Mitigating Financial Statement Fraud through Fraud Heptagon, Digital Forensics, and Risk Management: ‎Evidence from Indonesia’s StateOwned Enterprises

  • Authors

    https://doi.org/10.14419/3mr8v947

    Received date: September 28, 2025

    Accepted date: October 12, 2025

    Published date: December 14, 2025

  • Financial Statement Fraud; Fraud Heptagon; Digital Forensics; Risk Management; Fraud Detection

  • Abstract

    Financial statement fraud poses a critical threat to organizational integrity and stakeholder trust worldwide, particularly in state-owned enterprises (SOEs) where public accountability is paramount. This study investigates how the Fraud Heptagon framework, digital forensics, and ‎risk management practices mitigate financial statement fraud, providing insights relevant for both national and international contexts. A ‎mixed-methods approach was adopted, combining quantitative analysis of 116 firm-year observations from 68 SOEs listed on the Indonesia ‎Stock Exchange during 2020–2024 with qualitative data from semi-structured interviews with auditors, risk officers, and forensic specialists. ‎The quantitative results reveal that the integrated Fraud Heptagon dimensions, including greed, opportunity, pressure, rationalization, capability, arrogance, and collusion, significantly drive financial statement fraud, while digital forensic tools and risk management mechanisms ‎effectively moderate these effects. Qualitative findings emphasize that systemic pressures, operational demands, and institutional weaknesses ‎foster fraudulent behaviors, whereas technological and risk-based interventions enhance detection, transparency, and organizational accountability. This study underscores that financial statement fraud is primarily a systemic phenomenon rather than an outcome of isolated individual misconduct, highlighting the necessity of integrating behavioral frameworks with technological enforcement and structured governance. ‎By applying the Fraud Heptagon alongside digital forensics and risk management, organizations can implement a comprehensive fraud prevention strategy. The results offer valuable implications for policymakers, regulators, and corporate governance bodies globally, emphasizing-‎ing the importance of robust fraud detection, prevention mechanisms, and transparency to safeguard financial reporting integrity in public ‎and private sectors‎.

  • References

    1. Achmad, T., Ghozali, I., Helmina, M. R. A., Hapsari, D. I., & Pamungkas, I. D. (2023). Detecting Fraudulent Financial Reporting Using the Fraud Hexagon Model: Evidence from the Banking Sector in Indonesia. Economies, 11(1). https://doi.org/10.3390/economies11010005.
    2. Al-Shaer, H. (2020). Sustainability reporting quality and post-audit financial reporting quality: Empirical evidence from the UK. Business Strategy and the Environment, 29(6), 2355–2373. https://doi.org/10.1002/bse.2507.
    3. Andalia, A., Amiruddin, A., & Pontoh, G. T. (2021). Analysis of Factors Affecting Fraudulent Financial Reporting with Independent Commission-ers as a Moderation Variable. GATR Accounting and Finance Review, 5(4), 01–12. https://doi.org/10.35609/afr.2021.5.4(1).
    4. Arizanda Rahayu, R., Nurasik, Arista Firana, R., & Biduri, S. (2024). Fraud Pentagon in Detecting Financial Statement Fraud. Journal of Multiper-spectives on Accounting Literature, 2(1), 18–30. https://doi.org/10.22219/jameela.v2i1.30462.
    5. Arora, P., & Dharwadkar, R. (2011). Corporate governance and corporate social responsibility (CSR): The moderating roles of attainment discrep-ancy and organizational slack. Corporate Governance: An International Review, 19(2), 136–152. https://doi.org/10.1111/j.1467-8683.2010.00843.x.
    6. Buallay, A., & Al-Ajmi, J. (2019). The role of audit committee attributes in corporate sustainability reporting: Evidence from banks in the Gulf Co-operation Council. Journal of Applied Accounting Research. https://doi.org/10.1108/JAAR-06-2018-0085.
    7. Cressey, D. (1953). The Internal Auditor as Fraud Buster. Managerial Auditing Journal. MCB University.
    8. Daraojimba, R. E., Farayola, O. A., Olatoye, F. O., Mhlongo, N., & Oke, T. (2023). Forensic accounting in the digital age: a US perspective: scruti-nizing methods and challenges in digital financial fraud prevention. Finance & Accounting Research Journal, 5(11), 342–360. https://doi.org/10.51594/farj.v5i11.614.
    9. Dechow, P. M., Ge, W., Larson, C. R., & Sloan, R. G. (2011). Predicting Material Accounting Misstatements. Contemporary Accounting Research, 28(1), 17–82. https://doi.org/10.1111/j.1911-3846.2010.01041.x.
    10. Evana, E., Metalia, M., Mirfazli, E., Georgieva, D. V., & Sastrodiharjo, I. (2019). Business Ethics in Providing Financial Statements: The Testing of Fraud Pentagon Theory on the Manufacturing Sector in Indonesia. Business Ethics and Leadership, 3(3), 68–77. https://doi.org/10.21272/bel.3(3).68-77.2019.
    11. Fitriyah, R., & Novita, S. (2021). Fraud Pentagon Theory for Detecting Financial Statement Fraudulent. Jurnal Riset Akuntansi Kontemporer, 13(1), 20–25. https://doi.org/10.23969/jrak.v13i1.3533.
    12. Ghaisani, H. M., Dwi, A., & Bawono, B. (2022). Analysis of Financial Statement Fraud : The Vousinas Fraud Hexagon Model Approach and the Audit Committe as Moderating Variable. The International Journal of Business Management and Technology, 6(6), 115–125.
    13. Ghozali, I., Achmad, T., & Pamungkas, I. D. (2019). Determinants of fraudulent financial reporting and whistleblowing system: Applying theory of planned behavior. WSEAS Transactions on Business and Economics, 16, 393–402.
    14. Gupta, P. K., & Gupta, S. (2015). Corporate frauds in India - Perceptions and emerging issues. Journal of Financial Crime, 22(1), 79–103. https://doi.org/10.1108/JFC-07-2013-0045.
    15. Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate governance and information technology in fraud prevention and detection: Evidence from the UAE. Managerial Auditing Journal, 31(6–7), 589–628. https://doi.org/10.1108/MAJ-02-2015-1163.
    16. Handoko, B. L., & Angelyca, A. N. (2023). Examining the Psychological Aspect: Fraudulent Financial Reporting in Property and Real Estate Companies Listed on the Indonesia Stock Exchange During the Covid-19 Pandemic using the Fraud Heptagon Approach. Journal for ReAttach Therapy and Developmental Diversities, 6(10s (2)), 650–661.
    17. Handoko, B. L., Putri, R. N. A., & Wijaya, S. (2022). Analysis of Fraudulent Financial Reporting based on Fraud Heptagon Model in Transporta-tion and Logistic Industry listed on IDX during Covid-19 Pandemic. ACM International Conference Proceeding Series, 56–63. https://doi.org/10.1145/3578997.3579003.
    18. Hassan, S. W. U., Kiran, S., Gul, S., Khatatbeh, I. N., & Zainab, B. (2023). The perception of accountants/auditors on the role of corporate govern-ance and information technology in fraud detection and prevention. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-05-2023-0235.
    19. Hermiyetti. (2022). SCORRE approach as an instrument for detecting fraudulent financial reporting. International Journal of Business Ecosystem & Strategy (2687-2293), 4(4), 118–131. https://doi.org/10.36096/ijbes.v4i4.353.
    20. Howarth, C. (2012). The Mind Behind the Fraudsters Crime: Key Behavioral and Environmental Elements. Crowe Horwath LLP, 1–62.
    21. Husmawati, P., Septriani, Y., Rosita, I., & Handayani, D. (n.d.). Fraud Pentagon Analysis in Assessing the Likelihood of Fraudulent Financial Statement (Study on Manufacturing Firms Listed in Bursa Efek Indonesia Period 2013-2016). International Conference of Applied Science on En-gineering, Business, Linguistics and Information Technology (ICo-ASCNITech), 1(Oktober), 45–51.
    22. Husnawati, N., Handajani, L., & ... (2017). Accounting Fraud: Determinant, Moderation of Internal Control System and the Implication to Finan-cial Accountability. E-Proceeding Stie …, 60, 311–335. http://jurnal.stie-mandala.ac.id/index.php/eproceeding/article/view/139/0.
    23. Ibrani, E. Y., Faisal, F., & Handayani, Y. D. (2019). Determinant of non-GAAP earnings management practices and its impact on firm value. Co-gent Business and Management, 6(1), 1–17. https://doi.org/10.1080/23311975.2019.1666642.
    24. Irwandi, S. A., Ghozali, I., & Pamungkas, I. D. (2020). Can Environment Uncertainty Risk and Environment of Management Accounting System Affect Managerial Performance? In Calitatea (Vol. 21, Issue 177, pp. 31–37). https://scholar.google.com/citations?view_op=view_citation&hl=en&user=_BMTaskAAAAJ&pagesize=100&citation_for_view=_BMTaskAAAAJ:kNdYIx-mwKoC.
    25. Kamal, M. E. M., Salleh, M. F. M., & Ahmad, A. (2016). Detecting financial statement fraud by Malaysian public listed companies: The reliability of the Beneish M-Score model. Jurnal Pengurusan, 46, 23–32. https://doi.org/10.17576/pengurusan-2016-46-03.
    26. Kaur, B., Sood, K., & Grima, S. (2023). A systematic review on forensic accounting and its contribution towards fraud detection and prevention. Journal of Financial Regulation and Compliance, 31(1), 60–95. https://doi.org/10.1108/JFRC-02-2022-0015.
    27. Lastanti, H. S. (2020). Role of Audit Committee in The Fraud Pentagon and Financial Statement Fraud. International Journal of Contemporary Ac-counting, 2(1), 85–102. https://doi.org/10.25105/ijca.v2i1.7163.
    28. Lastanti, H. S., Murwaningsari, E., & Umar, H. (2022). The Effect of Hexagon Fraud on Fraud Financial Statements with Governance and Culture as Moderating Variables. Media Riset Akuntansi, Auditing & Informasi, 22(1), 143–156. https://doi.org/10.25105/mraai.v22i1.13533.
    29. Lee, E. Y., & Ha, W. (2021). Auditors’ response to corporate fraud: evidence from audit fees and auditor turnover. Managerial Auditing Journal, 36(3), 405–436. https://doi.org/10.1108/MAJ-12-2019-2515.
    30. Lefina Boboy, E., Tiwu, M. I., Dethan, M., Joyce, S., & Rafael, M. (2022). Detection of Financial Statement Fraud Based on Fraud Diamond on Transportation Companies during Covid-19 Pandemic with the Audit Committee as Moderating Variable. International Journal of Innovative Sci-ence and Research Technology, 7(4), 1057–1064. www.ijisrt.com.
    31. Lestari, R. I., Wahyudi, S., Muharam, H., & Utomo, M. N. (2020). The role of monitoring and bonding mechanisms of good corporate governance towards banks performance. Humanities and Social Sciences Reviews, 8(2), 328–336. https://doi.org/10.18510/hssr.2020.8237.
    32. Mandal, A., & Amilan, S. (2023). Preventing financial statement fraud in the corporate sector: insights from auditors. Journal of Financial Report-ing and Accounting. https://doi.org/10.1108/JFRA-02-2023-0101.
    33. Mangala, D., & Soni, L. (2023). A systematic literature review on frauds in banking sector. Journal of Financial Crime, 30(1), 285–301. https://doi.org/10.1108/JFC-12-2021-0263.
    34. Meidijati, & Amin, M. N. (2022). Detecting Fraudulent Financial Reporting Through Hexagon Fraud Model: Moderating Role of Income Tax Rate. International Journal of Social and Management Studies (IJOSMAS), 3(2), 311–322.
    35. Mohamed Yusof, K. (2016). Fraudulent financial reporting: An application of fraud models to malaysian public listed companies. University of Hull.
    36. Monteiro, A. P., Vale, J., Silva, A., & Pereira, C. (2021). Impact of the internal control and accounting systems on the financial information useful-ness: The role of the financial information quality. Academy of Strategic Management Journal, 20(SpecialIssue3), 1–13.
    37. Mukhtaruddin, Sabrina, E., Hakiki, A., Saftiana, Y., & Kalsum, U. (2020). Fraudulent Financial Reporting: Fraud Pentagon Analysis in Banking and Financial Sector Companies. Issues in Business Management and Economics, 8(2), 12–24.
    38. Nasir, N. A. B. M., Ali, M. J., & Ahmed, K. (2019). Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia. Accounting Research Journal, 32(3), 514–531. https://doi.org/10.1108/ARJ-02-2018-0024.
    39. Ningsih, E. N. Y., & Syarief, A. (2022). Pengaruh Teori Fraud Pentagon Terhadap Terjadinya Fraudulent Financial Reporting dengan F-Score. In-donesian Accounting Literacy Journal, 2(1), 1–11. https://doi.org/10.35313/ialj.v2i1.3421.
    40. Nugroho, D., & Diyanty, V. (2022). Hexagon Fraud in Fraudulent Financial Statements: the Moderating Role of Audit Committee. Jurnal Akuntansi Dan Keuangan Indonesia, 19(1), 46–67. https://doi.org/10.21002/jaki.2022.03.
    41. Pamungkas, I. D., & Utomo, S. D. (2018). Fraudulent financial reporting: An application of fraud pentagon theory to association of southeast Asian nations corporate governance scorecard. Journal of Advanced Research in Law and Economics, 9(5), 1729–1737. https://doi.org/10.14505//jarle.v9.5(35).26.
    42. Putra, A. N., & Dinarjito, A. (2021). The Effect of Fraud Pentagon and F-Score Model in Detecting Fraudulent Financial Reporting in Indonesia. Jurnal Ilmiah Akuntansi Dan Bisnis, 16(2), 247. https://doi.org/10.24843/JIAB.2021.v16.i02.p05.
    43. Putra, I., Sulistiyo, U., Diah, E., Rahayu, S., & Hidayat, S. (2022). The influence of internal audit, risk management, whistleblowing system and big data analytics on the financial crime behavior prevention. Cogent Economics & Finance, 10(1), 2148363. https://doi.org/10.1080/23322039.2022.2148363.
    44. Rahmatika, D. N., Kartikasari, M. D., Dewi Indriasih, D., Sari, I. A., & Mulia, A. (2019). Detection of Fraudulent Financial Statement; Can Per-spective of Fraud Diamond Theory be applied to Property, Real Estate, and Building Construction Companies in Indonesia? European Journal of Business and Management Research, 4(6), 1–9. https://doi.org/10.24018/ejbmr.2019.4.6.139.
    45. Rohmatin, B. L., Apriyanto, G., & Zuhroh, D. (2021). The Role of Good Corporate Governance to Fraud Prevention: An analysis based on the Fraud Pentagon. Jurnal Keuangan Dan Perbankan, 25(2), 280–294. https://doi.org/10.26905/jkdp.v25i2.5554.
    46. Rostami, V., & Rezaei, L. (2022). Corporate governance and fraudulent financial reporting. Journal of Financial Crime, 29(3), 1009–1026. https://doi.org/10.1108/JFC-07-2021-0160.
    47. Sari, S. P., & Nugroho, N. K. (2020). Financial Statements Fraud dengan Pendekatan Vousinas Fraud Hexagon Model : Tinjauan pada Perusahaan Terbuka di Indonesia. Islamic Economics, Finance, and Banking, 26(1), 409–430.
    48. Sari, S. P., & Nugroho, N. K. (2021). Financial Statements Fraud dengan Pendekatan Vousinas Fraud Hexagon Model: Tinjauan pada Perusahaan Terbuka di Indonesia. Annual Conference of Ihtifaz: Islamic Economics, Finance, and Banking, 409–430.
    49. Sawaka K., I. G. N. H. (2020). Fraud pentagon theory in detecting financial perception of financial reporting with good corporate governance as moderator variable. International Research Journal of Management, IT and Social Sciences, 7(1), 84–94. https://doi.org/10.21744/irjmis.v7n1.824.
    50. Shi, W., Connelly, B. L., & Hoskisson, R. E. (2017). External corporate governance and financial fraud: cognitive evaluation theory insights on agency theory prescriptions. In Strategic Management Journal (Vol. 38, Issue 6). https://doi.org/10.1002/smj.2560.
    51. Skousen, C. J., Smith, K. R., & Wright, C. J. (2008). Detecting and predicting financial statement fraud: The effectiveness of the fraud triangle and SAS No. 99. SSRN Electronic Journal, 13, 53–81. https://doi.org/10.1108/S1569-3732(2009)0000013005.
    52. Sumbari, S., Kamaliah, K., & Fitrios, R. (2023). Analisis Model Fraud Hexagon Dalam Mendeteksi Potensi Kecurangan Pada Laporan Keuangan Analysis of Fraud Hexagon to Detect Fraud on Financial Statement. 4(1), 179–196. https://doi.org/10.31258/current.4.1.179-196.
    53. Syahria, R. (2019). DETECTING FINANCIAL STATEMENT FRAUD USING FRAUD DIAMOND (A Study on Banking Companies Listed on the Indonesia Stock Exchange Period 2012-2016). Asia Pacific Fraud Journal, 4(2). https://doi.org/10.21532/apfjournal.v4i2.114.
    54. Thamlim, W., & Reskino. (2023). Fraudulent Financial Reporting with Fraud Pentagon Perspective: The Role of Corporate Governance as Modera-tor. American Journal of Humanities and Social Science Resesarch (AJHSSR), 07(01), 18–38.
    55. Triyanto, D. N. (2019). Detection of Financial Reporting Fraud: The Case of Socially Responsible Firms. Journal of Economics, 22(3), 399–410. https://doi.org/10.14414/jebav.v22i3.1792.
    56. Vanini, P., Rossi, S., Zvizdic, E., & Domenig, T. (2023). Online payment fraud: from anomaly detection to risk management. Financial Innovation, 9(1), 66. https://doi.org/10.1186/s40854-023-00470-w.
    57. Vousinas, G. L. (2019). Advancing theory of fraud: The S.C.O.R.E. Model. CA Magazine-Chartered Accountant, 136(4), 1–18. https://doi.org/10.1108/JFC-12-2017-0128.
    58. Wang, Z., Chen, M. H., Chin, C. L., & Zheng, Q. (2017). Managerial ability, political connections, and fraudulent financial reporting in China. Journal of Accounting and Public Policy, 36(2), 141–162. https://doi.org/10.1016/j.jaccpubpol.2017.02.004.
    59. Widnyana, I. W., & Widyawati, S. R. (2022). Role of forensic accounting in the diamond model relationship to detect the financial statement fraud. International Journal of Research in Business and Social Science (2147- 4478), 11(6), 402–409. https://doi.org/10.20525/ijrbs.v11i6.1924.
    60. Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond : Considering the Four Elements of Fraud: Certified Public Accountant. The CPA Journal, 74(12), 38–42.
    61. Wulandari, R., & Maulana, A. (2022). Institutional Ownership as Moderation Variable of Fraud Triangle on Fraudulent Financial Statement. Jurnal ASET (Akuntansi Riset), 14(2), 207–222. https://doi.org/10.17509/jaset.v14i2.44183.
    62. Yusrianti, H., Ghozali, I., & Yuyetta, E. N. (2020). Asset misappropriation tendency: Rationalization, financial pressure, and the role of opportunity (study in indonesian government sector). Humanities and Social Sciences Reviews, 8(1), 373–382. https://doi.org/10.18510/hssr.2020.8148.

  • Downloads

  • How to Cite

    Ghozali, I., Achmad, T., Hersugondo, & Pamungkas, I. D. (2025). Mitigating Financial Statement Fraud through Fraud Heptagon, Digital Forensics, and Risk Management: ‎Evidence from Indonesia’s StateOwned Enterprises. International Journal of Accounting and Economics Studies, 12(8), 398-407. https://doi.org/10.14419/3mr8v947