Analysis Of Financial Fraud Using The Fraud Diamond Model With Corporate Governance As The Moderating Variable

Abstract

This research aims to analyze the factors that influence financial fraud. The basic theory used was Wolfe and Hermanson’s (2004)Fraud Diamond Model stating that the factors that influence financial fraud are Pressure, Opportunity, Rationalization, and Capability. The model was added with corporate governance as the main trigger for financial fraud as suggested by Gbegi, D.O and Adebisi, J. F. The research samples were manufacturing companies listed on the Indonesia Stock Exchange for the period of 2012-2014. The data used were secondary data from company annual reports. Hypothesis testing was performed by the partial least squares (PLS) method. The research results showed that external pressure and capability have effectson financial statement fraud.Financial stability, nature of industry, and rationalization have no effects on financial statement fraud. Subsequent test results verified that corporate governance has no effect on the fraud diamond model. It means that the relationship between the financial stability, nature of industry, external pressure, and capability variables and financial statement fraud is not moderated by corporate governance.