. 2009) which states that auditor change does not affect financial statement fraud. Schwartz (cited by Amemic and Craig 2010) suggests that accounting as part of the financial system offers a greater "narcissistic opportunity" than management.
The results of this study can be concluded that the pentagon fraud model can be used to predict financial statement fraud. The results of this study are empirical evidence that the financial target variables and CEO narcissism have significant effects on financial statement fraud, while financial stability, external pressure, supervisory ineffectiveness, related party transactions, auditor turnover and CEO dominance have no significant effects on financial statements. . fraud. Furthermore, when viewed in the table of the F-Score and M-Score models, there are several companies suspected or indicated of fraudulent financial reporting, including 284 companies out of 385 observational samples.
The results of the Fraudulent Financial Report Analysis using F-Score and M-Score for manufacturing companies have successfully analyzed a total of 284 companies that indicated fraudulent financial reporting. Fraud pentagon as a theory proposed by Crowe in 2011 can be used to explain the phenomenon of accounting fraud. In this study, the Dechow (F-Score) and Beneish (M-Score) analysis succeeded in indicating accounting fraud committed by manufacturing companies.
Fraudulent Financial Statements: Revenue Recognition and the Auditor's Responsibility for Detecting Financial Statement Fraud. Detecting and predicting financial statement fraud: The effectiveness of the fraud triangle and SAS no.