The Relationship Between the Weakness of Internal Controls and Fraudulent Financial Reporting with an Emphasis on the Adjustment Role of External Audit Quality (original) (raw)

The Effect of Internal Financial Indicators on the Tendency of Accounting Fraud

Jurnal Dinamika Akuntansi, 2017

This research is carried out to prove factors of tendency of accounting fraud in companies empirically. Variable used in predicting the tendency of accounting fraud is profitability level, capital turnover, financial leverage, assets composition, and firm size tendency of accounting fraud. The population is companies registered in Indonesia Stock Exchange that are suspected to fraud the accounting during observation year 2013 2015. Samples are taken by using purposive sampling, there are 12 companies are proven to be done fraud accounting and 12 companies are not. Data is analysed by using logistic regression analysis and Hosmer and Lemeshow test to measure the model. The result shows that capital turnover and assets composition has significant influence on tendency of accounting fraud. Besides, profitability, financial leverage, and firm size has insignificant influence on tendency of accounting fraud variable. This research concluded that capital turnover and assets composition ca...

Factors Affecting Fraud Prevention and Its Implication to the Quality of Financial Statements

Journal of Applied Finance & Accounting

The study aims to determine the effect of internal control, internal audit, risk-based audit, audit committee, and whistleblowing system on fraud prevention and its implications to the quality of financial statements. The sample consisted of 7 companies from 12 populations of chemical sub-sector companies and 5 companies from 10 populations of pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange in 2018. Data were collected using questionnaires with 154 respondents. The analysis technique using Structural Equation Modeling (SEM) and processed with Lisrel 8.8. The results indicate that, partially, internal control, internal audit, risk-based audit, and audit committee have a positive and significant effect on fraud prevention, while the whistleblowing system partially has a negative and insignificant effect. However, simultaneously, the direct effect of internal control, internal audit, risk-based audit, audit committee, and whistleblowing system on fraud preven...

The role of the internal audits to the quality of financial reporting

Reports on Economics and Finance, 2018

The research objectives are to examine the influence of the role of the internal audits to the quality of financial reporting. This research uses descriptive and verification methods, with data collection using census approach by distributing questionnaires to 43 banks that listed on the Indonesia Stock Exchange. The unit of analysis is the bank that listed on the Indonesia Stock Exchange with the audit committee, the internal audit manager, the finance and accounting managers as respondents. The types of data that used as primary data is the result of questionnaire respondents' feedback and secondary data is obtained from the listed bank's annual reports. Validity and reliability tests are conducted on the questionnaire's feedback that were collected for further testing hypotheses. Data analysis hypothesis testing is using regression. The research outcome showed that there are significant role of internal audit to the quality of financial reporting. The quality of financial reporting is higher if the inernal audit role have a role in completion and understanding the objectives, management, scope of work, the application of the principles and implementation of the internal audit function.

DETERMINANTS OF THE QUALITY OF INTERNAL CONTROL OVER THE FINANCIAL REPORTING SYSTEM

Economy and Market Communication Review, 2022

External stakeholders rely heavily on the information contained in the financial statements when making business decisions. Given the risks they take in making decisions based on this information, they expect the management to provide them with quality financial statements. In order to be able to provide such financial statements, the company's management needs to establish quality internal control over the financial reporting system. The task of this internal control is to reduce the risks of unintentional errors in accounting records, as well as intentional manipulation of accounting information contained in financial statements. Having in mind the importance of internal control for providing reliable financial statements, the author intends to identify the determinants of the quality of internal control in this article. In order to identify these determinants, the author relies on the results of empirical research conducted in countries where companies are required to disclose information on the quality of internal control over financial statements. According to the author's findings, the quality of internal control is influenced by a number of factors concerning the characteristics of corporate governance and the characteristics of the company in which internal control is established. When it comes to the characteristics of corporate governance, the quality of internal control over the financial reporting system is affected by the quality of the board of directors, the quality of the audit committee and the quality of internal audit. When it comes to the characteristics of the company, the author found that the quality of internal control over the financial reporting system is influenced by the ownership structure of the company, its size, age, financial stability, complexity, growth rate and the fact that the company is in the process of restructuring.

The Influence of Internal Control, Compliance with Accounting Rules and Compatibility of Compensation on the Trend of Accounting Fraud

JEMSI (Jurnal Ekonomi, Manajemen, dan Akuntansi), 2023

The purpose of this study is to gather empirical data on the relationship between internal control, appropriate compensation, and adherence to accounting standards and how those factors affect the tendency of accounting fraud in state-owned companies (BUMN) in the construction industry. The sample of state-owned businesses used in this study (BUMN). Two businesses were selected as samples in this study. Convenience sampling is the foundation of this study. There was a total of 80 respondents in the sample for this study. Several regression analyses approach and a statistical methodology run using the SPSS program are used to test the hypothesis in this study. The findings of this study suggest that internal control, appropriate pay, and adh erence to accounting regulations all have an impact on a person's propensity to engage in accounting fraud.

The role of risk management and good governance to detect fraud financial reporting

Journal of Contemporary Accounting, 2019

The aim of this study is to investigate the organizational factors, auditor opinion and the role of internal auditor in banking industry to detect fraud in Indonesia. Observation data in this study are the years from 2013 to 2017. This study is an empirical study and the data are selected by using sampling technique. Observation data in this study are as many as 45, and are processed by using logistic regression analysis instrument. The dependent variable studied is fraud. Meanwhile, the corporate organizational factors are risk disclosure and independency of intern auditor function as well as independent auditor opinion. The testing result proofs that there is no corporate organizational variable and independent auditor opinion significantly affecting indication of fraud in banking company.

A study on the relationship between internal and external audits on financial reporting quality

Management Science Letters, 2020

Internal auditors are considered a valuable source of information since they are more familiar with the company and its environment. This study aimed to identify the relationship between internal and external audits affecting the quality of firms' reports. To achieve the objectives of the study, a 30-item questionnaire was developed and sent to 312 external auditors and managed to collect 276 (88.5%) properly filled questionnaires. Descriptive statistics and multiple regression were used to test the hypotheses of the study. The results show that Jordanian auditors perceived favorably the cooperation between internal and external auditors to enhance the quality of financial reporting. For instance, the results revealed positive and significant effect of objectivity in enhancing the level of cooperation between internal and external auditors in a way that increased the level of financial reporting quality. Moreover, the quality of financial reporting has been affected positively resulting in the positive effect of the technical competence of the internal audit's work and professional care. Finally, the cooperation between the two auditing teams was noticeable through the nature and scope dimension that, in turn, increased the quality of financial reporting. Based on these results, external auditors are highly recommended to rely on internal audit works which could lead to enhance financial reporting quality.

Influence of Internal Audit and Internal Control System on Quality of the Financial Statement

Proceedings of the Conference on International Issues in Business and Economics Research (CIIBER 2019), 2021

The expected results of this study are to obtain empirical evidence of the causes of financial report quality through the implementation of internal audits that are moderated by the effectiveness of the internal control system. The benefit of this research is to contribute scientifically to the science of public sector auditing and solve problems for governments throughout the ministry in improving the quality of financial reports through the implementation of internal audits and internal control systems. The process through surveys and grounded based on existing theories was developed into a model designed to examine the quality of financial reports obtained from the internal control system and the implementation of internal audits. The results of this study state that the Internal Audit Implementation does not affect the Quality of Financial Statements, if the Effectiveness of the Internal Control System as a result of the moderating variable does not affect the Quality of Financi...

The Effect of Financial Stability, Auditor Quality, and External Pressure on Financial Statement Fraud with Good Corporate Governance as a Moderating Variable

This study aims to determine whether Financial Stability, Auditor Quality, and External Pressure affect Fraud Financial Statements with Good Corporate Governance as a moderating variable. A total of 34 banking companies are listed on the Indonesia Stock Exchange for the 2019-2021 period. This study used purposive sampling as a sampling technique and documentation as a data collection technique. The data that has been collected is then analyzed by logistic regression analysis. The results of hypothesis testing show that (1) financial stability, auditor quality, and external pressure have no effect on financial statement fraud, (2) good corporate governance is not able to moderate the influence between financial stability and auditor quality on financial statement fraud, but can moderate the effect between external pressure on financial statement fraud.

The Impact of Auditor Quality, Financial Stability, and Financial Target for Fraudulent Financial Statement

2017

This study analyzes the influence of financial stability, financial targets and the role of the quality of auditors against fraud measures financial statements. This study using purposive sampling and use of the 21 companies that commit fraud recorded in the financial statements of the Financial Services Authority and 21 companies did not commit fraud which includes compass 100 in the Indonesia Stock Exchange using logistic regression analysis. The study found a positive effect of variable quality auditor against fraudulent financial reports, found a negative influence financial stability and financial variables against the target of fraudulent financial statements. Limitation of this study are limited variables and proxy variables used to measure financial targets, further research is recommended to add the variables that affect the occurrence of acts of fraud financial statements, and look for a proxy for a target financial variables.