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Financial Statement Fraud Detection With Beneish M-Score and Dechow F-Score Model: An Empirical Analysis of Fraud Pentagon Theory in Indonesia

Author

Listed:
  • Dwi Ratmono
  • Darsono Darsono
  • Nur Cahyonowati

Abstract

This research contributes to the Financial Statement Fraud (FSF) literature by examining the ability of the Beneish model and the F-Score model to detect FSF trends in the Indonesian context. This study also aims to provide empirical evidence on other issues that encourage fraud. The results of this study are empirical evidence that the financial target variables and CEO narcissism have a significant effect on financial statement fraud while financial stability, external pressure, supervision ineffectiveness, related party transactions, auditor turnover, and CEO dominance have no significant effect on financial statement 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 observation samples. The percentage of companies indicated to have financial statements fraud requires further examination to really prove that the company is cheating. The results of the fraudulent financial report analysis using the F-Score dan M-score for manufacturing companies in 2014 - 2018 successfully analyzed a total of 284 companies that indicated fraudulent financial reporting.

Suggested Citation

  • Dwi Ratmono & Darsono Darsono & Nur Cahyonowati, 2020. "Financial Statement Fraud Detection With Beneish M-Score and Dechow F-Score Model: An Empirical Analysis of Fraud Pentagon Theory in Indonesia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(6), pages 154-164, December.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:6:p:154-164
    DOI: 10.5430/ijfr.v11n6p154
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    References listed on IDEAS

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    1. Antoinette Rijsenbilt & Harry Commandeur, 2013. "Narcissus Enters the Courtroom: CEO Narcissism and Fraud," Journal of Business Ethics, Springer, vol. 117(2), pages 413-429, October.
    2. Beneish, Messod D., 1997. "Detecting GAAP violation: implications for assessing earnings management among firms with extreme financial performance," Journal of Accounting and Public Policy, Elsevier, vol. 16(3), pages 271-309.
    3. Patricia M. Dechow & Weili Ge & Chad R. Larson & Richard G. Sloan, 2011. "Predicting Material Accounting Misstatements," Contemporary Accounting Research, John Wiley & Sons, vol. 28(1), pages 17-82, March.
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