Analysis Of Factors Affecting The Fragle Of Financial Statement In Manufacturing Companies That Go Public In Indonesia And Malaysia In The Perspective Of Fraud Diamond

Feb 27, 2025 by ADMIN 168 views

**Analysis of Factors Affecting Fragile Financial Statements in Manufacturing Companies that Go Public in Indonesia and Malaysia in the Perspective of Fraud Diamond**

Introduction

The issue of fragile financial statements, also known as deceptive financial statements, is a serious problem that can erode public confidence in companies, especially those listed on the stock exchange. In this context, this study aims to analyze the factors that influence the occurrence of fragile financial statements in manufacturing companies that go public in Indonesia and Malaysia. The main focus of this analysis uses a diamond fraud perspective, which identifies various elements that contribute to fraud behavior in financial statements.

Background and Literature Review

Fragile financial statements can have severe consequences, including financial losses for investors and creditors, damage to a company's reputation, and even bankruptcy. In recent years, there has been a growing concern about the prevalence of fraud in financial statements, particularly in emerging markets such as Indonesia and Malaysia. The diamond fraud perspective, which was first introduced by Albrecht et al. (2010), provides a comprehensive framework for analyzing the factors that contribute to fraud behavior in financial statements. The framework consists of four elements: incentives, opportunities, attitudes, and capability.

Research Objectives and Methodology

The primary objective of this study is to investigate the factors that influence the occurrence of fragile financial statements in manufacturing companies that go public in Indonesia and Malaysia. The study uses a purposive sampling method to collect data from the financial statements of manufacturing companies in the basic and chemical industry subsectors listed on the Indonesia Stock Exchange and Malaysian Stock Exchange from 2013 to 2015. The data analysis method used includes logistic regression and multiple regression analysis, including partial and simultaneous tests and t-tests for differences.

Independent Variables and Dependent Variable

The study investigates several independent variables that are considered influential, such as Return on Assets (ROA), Financial Leverage, Total Asset Turnover, Effectiveness of Internal Control, Auditor Substitution, and Changes in Directors. The dependent variable is the fragile financial statement, which is measured using a binary variable (0 = no fragile financial statement, 1 = fragile financial statement).

Results and Discussion

The results of the analysis showed that there was no relationship between the independent variables studied and the dependent variable, namely the fragile financial statement, both partially and simultaneously. These findings give an indication that these factors may not be significant enough to influence the occurrence of fraud in the financial statements of companies in the two countries studied. However, the results also showed a significant difference in independent variables between manufacturing companies in Indonesia and Malaysia, giving a clearer picture of the characteristics and financial behavior of each country.

Implications and Recommendations

The findings of this study have several implications for investors and creditors in making investment decisions and credit granting. Knowing that the independent variables studied do not have a significant influence, can be a consideration in choosing a company that will be used as an investment site. In addition, the results of this study also showed a significant difference in independent variables between manufacturing companies in Indonesia and Malaysia, giving a clearer picture of the characteristics and financial behavior of each country.

Conclusion

In conclusion, this study provides insight into the factors that contribute to the fragile financial statements of manufacturing companies that go public in Indonesia and Malaysia. The findings of this study have several implications for investors and creditors in making investment decisions and credit granting. The results of this study also highlight the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud. Thus, stakeholders in the industrial sector can take appropriate strategic steps in creating a healthier and more trusted business environment.

Limitations and Future Research Directions

This study has several limitations, including the use of secondary data and the limited sample size. Future research directions include investigating the factors that contribute to fragile financial statements in other industries and countries, as well as exploring the effectiveness of internal control systems in preventing fraud.

References

Albrecht, W. S., Albrecht, C. C., & Zimbelman, M. F. (2010). Fraud examination (4th ed.). McGraw-Hill.

Appendix

The appendix includes the detailed results of the analysis, including the logistic regression and multiple regression analysis tables.

Introduction
Background and Literature Review
Research Objectives and Methodology
Independent Variables and Dependent Variable
Results and Discussion
Implications and Recommendations
Conclusion
Limitations and Future Research Directions
References
Appendix

Q: What is a fragile financial statement?

A: A fragile financial statement is a financial statement that contains false or misleading information, which can be used to deceive investors, creditors, or other stakeholders.

Q: Why is it important to analyze fragile financial statements?

A: Analyzing fragile financial statements is crucial to prevent financial losses for investors and creditors, damage to a company's reputation, and even bankruptcy.

Q: What are the factors that contribute to fragile financial statements?

A: The diamond fraud perspective identifies four elements that contribute to fraud behavior in financial statements: incentives, opportunities, attitudes, and capability.

Q: What are the independent variables studied in this research?

A: The independent variables studied in this research include Return on Assets (ROA), Financial Leverage, Total Asset Turnover, Effectiveness of Internal Control, Auditor Substitution, and Changes in Directors.

Q: What is the dependent variable in this research?

A: The dependent variable in this research is the fragile financial statement, which is measured using a binary variable (0 = no fragile financial statement, 1 = fragile financial statement).

Q: What are the implications of the findings of this research?

A: The findings of this research have several implications for investors and creditors in making investment decisions and credit granting. Knowing that the independent variables studied do not have a significant influence, can be a consideration in choosing a company that will be used as an investment site.

Q: What are the recommendations of this research?

A: The recommendations of this research include implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the limitations of this research?

A: The limitations of this research include the use of secondary data and the limited sample size.

Q: What are the future research directions?

A: Future research directions include investigating the factors that contribute to fragile financial statements in other industries and countries, as well as exploring the effectiveness of internal control systems in preventing fraud.

Q: What is the significance of this research?

A: This research provides insight into the factors that contribute to fragile financial statements in manufacturing companies that go public in Indonesia and Malaysia, and highlights the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the practical implications of this research?

A: The practical implications of this research include providing guidance for investors and creditors in making investment decisions and credit granting, and highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the theoretical implications of this research?

A: The theoretical implications of this research include contributing to the existing literature on fragile financial statements and providing a deeper understanding of the factors that contribute to fraud behavior in financial statements.

Q: What are the policy implications of this research?

A: The policy implications of this research include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the future research directions in this area?

A: Future research directions in this area include investigating the factors that contribute to fragile financial statements in other industries and countries, as well as exploring the effectiveness of internal control systems in preventing fraud.

Q: What are the potential applications of this research?

A: The potential applications of this research include providing guidance for investors and creditors in making investment decisions and credit granting, and highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the potential benefits of this research?

A: The potential benefits of this research include providing a deeper understanding of the factors that contribute to fragile financial statements, and highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the potential limitations of this research?

A: The potential limitations of this research include the use of secondary data and the limited sample size.

Q: What are the potential future research directions in this area?

Q: What are the potential implications of this research for policymakers?

A: The potential implications of this research for policymakers include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for investors and creditors?

A: The potential implications of this research for investors and creditors include providing guidance for making investment decisions and credit granting, and highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud.

Q: What are the potential implications of this research for companies?

A: The potential implications of this research for companies include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for companies in developing internal control systems and preventing fragile financial statements.

Q: What are the potential implications of this research for regulators?

A: The potential implications of this research for regulators include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for regulators in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for auditors?

A: The potential implications of this research for auditors include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for auditors in conducting audits and preventing fragile financial statements.

Q: What are the potential implications of this research for financial analysts?

A: The potential implications of this research for financial analysts include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for financial analysts in analyzing financial statements and preventing fragile financial statements.

Q: What are the potential implications of this research for financial institutions?

A: The potential implications of this research for financial institutions include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for financial institutions in developing internal control systems and preventing fragile financial statements.

Q: What are the potential implications of this research for the financial industry?

A: The potential implications of this research for the financial industry include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for the financial industry in developing internal control systems and preventing fragile financial statements.

Q: What are the potential implications of this research for the economy?

A: The potential implications of this research for the economy include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial system?

A: The potential implications of this research for the financial system include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial markets?

A: The potential implications of this research for the financial markets include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial sector?

A: The potential implications of this research for the financial sector include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial system as a whole?

A: The potential implications of this research for the financial system as a whole include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the economy as a whole?

A: The potential implications of this research for the economy as a whole include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial industry as a whole?

A: The potential implications of this research for the financial industry as a whole include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.

Q: What are the potential implications of this research for the financial markets as a whole?

A: The potential implications of this research for the financial markets as a whole include highlighting the importance of implementing a more effective internal control system and considering aspects that can minimize the risk of fraud, and providing guidance for policymakers in developing regulations and policies to prevent fragile financial statements.