Financial Statement Fraud Detection Using Published Data Based on Fraud Triangle Theory

This study empirically examined the effectiveness of financial factors based on Cressey's (1953) fraud triangle theory to the possibility of financial statement fraud. This research developed variables from financial statements which served as proxy measure for pressure, opportunity and rationalization. Financial factors studied were profitability, auditor change and ineffective monitoring to detect financial statement fraud possibility in non-financial companies listed on the Indonesian Stock Exchange (IDX) in 2008 to 2013. This research was conducted by quantitative methods using secondary data. The secondary data were gathered from a list of cases of Financial Services Authority of Indonesia (Otoritas Jasa Keuangan/OJK) and the annual reports of companies listed on the Stock Exchange. Logistic regression statistics were used, a dummy variable (non-metric) was selected as the dependent variable, while the independent variable was a combination of metric and non-metric variables. The analysis was performed with SPSS. The results showed that the proxies such as profitability and audit change are significantly related to the possibility of financial statement fraud. This finding consequently indicates that financial factors based on fraud triangle are effective to be used as a red-flag to detect and predict financial statement fraud possibility.