Article Sidebar

Download
Full text PDF
Statistic
Read Counter : 6 Download : 3

Downloads

Download data is not yet available.

Main Article Content

Abstract

This study examines the determinants of fraudulent financial statements in Indonesia’s non-bank financial industry by integrating the New Fraud Diamond Theory with Agency Theory. Specifically, it investigates the roles of financial targets, nature of industry, earnings management, and changes in directors as proxies for motivation, opportunity integrity, and capability, respectively. Using a quantitative approach, this study analyzes panel data from 53 non-bank financial institutions listed on the Indonesia Stock Exchange over the 2019-2022 period, yielding 212 firm-year observations. Fraudulent financial statements are measured using the Beneish M-Score model, while hypothesis testing is conducted through fixed-effects panel regression analysis. The empirical results indicate that financial targets, nature of industry, and earnings management significantly increase the likelihood of fraudulent financial reporting, whereas changes in directors do not exhibit a significant effect. These findings suggest that fraudulent financial statements are primarily driven by incentive pressure, discretionary accounting environments, and weakened managerial integrity rather than by leadership turnover. From an agency perspective, aggressive performance targets and information asymmetry intensify characterized by high estimation uncertainty. This study contributes to the fraud literature by providing empirical support for the New Fraud Diamond Theory in the context of non-bank financial institutions and highlights the critical role of integrity in translating pressure and opportunity into fraudulent behavior. The results offer practical implications for auditors, regulators, and investors in strengthening fraud risk assessment, ethical governance, and financial reporting oversight.

Keywords

fraudulent financial statement New Fraud Diamond Motivation opportunity Personal Integrity

Article Details

License

Copyright (c) 2026 Jurnal Akuntansi dan Auditing Indonesia

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

References

  1. ACFE. (2024). Occupational fraud 2024: A report to the nations. https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf
  2. AICPA. (2002). Statement of auditing standards (SAS) no. 99: Consideration of fraud in an audit of financial statements. American Institute of Certified Public Accountants.
  3. Biduri, S., & Tjahjadi, B. (2026). Determinants of financial statement fraud: The perspective of pentagon fraud theory (evidence on Islamic banking companies in Indonesia). Journal of Islamic Accounting and Business Research, 17(2), 392–422. https://doi.org/10.1108/JIABR-08-2022-0213
  4. Cressey, D. R. (1953). Other people’s money: A study in the social psychology of embezzlement. Free Press.
  5. de Oliveira Orth, C., Momo, F., Manfroi da Silva Bonotto, M., & Schiavi, G. (2024). Motivational processes involved in the behavior of the financial statement fraudster. Journal of Financial Crime, 31(6), 1362–1373. https://doi.org/10.1108/JFC-10-2023-0251
  6. Demetriades, P., & Owusu-Agyei, S. (2022). Fraudulent financial reporting: An application of fraud diamond to Toshiba’s accounting scandal. Journal of Financial Crime, 29(2), 729–763. https://doi.org/10.1108/JFC-05-2021-0108
  7. Dharmayuni, L. (2022). Paying a premium for an accounting crime. Journal of Financial Crime, 29(4), 1396–1405. Emerald Publishing. https://doi.org/10.1108/JFC-09-2021-0215
  8. Doss, S., & Bacha, S. (2026). Detecting fraudulent financial statements through SCCORE model: Evidence from French context. Journal of Financial Crime, 33(1-2), 75–93. https://doi.org/10.1108/JFC-02-2025-0042
  9. du Toit, E. (2024). The red flags of financial statement fraud: A case study. Journal of Financial Crime, 31(2), 311–321. https://doi.org/10.1108/JFC-02-2023-0028
  10. Gbegi, D. O., & Adebisi, J. F. (2013). The new fraud diamond model-how can it help forensic accountants in fraud investigation in Nigeria? European Journal of Accounting Auditing and Finance Research, 1(4), 129–138. www.eajournals.org
  11. Gunarianto, Puspitosari, E., & Mas’ud, M. (2022). The role of pressure, opportunity, and rationalization on fraud financial statements: A case study of banking companies on the Indonesia stock exchange. Academy of Strategic Management Journal, 21(3), 1–11.
  12. Haldar, A., Mayee, G. A., & Parikh, P. A. (2025). Stories speak louder than numbers: Evidence from annual reports. Qualitative Research in Financial Markets. https://doi.org/10.1108/QRFM-10-2024-0286
  13. Haqq, A. P. N. A., & Budiwitjaksono, G. S. (2019). Fraud pentagon for detecting financial statement fraud. Journal of Economics, Business, & Accountancy Ventura, 22(3), 319–332. https://doi.org/10.14414/jebav.v22i3.1788
  14. Hermiyetti. (2022). SCORRE approach as an instrument for detecting fraudulent financial reporting. International Journal of Business Ecosystem & Strategy (2687-2293), 4(4), 118–131. https://doi.org/10.36096/ijbes.v4i4.353
  15. Idris, M. (2021, February 3). Ini kronologi korupsi Asabri yang merugikan negara Rp 23,7 triliun. Kompas.com. https://money.kompas.com/read/2021/02/03/030400326/ini-kronologi-korupsi-asabri-yang-merugikan-negara-rp-23-7-triliun
  16. Jaswadi, J., Purnomo, H., & Sumiadji, S. (2024). Financial statement fraud in Indonesia: A longitudinal study of financial misstatement in the pre-and post-establishment of financial services authority. Journal of Financial Reporting and Accounting, 22(3), 634–652. https://doi.org/10.1108/JFRA-10-2021-0336
  17. 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. https://doi.org/https://doi.org/10.1016/0304-405X(76)90026-X
  18. Kazemian, S., Said, J., Hady Nia, E., & Vakilifard, H. (2019). Examining fraud risk factors on asset misappropriation: Evidence from the Iranian banking industry. Journal of Financial Crime, 26(2), 447–463. https://doi.org/10.1108/JFC-01-2018-0008
  19. Khamainy, A. H., Ali, M., & Setiawan, M. A. (2022). Detecting financial statement fraud through new fraud diamond model: The case of Indonesia. Journal of Financial Crime, 29(3), 925–941. https://doi.org/10.1108/JFC-06-2021-0118
  20. Khamainy, A. H., Amalia, M. M., Cakranegara, P. A., & Indrawati, A. (2022). Financial statement fraud: The predictive relevance of fraud hexagon theory. Journal of Accounting and Strategic Finance, 5(1), 110–133. https://doi.org/https://doi.org/10.33005/jasf.v5i1.249
  21. Lootah, M., Gleason, K., Smith, D., & Zoubi, T. (2025). Fraud risk of sovereign wealth funds: Fraud triangle and agency theory perspectives. Journal of Financial Crime, 32(3), 515–529. https://doi.org/10.1108/JFC-05-2024-0155
  22. Mahadew, B., & Dauhajee, B. (2025). An assessment of the legal framework on insurance frauds in Mauritius: A comparative approach with the UK. International Journal of Law and Management, 1–22. https://doi.org/10.1108/IJLMA-05-2025-0176
  23. Mandal, A., & S, A. (2025). Preventing financial statement fraud in the corporate sector: Insights from auditors. Journal of Financial Reporting and Accounting, 23(1), 56–80. https://doi.org/10.1108/JFRA-02-2023-0101
  24. Md Nasir, N. A., & Hashim, H. A. (2021). Corporate governance performance and financial statement fraud: Evidence from Malaysia. Journal of Financial Crime, 28(3), 797–809. https://doi.org/10.1108/JFC-09-2020-0182
  25. Mohd Razmin, M. A. R., Mohamad, A., & Zakaria, M. (2024). Adopting fraud diamond theory to predict factors of asset misappropriation fraud among police officers. Journal of Financial Crime, 31(6), 1576–1591. https://doi.org/10.1108/JFC-11-2023-0292
  26. Nejad, M. Y., Khan, A. S., & Othman, J. (2024). A panel data analysis of the effect of audit quality on financial statement fraud. Asian Journal of Accounting Research, 9(4), 422–445. https://doi.org/10.1108/AJAR-04-2023-0112
  27. Oboh, C. S., Obigbemi, I. F., & Fagboro, D. G. (2025). Moral intensity and fraudulent financial reporting rationalization: Evidence from a developing African country. Journal of Accounting in Emerging Economies, 1–29. https://doi.org/10.1108/jaee-10-2024-0468
  28. OJK. (2023). OJK dorong penguatan governansi dan integritas industri keuangan non-bank. https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/OJK-Dorong-Penguatan-Governansi-dan-Integritas-Industri-Keuangan-Non-Bank.aspx
  29. Omukaga, K. O. (2020). Is the fraud diamond perspective valid in Kenya? Journal of Financial Crime, 28(3), 810–840. https://doi.org/10.1108/JFC-11-2019-0141
  30. Riskiyadi, M. (2024). Detecting future financial statement fraud using a machine learning model in Indonesia: a comparative study. Asian Review of Accounting, 32(3), 394–422. https://doi.org/10.1108/ARA-02-2023-0062
  31. Riskiyadi, M. (2025). Detecting financial statement fraud using new ensemble learning: Evidence during the COVID-19 pandemic in Indonesia. Journal of Financial Crime, 32(4), 825–842. https://doi.org/10.1108/JFC-08-2024-0264
  32. Salihu, A. S. (2025). Re-examining the fraud hexagon through corruption deterrence by regulatory undertakings and corporate disclosures in Nigerian financial institutions. Journal of Financial Crime, 35(5), 1014–1029. https://doi.org/10.1108/JFC-08-2024-0262
  33. Setiawan, N., & Soewarno, N. (2025). The examination of asset misappropriations in managers’ workplaces using hexagon’s fraud and the moderating impact of perceived strength of internal control. Journal of Financial Crime, 32(4), 860–877. https://doi.org/10.1108/JFC-08-2024-0254
  34. Shuto, H. (2025). Audit quality and its relevance to purpose-driven management in Japan’s big 4: Literature review and directions for future research. Journal of Accounting and Organizational Change, 1–32. https://doi.org/10.1108/JAOC-08-2024-0254
  35. Simbolon, R. (2025). The presence of female legislators: Fraud triangle elements and fraud. Journal of Financial Crime, 32(4), 804–824. https://doi.org/10.1108/JFC-06-2024-0183
  36. 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. In M. Hirschey, K. John, & A. K. Makhija (Eds.), Corporate governance and firm performance (Vol. 13, pp. 53–81). Emerald Group Publishing Limited. https://doi.org/10.1108/S1569-3732(2009)0000013005
  37. Soltani, M., Kythreotis, A., & Roshanpoor, A. (2023). Two decades of financial statement fraud detection literature review; combination of bibliometric analysis and topic modeling approach. Journal of Financial Crime, 30(5), 1367–1388. https://doi.org/10.1108/JFC-09-2022-0227
  38. Wolfe, D. T., & Hermanson, D. R. (2004). The fraud diamond: Considering the four elements of fraud. The CPA Journal, 74(12), 38–42.