Financial Statement Fraud: An Investigation into its Prevalence in Cross Sector Industries in Indonesia
Financial Statement Fraud: An Investigation into its Prevalence in Cross Sector Industries in Indonesia

Summary/Abstract: This study investigates the tendency level of companies in Indonesia performing Financial Statement Fraud (FSF). This research also investigates which industries are indicated on practicing so. This research explores grey area indices that shows types of FSF techniques applied by those companies. This study empirically examined 352 companies listed on the Indonesia Stock Exchange, included in five major industries. This research is an exploratory research that applies Beneish M-Score Model in calculating the manipulation score, calculates the statistic of frequency to find the overall manipulation index, and utilizes the descriptive statistics to explore the result data. The result shows that 132 of 352 companies or 37.50% are included as companies with indications of performing FSF in 2016. The indicated number of 132 is much higher compared to number of sanctions issued by Financial Service Authoritative to only three companies in 2016. The research result also shows that manufacturing industry has the biggest number of 35 companies indicated as practicing financial statement fraud. The research concludes that Beneish M-Score Model can be used as an additional analytical procedure to detect the indication of FSF.

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