The pentagon fraud theory perspective: understanding of motivation of executives to manipulate with the financial statements of a state-owned enterprise
The pentagon fraud theory perspective: understanding of motivation of executives to manipulate with the financial statements of a state-owned enterprise

Summary/Abstract: State-Owned Enterprises (SOEs) in Indonesia are important economic actors in the national economy. However, SOEs have problems with accountability and financial transparency. SOEs problems ultimately lead to high economic costs and reduce efficiency. This study aims to determine the practice of fraudulent financial statements in SOEs. The method used in this research is descriptive. Data was obtained using observation and documentation of the Garuda Indonesia Group company which is a major airline in Indonesia. In addition, data were obtained from the Indonesia Stock Exchange (IDX), which consists of 36 samples. This study analyzes the financial statements from 2010 to 2018 as an independent variable. The dependent variable is measured by the elements of the pentagon fraud theory (pressure, opportunity, rationalization, competence, and arrogance) to detect fraudulent financial statements. Data analysis uses Kernel regression parameters, namely R-squared, predictive sign, and standard error, to detect earnings management in the context of the Garuda Indonesia Group.The results show that all the elements of the pentagon fraud theory affect financial statements. The study results show that the pentagon theory of fraud can be relied upon to detect misreporting in financial statements of SOEs. Furthermore, the study results are expected to be considered by related parties to be better prepared when detecting financial statement fraud using the fraud pentagon theory model.

• Details
• Contents