The factors affecting fraudulent financial reporting in the fraud triangle perspective

Earlier studies suggest that fraudulent practice in financial reporting reflects weakness of an internal control in management. Due to this reason, sufficient understanding about factors affecting fraudulent financial reporting is needed, especially in the fraud triangle perspective. This study aims to identify the effects of financial stability, external pressures, personal financial needs, financial targets, effectiveness of supervision, and auditor turnover for fraudulent financial reporting. The sample used in this study were non-financial companies listed in Indonesia Stock Exchange 2008-2013. Sampling was done using purposive sampling technique. The total obtained sample was 87 companies. Analysis was done using logistic regression analysis technique with the significance level of 5%. The results showed that the financial stability variable with the proxy of total assets change (ACHANGE) obtained a positive coefficient of 1.342 with a significance of 0.483, an external pressure variable with a proxy for leverage (LEV) obtained a negative coefficient of 1.320 with a significance of 0.411, a variable of personal financial needs with a proxy of share ownership by insiders (OSHIP) obtained a positive coefficient of 7.640 with a significance of 0.429, a financial target variable with a return on asset (ROA) proxy obtained a negative coefficient of 7.652 with a significance of 0.043, a variable effectiveness of supervision with a proxy proportion of independent commissioners (IND) obtained a negative coefficient of 0.729 with a significance of 0.788 and a significance of 0.788 and auditor change variable (AUDCHANGE) obtained a positive coefficient of 1.076 with a significance of 0.118. Financial targets have a significant negative effect on fraudulent financial reporting while financial stability, external pressures, personal financial needs, effectiveness of supervision, and auditor changes do not significantly influence fraudulent financial reporting. This study contributed to the addition of literature and can be used as a reference in company management to minimise fraud.