Title: “Financial Statement Fraud in Indonesia: A Longitudinal Study”

Introduction

Indonesia, the world’s fourth most populous country, has witnessed an alarming increase in financial statement fraud cases over the past few decades. In a new study published in the Journal of Financial Reporting and Accounting, Jaswadi Jaswadi, Hari Purnomo, and Sumiadji Sumiadji offer a longitudinal analysis of financial misstatements in Indonesia during the pre- and post-establishment of the Financial Services Authority (OJK).

findings from the Study

The researchers assessed 93 listed companies that faced official investigations due to publication of financial misstatements. They gathered their data through content analysis of annual reports following the announcement of an investigation.

Patterns of Financial Misstatements

The study revealed that each financial regime had a specific pattern of financial statement fraud. In both regimes, senior management was responsible for most fraudulent activities. The most common method of falsifying financial statements involved recording fictitious sales.

Impact of Financial Services Authority (OJK)

Under the new regime, the publication of cases is significantly limited due to the introduction of risk-based supervision. The OJK is likely to fine and prosecute the director of a company as a perpetrator rather than punishing the corporation as a legal entity.

Implications for Finance and Policy

This research significantly contributes to the literature on financial statement fraud in public companies. It provides a detailed, comparative analysis of the cases scrutinized by the Securities Exchange Commission in an emerging economy.

Regulators, Auditors, and Policymakers

The findings have implications for regulators, auditors, and policymakers in the fight against financial statement fraud in Indonesia and other developing countries.

Insights from the Researcher

In an interview with Emerald Insight, Jaswadi Jaswadi stated, “Our study reveals how financial statement fraud has evolved in Indonesia over the years and helps stakeholders understand the patterns and drivers of financial misstatements.” By sharing their research, the researchers aim to provide valuable insights to financial institutions, regulators, and investors, allowing them to mitigate the risks of fraud and strengthen the foundation of Indonesia’s financial sector.