This study aims to examine the six components of hexagon fraud which include: financial pressure, change of leadership, whistleblowing system, auditor opinion, education of head government and procurement system to fraudulent financial statements that occur in local government in Indonesia. In addition, this study also places the APIP (Government Internal Supervisory Apparatus) as a moderating variable. This study uses data from 1,419 financial statements in local government in Indonesia during the 2018–2020 period. The sampling technique is purposive sampling with the judgment sampling method. The research hypothesis was tested using Ordinary Least Squares regression. The results of the study show that only financial pressure and auditor opinion have a significant effect on fraudulent financial statements in local governments in Indonesia. In addition, evidence was found that APIP moderated the relationship between financial pressure and auditor opinion with fraudulent financial statements. This shows that APIP plays a role in mitigating fraudulent financial statements. This research is the first to test the hexagon theory to the financial statements environment in local government in Indonesia which contributes to integrating the role of APIP as a form of preventing financial statement fraud.
- fraud hexagon theory
- fraudulent financial statement
- government internal supervisory apparatus