Fraud Pentagon Analysis in Detecting Fraudulent Financial Reporting (Study on Indonesian Capital Market)

  • Made Yessi Puspitha Faculty of Economic and Business, Udayana University, Bali, Indonesia
  • Gerianta Wirawan Yasa Faculty of Economic and Business, Udayana University, Bali, Indonesia
Keywords: Fraud pentagon, fraudulent financial reporting, non-financial company.


This study aims to detect the occurrence of fraud by using fraud pentagon analysis. Fraud is a deliberate accounting error with the purpose of misleading users of financial statements. Fraud pentagon theory developed by Crowe Howart in 2011 covers financial stability, external pressure, personal financial needs, financial targets,  nature of industry, ineffective monitoring, organizational structures, auditor switching, change of director, and frequent number of CEO's picture. This study uses secondary data. The populations in this study were all non-financial companies that were sanctioned due to violations of regulations VIII.G.7 and IX.E.2 during 2012-2016. The research sample was determined using the purposive sampling method. The data analysis technique used is logistic regression analysis. The test results prove that external pressure, ineffective monitoring, auditor switching, change of director, and frequent number of CEO's picture can predict fraudulent financial reporting. Meanwhile, financial stability, personal financial needs, financial targets, nature of industry, and organizational structures cannot predict fraudulent financial reporting.


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