Do Fraud Hexagon Components Promote Fraud in Indonesia?

Dio Alfarago; Azas Mabrur

Do Fraud Hexagon Components Promote Fraud in Indonesia?

Dio Alfarago, Azas Mabrur

Abstract

This study provides information about the likelihood of the nature
of fraud companies so that investors and stakeholders can make
better decisions. The Beneish model and the fraud theory are
two well-developed ideas for understanding fraud motivations
and detecting earnings manipulation in a corporation. Unlike
previous studies using the fraud triangle, this study uses the latest
theory (the fraud hexagon) perspective to detect fraud actions.
Thus, this study aims to examine the applicability of the fraud
hexagon components in combination with the M-score from
the Beneish model. Seventy-six manufacturing firms listed on
Indonesia Stock Exchange from 2015 to 2019 were chosen as
samples. The findings confirmed that enterprises with fraud tend
to: be more financially stable, be more leveraged, have higher
profitability, have cooperation projects with the government, have
more related-party transactions, have more auditor changes, be
less liquid, less changing directors, be less supervised, and less
display CEO.’s picture.

JEL Classification: K40, K42

Keywords

beneish m-score; financial statement fraud; fraud hexagon; fraud detection

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DOI: 10.15408/etk.v21i2.24653