Industry where the company operates

Oct 13, 2025 by talynt.org 33 views

Analysis of the Effect of Fraud Hexagon in Detecting Accounting Irregularities in Manufacturing Companies Listed on the Indonesia Stock Exchange (2018-2022)

Introduction

In the business world, especially for companies listed on the Stock Exchange, transparency and the accuracy of financial statements are crucial. However, not infrequently, we encounter irregularities in financial statements that can harm various parties. This study aims to analyze the effect of the Hexagon Fraud Element on the detection of accounting irregularities in manufacturing companies listed on the Indonesia Stock Exchange during the 2018 to 2022 period.

Understanding of Hexagon Fraud

Fraud Hexagon consists of six main components that can affect the occurrence of fraud in financial statements:

External Pressure: refers to the pressures experienced by management from various parties such as investors or creditors.
Opportunity: Factors that provide access to individuals to commit fraud.
Rationalization: Mental processes carried out by perpetrators of fraud to justify their actions.
Auditor Change: Auditor's change activities that can affect independence and objectivity in the audit.
Changes in Director: Change of important positions in management that can affect company policies and decisions.
Industry where the company operates: Industrial characteristics that can influence accounting practices.

These six components are interconnected and can contribute to the occurrence of fraud in financial statements. Understanding the Fraud Hexagon is essential in detecting and preventing accounting irregularities.

Research Methodology

This study used secondary data obtained from www.idx.co.id and the official website of the company. A purposive sampling method was used to select 232 companies, resulting in 59 companies that met the sample criteria, with a total of 295 observations over a five-year span. The data analysis technique used was panel data regression analysis with the help of EViews software 12.

Research Findings

The results showed that only auditor changes and director changes had a significant positive influence on accounting. This indicates that when there is a change in the auditor, there is a potential increase in accuracy in the supervision of financial statements. Meanwhile, the change of director shows the possibility of more stringent changes in strategy and supervision in the company's financial management.

On the other hand, other factors such as external pressure, industrial nature, CEO image frequency, and projects with the government do not show significant effects on accountability of accounting. This indicates that accounting irregularities in manufacturing companies are more influenced by internal factors, such as managerial policies and integrity in the organization.

Conclusion

From the analysis conducted, it can be concluded that the company's internal factors, especially those related to changes in auditors and directors, have a greater influence in detecting accounting irregularities in manufacturing companies listed on the Indonesia Stock Exchange. Therefore, companies are advised to pay attention to auditor selection and change management in an important position to maintain the integrity of financial statements.

Implications of the Study

This study has several implications for the capital market regulator and the company itself. Firstly, it highlights the importance of strict monitoring of internal policies and accounting practices in the increasingly complex modern era. Secondly, it emphasizes the need for companies to pay attention to auditor selection and change management in an important position to maintain the integrity of financial statements.

Limitations of the Study

This study has several limitations. Firstly, the study only focused on manufacturing companies listed on the Indonesia Stock Exchange, which may not be representative of all companies. Secondly, the study only used secondary data, which may not capture all the nuances of the Fraud Hexagon.

Future Research Directions

Future research directions include:

Extending the study to other industries: The study only focused on manufacturing companies, and it would be interesting to extend the study to other industries to see if the findings are generalizable.
Using primary data: The study only used secondary data, and it would be interesting to use primary data to capture all the nuances of the Fraud Hexagon.
Analyzing the impact of Fraud Hexagon on financial performance: The study only analyzed the impact of Fraud Hexagon on accounting irregularities, and it would be interesting to analyze the impact on financial performance.

Conclusion

In conclusion, this study provides insights into the effect of the Fraud Hexagon on detecting accounting irregularities in manufacturing companies listed on the Indonesia Stock Exchange. The study highlights the importance of internal factors, especially changes in auditors and directors, in detecting accounting irregularities. The study also emphasizes the need for companies to pay attention to auditor selection and change management in an important position to maintain the integrity of financial statements.
Q&A: Analysis of the Effect of Fraud Hexagon in Detecting Accounting Irregularities in Manufacturing Companies Listed on the Indonesia Stock Exchange (2018-2022)

Q: What is the Fraud Hexagon?

A: The Fraud Hexagon is a concept that consists of six main components that can affect the occurrence of fraud in financial statements. These components are:

External Pressure: pressures experienced by management from various parties such as investors or creditors.
Opportunity: factors that provide access to individuals to commit fraud.
Rationalization: mental processes carried out by perpetrators of fraud to justify their actions.
Auditor Change: auditor's change activities that can affect independence and objectivity in the audit.
Changes in Director: change of important positions in management that can affect company policies and decisions.
Industry where the company operates: industrial characteristics that can influence accounting practices.

Q: What is the purpose of this study?

A: The purpose of this study is to analyze the effect of the Fraud Hexagon on detecting accounting irregularities in manufacturing companies listed on the Indonesia Stock Exchange during the 2018 to 2022 period.

Q: What methodology was used in this study?

A: This study used secondary data obtained from www.idx.co.id and the official website of the company. A purposive sampling method was used to select 232 companies, resulting in 59 companies that met the sample criteria, with a total of 295 observations over a five-year span. The data analysis technique used was panel data regression analysis with the help of EViews software 12.

Q: What were the findings of this study?

A: The results showed that only auditor changes and director changes had a significant positive influence on accounting. This indicates that when there is a change in the auditor, there is a potential increase in accuracy in the supervision of financial statements. Meanwhile, the change of director shows the possibility of more stringent changes in strategy and supervision in the company's financial management.

Q: What are the implications of this study?

A: This study has several implications for the capital market regulator and the company itself. Firstly, it highlights the importance of strict monitoring of internal policies and accounting practices in the increasingly complex modern era. Secondly, it emphasizes the need for companies to pay attention to auditor selection and change management in an important position to maintain the integrity of financial statements.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, the study only focused on manufacturing companies listed on the Indonesia Stock Exchange, which may not be representative of all companies. Secondly, the study only used secondary data, which may not capture all the nuances of the Fraud Hexagon.

Q: What are the future research directions?

A: Future research directions include:

Extending the study to other industries: The study only focused on manufacturing companies, and it would be interesting to extend the study to other industries to see if the findings are generalizable.
Using primary data: The study only used secondary data, and it would be interesting to use primary data to capture all the nuances of the Fraud Hexagon.
Analyzing the impact of Fraud Hexagon on financial performance: The study only analyzed the impact of Fraud Hexagon on accounting irregularities, and it would be interesting to analyze the impact on financial performance.

Q: What are the practical implications of this study?

A: The practical implications of this study are that companies should pay attention to auditor selection and change management in an important position to maintain the integrity of financial statements. Additionally, companies should also pay attention to internal policies and accounting practices to prevent accounting irregularities.

Q: What are the future implications of this study?

A: The future implications of this study are that it can be used as a reference for the capital market regulator and the company itself to improve the practice of corporate governance and minimize the risk of fraud in financial statements.