SEMINAR AUDITING

KASUS AMRE DAN REVIEW ARTIKEL PERTEMUAN KE-3

Dosen: Dr. Maria M. Ratna Sari, SE., M.Si., Ak., CA

OLEH:
KELOMPOK 4

1. Komang Tri Utariyani (1981621005)

2. Ni Kadek Alit Agustini Witari (1981621009)
3. Ni Nyoman Kosi Syanuri (1981621011)
4. Cintya Purnama Sari (1981621020)

PROGRAM MAGISTER AKUNTANSI

FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS UDAYANA
DENPASAR
2021
 KASUS AMRE, Inc

American Remodelling (AMRE, Inc) merupakan sebuah perusahaan yang

menjual produk pelapis dinding rumah dan interior seperti meja kabinet. AMRE, Inc
mulai beroperasi pada tahun 1980 di Irving, Texas, rumah dari Dallas Cowboys.
Perusahaan ini berkembang sangat pesat dan menempati peringkat perusahaan terbesar
dalam industri papan rumah dan dekorasi interior, sehingga pada tahun 1987, AMRE
memutuskan untuk go public di Bursa Efek New York.
Biaya operasi utama AMRE yaitu biaya-biaya iklan yang dikeluarkan untuk
memperoleh keuntungan besar melalui iklan langsung dan televisi. Sepanjang tahun
1980an, AMRE membebankan sebagian biaya periklanannya setiap tahun ke perkiraan
biaya yang ditangguhkan, alasannya adalah biaya iklan memberikan manfaat di masa
depan. Pada pertengahan tahun 1980-an AMRE menciptakan “lead bank” berbasis
komputer, yang dimana perusahaan memasukkan informasi seperti umur, jumlah
pendapatan, nilai pasaran rumah dan berapa lama tinggal di rumah tersebut, yang
didapat dari calon konsumen untuk mengembangkan pola penjualan. Informasi ini
memungkinkan AMRE untuk mengevaluasi kinerja setiap staf dan memberikan
kontribusi yang signifikan terhadap keberhasilan awal perusahaan.

1. Akuntansi untuk “Memimpin” Menghasilkan Masalah

Pada akhir kuartal pertama, diketahui bahwa proyeksi laba bersih AMRE
untuk kuartal tersebut di awal tahun tidak dapat dicapai. Untuk meningkatkan laba
bersih AMRE pada kuartal pertama tahun fiskal 1988, Robert Levin
menginstruksikan kepada kepala bagian akuntansi perusahaan, Dennie D. Brown,
untuk membuat laporan tidak wajar (overstate) mengenai jumlah keuntungan yang
belum ditetapkan dalam lead bank AMRE. Penipuan akuntansi ini memungkinkan
AMRE melebih-lebihkan pendapatan sebelum pajaknya untuk kuartal itu sekitar $ 1
juta, atau hampir 50 persen untuk menutupi biaya-biaya iklan perusahaan. Hal ini
terus dilakukan pada kuartal kedua tahun fiskal 1988 dan bahkan pada kuartal ketiga
dan keempat, melaporkan persediaan akhir AMRE secara overstatement dengan
memasukkan inventaris fiktif dalam catatan inventaris. AMRE melaporkan
pendapatan sebelum pajak sebesar $12,2 juta dalam laporan keuangan fiskal 1988-
nya.
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 KAP Price Waterhouse mengeluarkan opini Wajar Tanpa Pengecualian atas
laporan keuangan AMRE, Inc untuk tahun fiskal 1988. Namun demikian, seorang
analis keuangan dari The New York Times mempertanyakan kredibilitas dan
integritas laporan keuangan AMRE. Pelaporan ini terlihat sebuah pola klasik yang
meningkatkan pendapatan dan mengecilkan beban.

2. Tahun Anggaran 1989 AMRE

Selama tahun fiskal 1989, para eksekutif AMRE semakin khawatir bahwa
kecurangan mereka akan ditemukan, sehingga pada kuartal ketiga diputuskan untuk
mengakhiri penipuan akuntansi. Salah satu metode yang digunakan untuk
menghentikan kecurangan tersebut yaitu dengan mentransfer sekitar $ 3 juta aset
fiktif dalam catatan akuntansi AMRE ke divisi Decks yang merupakan lini bisnis
perusahaan agar tidak menimbulkan kecurigaan. Perusahaan menghapus sekitar $ 5
juta aset fiktif tambahan sebagai kerugian pada kuartal keempat tahun fiskal 1989.
Penghapusan ini mengakibatkan AMRE melaporkan kerugian bersih hampir $ 6 juta
untuk tahun 1989.

3. Peran CFO Baru AMRE dalam Menghentikan Kecurangan Akuntansi

Pada bulan Maret 1989, menjelang akhir kuartal keempat tahun fiskal 1989
AMRE, AMRE mempekerjakan Mac M. Martirossian yang memiliki pengalaman
lebih dari 10 tahun sebagai akuntan publik kantor Price Waterhouse di Dallas untuk
menjabat sebagai Chief Financial Officer (CFO). Martirossian menemukan banyak
entri akuntansi yang tidak memiliki dokumentasi yang memadai dan mulai
menyelidiki masalah pengendalian internal perusahaan. Para eksekutif puncak
memutuskan untuk mengungkapkan penipuan tersebut kepada Martirossian. Pada 28
April 1989, Martirossian mengadakan pertemuan dengan para eksekutif yang
terlibat dalam penipuan tersebut dan bersikeras agar kesalahan pada catatan
akuntansi perseroan segera diperbaiki.
Para eksekutif memutuskan bahwa kesalahan yang tersisa dalam catatan
akuntansi AMRE akan dihapuskan terhadap hasil operasi kuartal keempat tahun
fiskal 1989 melalui jurnal penyesuaian akhir periode. Sebelum Price Waterhouse
menyelesaikan audit AMRE tahun 1989, Martirossian mengatur pertemuan rahasia
di hotel setempat dengan personel kunci Price Waterhouse yang ditugaskan untuk
audit AMRE dan mengisyaratkan kepada auditor bahwa penghapusan kuartal
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 keempat AMRE mencurigakan. Price Waterhouse akhirnya menerima penyesuaian
besar di kuartal keempat sebelum mengeluarkan opini Wajar Tanpa Pengecualian
atas laporan keuangan AMRE tahun 1989. Selama tahun fiskal 1990, Martirossian
melakukan upaya ekstensif untuk meningkatkan fungsi akuntansi dan pelaporan
keuangan AMRE. Upaya ini termasuk menerapkan beberapa langkah untuk
memperkuat sistem pengendalian internal perusahaan.

4. Kecurangan yang Diungkapkan Ke Publik

Pada tahun 1990, SEC mengungkapkan bahwa mereka sedang menyelidiki
laporan keuangan AMRE untuk beberapa tahun sebelumnya. Artikel New York
Times pada akhir tahun 1988 yang menantang data keuangan AMRE untuk
diselidiki. AMRE mengungkapkan secara terbuka bahwa laporan keuangannya
untuk setiap tahun sejak 1987-1990, namun pada prinsipnya 1988 dan 1989,
mengandung kesalahan material. Para eksekutif tidak mengakui atau membantah
dugaan peran mereka dalam kecurangan tersebut namun berjanji untuk tidak
melanggar undang-undang sekuritas federal di masa depan. Brown membayar
sekitar $ 16.000 kepada pemerintah federal, sedangkan Levin membayar hampir $
1,8 juta kepada pemerintah federal, termasuk denda $ 500.000 karena melanggar
ketentuan Insider Trading Sanctions Act.
Martirossian mencapai kesepakatan dengan SEC yang serupa dengan
kesepakatan yang dibuat oleh agen federal tersebut dengan para eksekutif AMRE
lainnya. Namun, badan federal mengeluarkan sebuah rilis penegakan terpisah yang
menjelaskan peran Martirossian dalam kecurangan tersebut. SEC mengkritik
Martirossian karena tidak bersikeras melakukan tindakan yang tepat untuk
memperbaiki catatan akuntansi AMRE dan karena tidak mengungkapkan
kecurangan tersebut kepada Price Waterhouse.

5. SEC Menyelidiki Audit Price Waterhouse terhadap AMRE Tahun 1988 dan
1989
Penyelidikan oleh SEC difokuskan pada tindakan yang dilakukan oleh
auditor AMRE yaitu Price Waterhouse. Terdapat beberapa hasil investigasi oleh
SEC yaitu sebagai berikut:

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a. Tim auditor tidak mampu menyelidiki dengan baik praktik AMRE yang
menangguhkan biaya-biaya akuntansi tertentu.
b. Para staf auditor diduga gagal untuk menguji dengan tepat jumlah keuntungan
yang belum ditetapkan oleh AMRE pada akhir tahun fiskal 1988, karena tidak
ada prosedur-prosedur yang dilakukan untuk memverifikasi integritas laporan
yang mendasari pelaksanaan audit.
c. Laporan-laporan AMRE tidak didukung oleh data-data utama dan eksekutif
AMRE meminta untuk mengabaikan tes-tes EDP untuk menguji integritas dari
lead bank.
d. AMRE tidak menggunakan sistem inventori yang berkesinambungan.
e. Observasi terhadap perhitungan-perhitungan inventori fisik dari klien, dan ini
dilakukan oleh staf AMRE.
f. Auditor Price Waterhouse menerima penjelasan-penjelasan klien untuk
kerugian-kerugian yang dialami ini tanpa “menerapkan prosedur-prosedur yang
sangat penting untuk kerugian-kerugian tersebut”.
g. Dalam kertas kerja audit, staf auditor itu menyimpulkan berdasarkan pada
laporan akuntansi AMRE bahwa kelemahan ini adalah suatu insiden yang berdiri
sendiri yang tidak membutuhkan penyelidikan lebih jauh. Smith dan Reed setuju
dengan penilaian staf auditor itu dan tidak membutuhkan prosedur-prosedur
audit lebih lanjut untuk diterapkan pada penyesuaian yang besar.
h. SEC juga mempertanyakan pengkajian Price Waterhouse terhadap data
keuangan setiap kuartal. Sebuah faktor kunci yang diduga mempengaruhi
keputusan Smith dan Reed untuk menerima metode-metode akuntansi yang
patut dipertanyakan yang diterapkan AMRE adalah karena mereka mengenal
“Martirossian”, seorang mantan teman mereka di kantor Price Waterhouse di
Dallas.

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 JAWABAN PERTANYAAN KASUS AMRE, Inc

1. Definisikan istilah etika dan etika profesi. Menggunakan skala berikut,

evaluasi perilaku setiap individu yang terlibat dalam kasus ini.
Tidak Etis Etis
Tinggi Tinggi
- 100…………………………..0………………………….…100
Jawaban:
Etika merupakan sistem prinsip-prinsip moral yang mempengaruhi bagaimana
seseorang membuat keputusan dan menjalani hidup mereka. Etika berkaitan dengan
apa yang baik bagi individu dan masyarakat dan juga digambarkan sebagai filsafat
moral. Etika juga dapat dikaitkan sebagai suatu kebiasaan tata cara dalam
berperilaku baik itu dalam keseharian maupun dalam lingkungan masyarakat.
Sedangkan etika profesi adalah suatu sikap etis yang dimiliki seorang profesional
yakni sebagai bagian integral dari sikap hidup dalam mengembang tugasnya dan
juga menerapkan norma-norma etis umum pada bidang-bidang khusus (profesi)
didalam kehidupan manusia. Di Indonesia etika profesional merupakan aturan etika
yang harus diterapkan oleh anggota Institut Akuntan Publik Indonesia atau IAPI dan
staf profesional (baik anggota IAPI maupun yang bukan anggota IAPI) yang bekerja
pada satu Kantor Akuntan Publik (KAP). Sehingga dapat dijelaskan sebagai berikut:
Tidak Etis Etis
Tinggi Tinggi
- 100…………………………..0………………………….…100
❖ Manajemen AMRE (tidak etis)
❖ Auditor Price Waterhouse (tidak etis)
❖ Martirossian (kurang etis)

2. Apakah Anda percaya bahwa individu yang berperilaku tidak etis dalam kasus
ini dihukum dengan tepat? Pertahankan jawaban Anda
Jawaban:
Sudah semestinya pihak-pihak yang melakukan tindakan tidak etis dalam kasus ini
dihukum dengan tepat. Dimana pihak-pihak yang berperilaku tidak etis yakni:

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 a. Pihak Manajemen AMRE
Pihak manajemen AMRE ini terdiri dari Bedowitz, Robert Levin dan AMRE,
Inc, dimana mereka telah menerima hukuman beserta dengan sanksi yang
digugat oleh Pemegang saham. Sanksi yang harus diterima oleh kedua pihak
manajemen yaitu Bedowitz dan Robert Levin yakni harus membayar sanksi
sebesar 88 juta dolar, sedangkan pihak AMRE Inc harus membayar sanksi
sebesar 5,9 juta dolar kepada para pemegang saham.
b. KAP Price Waterhouse
Pihak KAP Price Waterhouse dikenakan sanksi berupa larangan untuk kedua
auditor yaitu Smith dan Reed dalam menjalankan tugas mengaudit klien-klien
SEC selama waktu sembilan bulan.
c. Pihak Ekstekutif dan Martirossian
Dalam kasus diatas masih belum jelas sanksi apa yang diberikan kepada pihak
eksekutif dan Martirossian atas kecurangan yang dilakukannya.

3. Identifikasi tindakan alternatif yang dapat dilakukan Martirossian ketika ia

menyadari fraud Akuntansi yang dilakukan AMRE. Alternatif mana yang akan
anda pilih? Mengapa?
Jawaban:
1) Alternatif yang dapat diambil oleh Martirossian adalah memperbaiki metode
akuntansi yang sudah diatur dalam standar akuntansi serta perbaikan sebagai
akibat kesalahan di masa lalu dan memberikan informasi yang jelas, lengkap dan
benar kepada eksternal auditor dan tidak mengarahkan opini mereka sesuai
harapan manajemen. Opini dari hasil pemeriksaan yang dihasilkan dapat menjadi
bahan evaluasi sehingga dapat memberikan gambaran tindak lanjut yang dapat
diambil untuk melakukan perubahan dalam sistem dan metode akuntansi yang
dilakukan selanjutnya oleh manajemen.
2) Alternatif selanjutnya denan kemampuan yang dimiliki Martirossian berusaha
melakukan perbaikan secara internal dan melakukan konsultasi ke auditor
eksternal dalam hal ini dengan KAP Price Waterhouse untuk memperoleh
masukan mengenai penanganan yang tepat untuk penyelesaian permasalahan ini

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 sehingga pada saat dilakukan audit salah saji pada laporan keuangan menjadi
lebih sedikit.
Alternatif yang kami pilih adalah alternatif 1) karena dengan melakukan konsultasi
akan menimbulkan masalah baru yaitu antara lain adanya upaya yang tidak sesuai
dengan aturan dan kode etik untuk penyelesaian permasalah AMRE mengingat
adanya hubungan yang cukup dekat antara kedua belah pihak.

4. Apakah praktik yang dilakukan AMRE dengan menangguhkan biaya iklan

pada akun aktiva sudah tepat? Argumentasikan jawaban anda!
Jawaban:
Menurut kelompok kami praktik yang dilakukan AMRE tidak tepat karena biaya
iklan yang diakui sebagai biaya saat memberikan manfaat. Sehingga dengan
menangguhkan biaya iklan ini maka akan menghasilkan kesalahan laporan keuangan
di mana penghasilan akan lebih tinggi dari seharusnya. Praktik yang AMRE Inc yang
menangguhkan biaya iklan ini sengaja dilakukan agar meningkatkan kinerja laporan
keuangannya sehingga anggaran yang sudah ditetapkan di setiap triwulan tercapai
dan perusahaan seolah-olah berkembang dengan prospek yang bagus.

5. Apa kunci red flags, atau faktor risiko audit, yang hadir selama audit AMRE
1988 dan 1989? Apakah Price Waterhouse secara tepat mempertimbangkan
faktor dalam perencanaan audit tersebut? Mengapa ya atau mengapa tidak?
Jawaban:
Menurut SPAP SA 300, Seksi 312, risiko yang terdapat pada audit AMRE adalah:
a. Risiko Bawaan
Risiko bawaan adalah kerentanan suatu saldo akun atau golongan transaksi
terhadap suatu salah saji material, seperti akun yang terdiri dari jumlah yang
berasal dari estimasi akuntansi cenderung mengandung risiko salah saji yang
besar. Dalam hal ini AMRE membebankan biaya iklan berdasarkan estimasi.
Pada AMRE Inc, risiko bawaan ini terlihat pada estimasi dari pengakuan
pendapatan yang berdasarkan persentase penyelesaian pekerjaannya. Auditor
dalam hal ini seharusnya mampu untuk memeriksa pengakuan pendapatan yang
diakui oleh AMRE Inc.

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b. Risiko deteksi
Risiko deteksi adalah risiko bahwa auditor dapat mendeteksi salah saji
material yang terdapat dalam suatu asersi. Risiko deteksi merupakan fungsi
efektivitas prosedur audit dan penerapannya oleh auditor. Pada perusahaan
AMRE Inc terlihat bahwa auditor dari KAP Price Waterhouse tidak dapat
mendeteksi adanya kesalahan pencatatan yang dilakukan oleh perusahaan.
Sehingga kecurangan yang terjadi dalam perusahaan terus berlangsung dan tidak
dapat diperbaiki oleh auditor, sehingga dapat menyesatkan pengguna laporan
keuangan.
Price Waterhouse tidak secara tepat mempertimbangkan faktor dalam
perencanaan audit tersebut, karena Price Waterhouse tidak benar-benar
melakukan pengujian yang berarti bagi AMRE, kurangnya independensi dan
prosedur audit yang dilakukan oleh Price Waterhouse batas auditnya untuk
AMRE, misalnya dalam prosedur audit dalam perhitungan fisik persediaan.
Price Waterhouse hanya meninjau beberapa lokasi, sedangkan lokasi yang tidak
dipantau oleh Price Waterhouse, terjadi penggelembungan fisik persediaan.
Rencana audit awal Price Waterhouse untuk tahun 1988 menyerukan
pengamatan jumlah persediaan fisik klien di 11 lokasi dari 26 lokasi persediaan.
Eksekutif AMRE meyakinkan Price Waterhouse untuk memungkinkan petugas
AMRE untuk memantau jumlah fisik di tiga lokasi persediaan yang telah auditor
pilih untuk observasi.
c. Risiko Pengendalian
Risiko pengendalian adalah risiko bahwa suatu salah saji material yang
dapat terjadi dalam suatu asersi tidak dapat dicegah atau dideteksi secara tepat
waktu oleh pengendalian intern entitas. Hal ini terlihat ketika Martirossian
menemukan bukti bahwa terdapat banyak entri data akuntansi yang tidak
memiliki dokumentasi pendukung yang memadai. Hal ini menandakan bahwa
sistem pengendalian intern dalam perusahaan tersebut tidak atau kurang efektif.
Faktor-faktor risiko pengendalian tampaknya tidak dipertimbangkan oleh
auditor, hal ini tercermin dari tidak terdeteksinya salah saji material pada
persediaan, perhitungan biaya iklan dan salah saji pada akun piutang pekerjaan

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 instalasi padahal laporan keuangan AMRE mengandung salah saji material atas
akun-akun tersebut.
Faktor risiko audit yang hadir selama audit AMRE yaitu adanya hubungan
pertemanan antara Martirossian, mantan staf auditor Price Waterhouse yang
bekerja untuk AMRE dengan staf auditor Price Waterhouse yang sekarang
menangani audit AMRE. Martirossian melakukan pertemuan rahasia dengan staf
auditor Price Waterhouse untuk mengungkapkan masalah dalam AMRE dan
akan menyelesaikan masalah tersebut, hingga Price Waterhouse mengeluarkan
opini wajar tanpa pengecualian untuk audit AMRE.

6. Apakah Price Waterhouse dibenarkan selama audit tahun 1988 menyetujui

untuk mengizinkan personel klien untuk mengamati perhitungan fisik
persediaan di lokasi tertentu? Sampai sejauh mana suatu klien audit
diperbolehkan untuk mempengaruhi keputusan perencanaan audit utama?
Jawaban:
Selama audit tahun 1988 Price Waterhouse dibenarkan untuk mengizinkan
personel klien untuk mengamati perhitungan fisik persediaan di lokasi tertentu,
karena fisik persediaan tersebut adalah milik klien. Klien masih diperbolehkan
untuk ikut mengamati proses perhitungan fisik persediaan, tanpa akan
mempengaruhi hasil perhitungan fisik persediaan di lokasi tertentu tersebut.
Pengamatan oleh pihak klien tersebut juga dapat meyakinkan pihak klien atas proses
audit yang telah dilaksanakan, khususnya dalam pelaksanakan perhitungan fisik
persediaan. Menurut SPAP SA 300 Seksi 331 bahwa auditor dapat mengijinkan
kliennya mengobservasi perhitungan fisik persediaan apabila auditor memperoleh
keyakinan yang memadai atas keberadaan dan jumlah fisik persediaan. Auditor
dapat meyakinkan dirinya bahwa perhitungan fisik yang dilakukan oleh pegawai
perusahaan klien dengan cara:
a. Menguji prosedur yang digunakan oleh pengawas gudang untuk menghitung
persediaannya dan melakukan penilaian kinerja operator gudang.
b. Menerapkan prosedur alternatif digudang untuk memperoleh keyakinan
memadai bahwa informasi yang diterima dari operator gudang yang dapat
diandalkan.

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 Klien diperbolehkan mempengaruhi keputusan perencanaan audit utama
selama pengaruh itu tidak mempengaruhi hasil dari audit, tidak ikut dalam proses,
tidak menghilangkan proses-proses atau prosedur audit yang seharusnya
dilaksanakan dan yang utama adalah tidak mempengaruhi opini audit nantinya.

7. SAS no.31 “Evidential Matter” mengidentifikasi lima asersi manajemen yang

mendasari laporan keuangan. Manakah diantara asersi ini yang seharusnya
menjadi perhatian paling besar bagi Price Waterhouse berkenaan dengan
penyesuaian akhir periode yang besar yang dicatat oleh AMRE selama
triwulan keempat tahun fiskal 1989?
Jawaban:
Asersi manajemen merupakan suatu penyajian atau pelaporan oleh manajemen
tentang pengelompokan dan pengungkapan transaksi maupun akun yang terkait di
dalam laporan keuangan. Asersi tersebut dapat bersifat implisit atau eksplisit serta
diklasifikasikan berdasarkan penggolongan besar sebagai berikut ini:
a. Keberadaan atau keterjadian (existence or occurrence)
b. Kelengkapan (completeness)
c. Hak dan kewajiban (right and obligation)
d. Penilaian atau alokasi (valuation or allocation)
e. Penyajian dan pengungkapan (presentation and disclosure)
Menurut pendapat kami, asersi yang seharusnya mendapatkan perhatian dari auditor
Price Waterhouse ketika melakukan audit adalah dua asersi yaitu asersi keberadaan
atau keterjadian dan asersi penyajian dan pengungkapan.
a. Pelanggaran terhadap asersi keberadaan atau keterjadian terlihat jelas pada
kecurangan yang dilakukan oleh perusahaan terhadap keterjadian pendapatan
yang diperoleh. Perusahaan menggunakan metode persentase dengan mengakui
pendapatan pada pekerjaan instalasi yang belum selesai pada akhir periode
akuntansi. Dari segi keberadaan, auditor seharusnya berfokus pada pencatatan
inventaris perusahaan dengan melakukan stock opname agar auditor memiliki
keyakinan yang memadai terhadap keberadaan inventaris perusahaan, sehingga
pencatatan inventaris tidak dapat difiktifkan.

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 b. Pelanggaran terhadap asersi penyajian dan pengungkapan terlihat pada
pengklasifikasian biaya operasional yaitu biaya iklan sebagai biaya yang
ditangguhkan. Biaya iklan ini seharusnya dicatat sebagai biaya operasional yang
akan dibiayakan selama satu tahun periode akuntansi. Tetapi perusahaan
mengklasifikasikan biaya iklan sebagai biaya yang ditangguhkan sehingga
menyalahi asersi penyajian dan pengungkapan.

8. Tanggung jawab apa yang dimiliki auditor terhadap informasi laporan

triwulanan yang dilaporkan pada catatan kaki laporan keuangan klien yang
sudah diaudit?
Jawaban:
Laporan keuangan merupakan tanggung jawab penuh pihak manajemen. Tanggung
jawab auditor hanya terbatas pada memberikan pendapat terkait kewajaran
penyajian laporan keuangan perusahaan yang diaudit, dengan melakukan
pengungkapan koreksi yang diperlukan terhadap perubahan yang dapat
mempengaruhi laporan keuangan sehingga dapat memberikan keyakinan bagi pihak
yang berkepentingan (misalnya para investor) bahwa laporan keuangan perusahaan
telah disajikan sesuai dengan standar akuntansi yang berlaku umum.

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 REVIEW ARTIKEL INTERNASIONAL

Judul Artikel : Corporate governance, board ethnicity and financial statement

fraud: evidence from Malaysia
Penulis : Noorul Azwin Binti Md Nasir, Muhammad Jahangir Ali dan Kamran
Ahmed
Publikasi : Accounting Research Journal, Vol. 32 No. 3, 2019 pp. 514-531,
Emerald Publishing Limited, 1030-9616
Reviewer : Ni Nyoman Kosi Syanuri (1981621011)

A. Area of Interest
Penelitian ini pada ranah yang bertujuan untuk menguji hubungan antara kehadiran
direktur Melayu di dewan direksi dan penipuan laporan keuangan di Malaysia.
Selanjutnya penulis menyelidiki apakah laporan keuangan perusahaan penipuan
meningkatkan mekanisme tata kelola mereka dibandingkan dengan perusahaan non-
penipuan setelah tahun penipuan. Alasan kecurangan laporan keuangan adalah
mekanisme tata kelola perusahaan yang lemah. Mekanisme tata kelola perusahaan
yang lemah dapat digambarkan sebagai memiliki lebih sedikit direktur independen,
kurangnya direktur dengan keahlian keuangan, perusahaan yang anggota dewannya
sangat didominasi oleh manajemen dan jumlah rapat dewan yang jarang. Komite
audit juga memainkan peran penting dalam mekanisme tata kelola perusahaan untuk
membantu mendeteksi kecurangan laporan keuangan. Rasio direktur independen
yang lebih kecil pada komite audit, komite audit yang kurang memiliki keahlian
akuntansi dan keuangan, beberapa rapat komite audit dan biaya audit eksternal yang
lebih besar menunjukkan adanya mekanisme tata kelola perusahaan yang lemah.
B. Phenomena
Selama dekade terakhir, beberapa kasus penipuan laporan keuangan telah mendapat
perhatian yang cukup besar dari regulator, praktisi dan akademisi di seluruh dunia.
Muncul negara-negara seperti Malaysia telah mengalami bagian penipuan keuangan
mereka. KPMG Malaysia (2009) memperkirakan bahwa valuasi yang timbul dari
penipuan laporan keuangan sekitar RM63.5m (sekitar US $ 16m). Contoh
perusahaan terkenal yang baru-baru ini dihukum karena penipuan laporan keuangan

12
 di Malaysia adalah Gula Perak, MEMS Technology, PuncakNiaga, Golden Land
dan Actacorp. Kecurangan pelaporan keuangan memiliki konsekuensi ekonomi
yang parah. Pertama, berdampak negatif terhadap karyawan, kreditur dan investor,
dan kedua, melemahkan keandalan laporan keuangan perusahaan dan kepercayaan
di pasar keuangan.
C. Research Gap, Hyphotesis and Variable
1. Research Gap
Keyakinan dan nilai yang berbeda dapat ditemukan dalam praktik untuk setiap
etnis. Hofstede (1983) berpendapat bahwa perbedaan nilai mengarah pada
pendekatan yang berbeda dalam penataan perusahaan, memotivasi individu
dalam suatu perusahaan dan menangani masalah dalam perusahaan. Iskandar
dan Pourjalali (2000) juga berpendapat bahwa setiap suku memiliki kepercayaan
dan nilai praktis yang berbeda. Gray (1988) mengembangkan kerangka kerja
Hofstede-Gray, yang menyatakan bahwa orang Melayu lebih tertutup
dibandingkan dengan orang Cina, sehingga pengungkapannya lebih rendah.
Selain itu, Abdullah (2006) memberikan bukti bahwa orang Melayu memiliki
karakteristik individualisme yang lebih rendah dibandingkan dengan orang
Tionghoa. Sebaliknya, Rahman dan Ali (2006) menemukan bahwa perusahaan
dengan proporsi Melayu yang lebih tinggi cenderung terlibat dalam manajemen
laba.
Studi kasus tentang Satyam Computers dibatasi oleh Bhasin (2016) menemukan
bahwa perusahaan menunjuk kembali anggota dewan dan manajer tingkat atas
mereka setelah skandal. Selain itu, perusahaan telah membuat keputusan untuk
memisahkan peran CEO dan ketua dewan. Ketika Perusahaan Enron runtuh,
kepala keuangan diganti. Menurut Goldberg (2001), perubahan tersebut
dilakukan untuk mengembalikan kepercayaan investor. Lebih lanjut, Christensen
dan Byington (2002) mengandaikan bahwa pemilihan anggota dewan baru
adalah untuk meningkatkan kekayaan pemegang saham melalui keterlibatan
dalam kegiatan pengambilan keputusan.
2. Hyphotesis
H1: Perusahaan dengan proporsi direktur Melayu yang lebih rendah cenderung
tidak terlibat dalam penipuan laporan keuangan.

13
 H2: Perusahaan penipuan laporan keuangan lebih cenderung meningkatkan
mekanisme tata kelola perusahaan mereka dibandingkan dengan perusahaan
non-penipuan setelah tahun penipuan.
3. Variables
Variabel dependen: penipuan laporan keuangan (FSF).
Variabel independen:
• Variable kontinu: persentase direktur Melayu di dewan (DETHNIC),
persentase direktur independen di dewan (DINDEP), persentase direktur
dengan keahlian akuntansi atau keuangan (DEXPERT), persentase direktur
yang bertugas di manajemen (DINSIDE), jumlah rapat dewan setiap tahun
(DMEET), log alami dari remunerasi direktur (DREMUN), persentase
direktur independen pada komite audit (AINDEP), persentase anggota
komite audit dengan keahlian akuntansi atau keuangan (AEXPERT), jumlah
rapat komite audit setiap tahun (AMEET), persentase bahasa Melayu di
komite audit (AETHNIC), log alami dari biaya audit (AFEE),
• Variabel dummy: 1 untuk ketua yang juga menjabat sebagai CEO; jika tidak,
0; (DUALITY), 1 untuk perusahaan yang menunjuk 4 besar perusahaan
audit; jika tidak, 0; (BIG4), 1 untuk outsourcing fungsi audit internal; jika
tidak, 0; (AINT)
D. Methodology
Metodelogi yang digunakan dalam penelitian ini yaitu metode penelitian kuantitatif
dengan menggunakan model regresi univariat dan logistik, model regresi logit biner
(binary-logit regression model) untuk menguji hubungan hipotesis antara
mekanisme tata kelola perusahaan dan terjadinya FSF.
E. Data and Method
1. Populasi dan Sampel
Peneliti menggunakan metode purposive sampling (yaitu firma penipuan laporan
keuangan) yang melibatkan proses pencocokan satu-ke-satu. Mengikuti Beasley
(1996), peneliti mengidentifikasi sampel control. Peneliti menggunakan skor
yang dibuat oleh Charitou dkk. (2004) untuk menentukan apakah perusahaan
sehat atau lemah pada tahun penipuan yang dipilih dan tahun sebelumnya, dan
hanya perusahaan yang sehat yang dipilih sebagai perusahaan kontrol yang

14
 cocok. 76 perusahaan penipuan laporan keuangan dicocokkan dengan 76
perusahaan yang bebas dari biaya dan risiko penipuan laporan keuangan selama
delapan tahun yaitu dari 2001 hingga 2008 (608 perusahaan). Hal ini
menunjukkan bahwa perusahaan fraud dan non fraud tidak berbeda secara
signifikan berdasarkan total aset dan pendapatan.
2. Metode Pengumpulan Data
Peneliti memeriksa firma penipuan laporan keuangan yang terdaftar sebagai
firma publik di Company Registrar of Malaysia. Peneliti menggunakan dua
sumber untuk mengidentifikasi perusahaan-perusahaan ini. Pertama, daftar
perusahaan yang terlibat dalam penipuan laporan keuangan diambil dari rilis
penegakan SCM. Karena informasi dari SCM hanya tersedia mulai tahun 2001,
berdasarkan informasi dakwaan, peneliti memilih perusahaan yang melakukan
kecurangan laporan keuangan dari tahun 2001 hingga 2008. Dalam kebanyakan
kasus, firma penipuan yang diidentifikasi dalam siaran pers SCM juga
dilaporkan dalam rilis penegakan SCM. Daftar sumber kedua dari daftar
perusahaan penipuan laporan keuangan berasal dari rilis penegakan Bursa
Malaysia.
F. Findings
Dengan menggunakan model regresi univariat dan logistik, hasilnya menunjukkan
hubungan positif yang signifikan antara proporsi direktur Melayu di dewan dan
kecurangan laporan keuangan. Peneliti juga menemukan bahwa firma penipuan
secara signifikan meningkatkan proporsi direktur independen di dewan direksi
mereka, meningkatkan frekuensi rapat dewan dan komite audit dan mengurangi
dualitas setelah deteksi penipuan laporan keuangan dibandingkan dengan
perusahaan non-penipuan.
G. Conclusions
Peneliti memeriksa hubungan antara mekanisme tata kelola perusahaan, terutama
kehadiran direktur Melayu di dewan FSF di Malaysia. Peneliti juga menyelidiki
apakah terjadi perubahan dalam mekanisme tata kelola perusahaan yang dilakukan
oleh firma penipuan setelah tahun FSF. Sampel terdiri dari 76 FSF dan 76 firma
non-fraud selama periode delapan tahun dari 2001 hingga 2008. Menggunakan
model regresi univariat dan logistik, hasil kami menunjukkan hubungan positif

15
 yang signifikan antara proporsi direktur Melayu di dewan dan insiden FSF. Hal ini
mungkin disebabkan oleh fakta bahwa orang Melayu bersifat tertutup, yang
mengakibatkan praktik pengungkapan yang lemah, karenanya, dikaitkan dengan
FSF. Hasil yang disajikan di sini harus dipertimbangkan dalam konteks keterbatasan
penelitian ini. Studi saat ini tidak mempertimbangkan apakah firma penipuan mulai
melakukan penipuan beberapa tahun sebelum mereka diidentifikasi sebagai firma
penipuan oleh SCM dan Bursa Malaysia atau mulai meningkatkan praktik tata
kelola perusahaan mereka sebelum dideteksi sebagai firma penipuan keuangan oleh
SCM dan Bursa Malaysia karena kurangnya pengungkapan.
H. Recommendations
Temuan studi ini kemungkinan akan membantu pembuat kebijakan dan regulator
dalam meningkatkan praktik tata kelola perusahaan untuk perusahaan FSF.
Misalnya, SCM dapat mengarahkan agensi untuk fokus pada atribut tata kelola
perusahaan yang dipertimbangkan dalam studi ini, yang perlu diperiksa ulang dan
direstrukturisasi untuk menghasilkan pelaporan keuangan yang lebih berkualitas.
Auditor dapat menggunakan penelitian ini untuk menilai dan mengevaluasi
perubahan yang dibuat dalam mekanisme tata kelola perusahaan perusahaan dan
menentukan apakah perubahan tersebut mengurangi FSF. Demikian pula, tanggung
jawab utama CCM adalah membantu bisnis terdaftar dan memastikan perusahaan
beroperasi sesuai dengan undang-undang dan memiliki tim tata kelola perusahaan.
Temuan penelitian kami dapat membantu perusahaan untuk lebih waspada saat
mempekerjakan direktur di dewan melalui bukti praktik tata kelola perusahaan yang
baik.

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 REVIEW ARTIKEL INTERNASIONAL

Judul Artikel : Evidence on How Different Interventions Affect Juror Assessment of

Auditor Legal Culpability and Responsibility for Damages After
Auditor Failure to Detect Fraud
Penulis : Timothy Brown, Tracie M. Majors dan Mark E. Peecher
Publikasi : Accounting, Organizations and Society, 2020, 0361-3682, Elsevier
Ltd. https://doi.org/10.1016/j.aos.2020.101172.
Reviewer : Cintya Purnama Sari (1981621020)

A. Area of Interest
Penelitian ini berfokus pada evaluasi juri atas kesalahan firma audit ketika salah saji
material muncul setelah penerbitan opini audit yang bersih. Juri menerima instruksi
untuk hal yang berlaku standar hukum, mendengarkan argumen dari penggugat dan
tergugat pengacara, menafsirkan bukti kompleks dan membuat kesimpulan tentang
kesalahan. Namun, sering kali kesimpulan yang dibuat oleh juri adalah rawan
kesalahan dan tidak adil terhadap auditor dalam banyak kondisi realistis.
B. Phenomena
Salah satu temuan luar biasa yaitu bahwa juri menganggap auditor lebih bersalah
ketika mereka secara objektif melakukan audit kualitas yang lebih tinggi (Backof,
2015; Maksymov & Nelson, 2017; Reffett, 2010). Kesimpulan kesalahan fungsional
juri menciptakan insentif bagi auditor untuk terlibat dalam audit defensif, seperti
menghindari klien yang menciptakan nilai bagi masyarakat tetapi menghadirkan
risiko bisnis auditor yang tinggi dan menghindari tes audit inovatif yang akan lebih
baik mengatasi faktor-faktor risiko salah saji yang mendasari yang mendukung
pengujian standar yang biasa. Ketidakpastian tentang kebenaran kesimpulan juri
meningkatkan risiko hukum firma audit, yang meningkatkan kekhawatiran bahwa
para akuntan akan meninggalkan profesinya demi pekerjaan yang tidak terlalu
berkaitan dengan hukum. Hal inilah yang memotivasi penyelidikan berkelanjutan
atas intervensi yang dapat mengurangi penilaian kesalahan juri dan mediator utama
melalui mana mereka beroperasi.

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C. Theoretical Foundation, Research Question, Hyphotesis, Variabels
1. Theoretical Foundation
Teori untuk evaluasi juri meliputi deteksi dan persetujuan yang berhubungan
dengan keinginan. Peneliti berteori bahwa penilaian juri atas kesalahan terdakwa
perusahaan audit akan beroperasi melalui keyakinan bahwa perusahaan audit
melewatkan penipuan yang mudah dideteksi dan menyetujui potensi penipuan
manajemen.
2. Research Question
RQ 1: Apakah efek CAM dan AJR pada penilaian kesalahan berinteraksi?
Akankah interaksi yang diamati beroperasi melalui deteksi dan
persetujuan yang dirasakan?
RQ 2: Akankah efek JNT dan AJR pada penilaian kesalahan berinteraksi?
Akankah interaksi yang diamati beroperasi melalui deteksi dan
persetujuan yang dirasakan?
RQ 3: Akankah efek AJR dan JNT pada penilaian kerusakan berinteraksi?
Akankah interaksi yang diamati beroperasi melalui deteksi yang
dirasakan, melalui persetujuan yang dirasakan, dan / atau secara
langsung?
3. Hyphotesis
H1a: Juri yang mengevaluasi kesalahan firma audit berdasarkan AJR akan
membuat penilaian kesalahan yang lebih rendah daripada juri yang
mengevaluasi kesalahan di bawah kelalaian biasa sederhana.
H1b: Efek yang dihipotesiskan di atas akan beroperasi melalui melemahnya
deteksi dan persetujuan yang dirasakan.
H2a: Juri yang mengevaluasi kesalahan firma audit ketika firma audit
mengungkapkan CAM dalam laporan mereka akan membuat penilaian
kesalahan yang lebih rendah daripada juri yang mengevaluasi kesalahan
dalam suatu rezim di mana CAM tidak ada.
H2b: Efek yang dihipotesiskan di atas akan beroperasi melalui melemahnya
deteksi dan persetujuan yang dirasakan.
H3a: Para juri yang telah menyelesaikan JNT akan membuat penilaian kesalahan
yang lebih rendah daripada juri yang belum menyelesaikan JNT.

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 H3b: Efek yang dihipotesiskan di atas akan beroperasi melalui melemahnya
deteksi dan persetujuan yang dirasakan.
H4a: Di antara temuan juri terhadap firma audit, juri yang melakukan evaluasi
berdasarkan AJR akan memberikan ganti rugi yang lebih besar daripada
juri yang melakukan evaluasi di bawah kelalaian biasa. Efek ini dapat
beroperasi melalui deteksi yang dirasakan, melalui persetujuan yang
dirasakan, dan / atau secara langsung.
H4b: Di antara temuan juri terhadap firma audit, juri yang telah menyelesaikan
JNT akan memberikan ganti rugi yang lebih banyak daripada juri yang
belum menyelesaikan JNT. Efek ini dapat beroperasi melalui deteksi yang
dirasakan, melalui persetujuan yang dirasakan, dan / atau secara langsung.
4. Variables
Variabel dependen: audit firm culpability dan audit firm damages.
Variabel independen: auditor judgment rule (AJR) dan critical audit matter
(CAM) dan juror negligence training (JNT).
Variabel moderasi: deteksi (detactability) dan persetujuan yang dirasakan
(acquiescence).
D. Methodology
Penelitian ini menggunakan metode ekperimen, yang dimana dilakukan dua
eksperimen dengan menggunakan desain 2x2 di antara peserta.
E. Data and Method
1. Populasi dan Sampel
Ekperimen satu (dua) mencakup 239 (353) peserta dari Amazon's Mechanical
Turk (MTurk) yang bertindak sebagai juri. MTurks telah terbukti mewakili
populasi umum AS.
2. Metode Pengumpulan Data
Sebagai pemeriksaan ex post, peserta harus menjawab pertanyaan review secara
berkala selama evaluasi kasus (n=21); dalam mendukung penyelesaian yang
rajin, tingkat keakuratannya cukup tinggi, yaitu 96 (92) persen dalam
eksperimen satu (dua). Peserta dalam kedua eksperimen berperan sebagai juri
dalam persidangan berdasarkan hukum umum negara bagian AS dan diberi
informasi latar belakang (yaitu, tentang proses audit, apa yang terjadi jika terjadi

19
 kegagalan audit, dan standar perawatan yang harus mereka gunakan dalam
evaluasi mereka). Peserta membaca kasus tentang audit perusahaan
pertambangan, kecurangan yang dilakukan oleh manajemen bahwa firma audit
gagal untuk mendeteksi, dan tuntutan hukum diajukan oleh kreditur yang
kehilangan uang karena mengandalkan laporan keuangan yang salah saji secara
material. Peserta kemudian membacakan transkrip, termasuk argumen pembuka
dan penutup dari penggugat dan pembela, keterangan ahli atas nama penggugat
dan tergugat, dan pemeriksaan silang saksi ahli.
F. Findings
1. Untuk mendukung Hipotesis 1a, terdapat pengaruh utama AJR dalam
menurunkan audit firm culpability (p ¼ 0,009) (43,53 vs 33,08 persen).
2. Untuk mendukung Hipotesis 2a, terdapat pengaruh utama dari CAM yang
mengurangi audit firm culpability yang dinilai (p ¼ 0,038) (42,39 vs 34,15
persen). Sehubungan dengan RQ1, interaksi AJR CAM tidak signifikan (dua sisi
p ¼ 0,378).
3. Untuk mendukung Hipotesis 1b dan 2b, peneliti melakukan model persamaan
struktural (SEM) untuk menguji hipotesis mediator keyakinan juri tentang
deteksi dan persetujuan AJR dan CAM masing-masing melemahkan deteksi
yang dirasa juri (p 0,042 dan 0,028), dan AJR juga melemahkan persepsi juri
tentang persetujuan yang dirasakan (p) 0,022). Deteksi dan persetujuan yang
dirasakan masing-masing meningkatkan audit firm culpability yang dinilai
(keduanya p <0,001).
4. Untuk mendukung Hipotesis 3a, terdapat efek sederhana dari JNT yang
mengurangi audit firm culpability yang dinilai (p ¼ 0,018) (46,84 vs 36,99
persen). Tidak ada efek yang signifikan dari kedua intervensi dengan adanya
yang lain (p dua sisi terkecil 0,484), sehingga hasil secara kolektif mendukung
interaksi bentuk yang semakin berkurang.
5. Untuk mendukung Hipotesis 3b, peneliti melakukan SEM untuk menguji
mediator yang dihipotesiskan, juga termasuk istilah interaksi AJR x JNT. AJR
dan JNT masing-masing mengurangi deteksi yang dirasakan (masing-masing p
0,020 dan 0,001), yang meningkatkan audit firm culpability yang dinilai (p
<0,001). Ada bentuk yang semakin berkurang dari interaksi JNT AJR di

20
 persetujuan yang dirasakan yang mendekati signifikansi marjinal (p dua sisi
0,125), dan JNT juga mengurangi Penerimaan yang dirasakan (p ¼ 0,003);
Penerimaan dirasakan meningkatkan Kesalahan Perusahaan Audit dinilai (p ¼
0,001). Akhirnya, ada sedikit signifikan, berkurangnya bentuk AJR JNT
interaksi yang secara langsung mempengaruhi kesalahan KAP yang dinilai (dua
sisi p ¼ 0,068), dan juga signifikan, efek langsung negatif dari AJR pada
kesalahan KAP yang dinilai (p ¼ 0,013) ).
6. Untuk mendukung Hipotesis 4a, terdapat pengaruh utama AJR yang
meningkatkan kerusakan kantor audit (audit firm damages ) yang ditetapkan (p
¼ 0,040) (4,43 vs. 5,43 juta). Seperti yang diharapkan, tidak ada efek utama dari
CAM (p> 0,500) (4,78 vs. 4,85 juta).
7. Untuk mendukung Hipotesis 4b, terdapat pengaruh utama yang signifikan JNT
terhadap peningkatan kerusakan kantor audit (audit firm damages ) (p ¼ 0,034)
(4,94 vs. 5,86 juta).
G. Conclusions
Hasil dari dua eksperimen menunjukkan bahwa AJR, CAM, dan JNT masing-
masing mengurangi penilaian kesalahan juri. Ada juga interaksi bentuk yang
semakin berkurang di mana AJR dan JNT masing-masing menurunkan penilaian
kesalahan secara terpisah, tetapi keduanya tidak melakukannya di hadapan yang
lain. Temuan SEM menunjukkan bahwa AJR, CAM, dan JNT masing-masing
mengurangi penilaian kesalahan melalui melemahnya deteksi yang dirasakan; AJR
dan JNT juga beroperasi melalui melemahnya persetujuan yang dirasakan, meskipun
interaksi yang sedikit signifikan menunjukkan bahwa efek gabungan mereka kurang
dari jumlah efek individual mereka. Sejalan dengan reaktansi, di antara temuan juri
terhadap KAP, yang mengalami AJR atau JNT menetapkan ganti rugi yang lebih
tinggi. SEM mengungkapkan bahwa efek AJR dapat beroperasi melalui peningkatan
persetujuan dan deteksi yang dirasakan, dengan efek terakhir surut dengan adanya
JNT. Ada juga efek langsung dari AJR, JNT, dan interaksi bentuknya yang semakin
berkurang pada kerusakan.
H. Recommendations
Kami percaya bahwa teori dan temuan kami berkontribusi pada literatur litigasi
audit dan praktik audit. Kami memperkenalkan AJR dan JNT ke literatur litigasi

21
 audit, dan praktisi kemungkinan besar akan tertarik pada efek reaktansi yang kami
dokumentasikan. Lebih lanjut, peneliti audit dan regulator juga mungkin
menganggap hasil CAM kami menarik. Temuan kami memperkuat hasil dari studi
sebelumnya bahwa CAM dapat mengurangi tanggung jawab hukum auditor (Brasel
et al., 2016; Kachelmeier et al., 2019), dan menawarkan bukti baru bahwa, selain
memberikan keringanan melalui keyakinan bahwa penggugat (misalnya, investor)
diperingatkan, CAM juga dapat mengurangi penilaian kesalahan dengan
melemahkan keyakinan juri bahwa auditor melewatkan kecurangan yang sangat
terdeteksi.
I. Further Researches
Penelitian di masa depan dapat memeriksa apakah auditor percaya bahwa CAM
melemahkan persepsi juri atau investor tentang pendeteksian dan / atau persetujuan
jika kecurangan material terungkap kemudian, dan apakah aktivasi keprihatinan
pertahanan terhadap AJR memengaruhi strategi auditor di bidang mana yang harus
dipilih.

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 REVIEW ARTIKEL NASIONAL

Judul Artikel : Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan

Keuangan Menggunakan Beneish Model Pada Perusahaan Yang
Menerapkan ASEAN Corporate Governance Scorecard
Penulis : Aprilia
Publikasi : JURNAL ASET (AKUNTANSI RISET), Vol 9 (1), 2017, 101-132.
ISSN: 2541-0342
Reviewer : Komang Tri Utariyani (1981621005)

A. Area of Interest
Dalam menilai kewajaran laporan keuangan dibutuhkan penilaian dari seseorang
yang ahli dan independen dalam melakukan pemeriksaan laporan keuangan tersebut.
Audit atas laporan keuangan diperlukan untuk mendeteksi dan mencegah terjadinya
kecurangan laporan keuangan yang disajikan oleh pihak manajemen perusahaan.
Audit atas laporan keuangan diperlukan untuk meyakinkan investor bahwa
informasi yang disajikan pihak manajemen perusahaan tidak bias dan dapat
dipercaya. Maka dari itu tujuan dari penelitian ini adalah untuk mengetahui
pengaruh analisa fraud pentagon terhadap kecurangan laporan keuangan dengan
menggunakan beneish model pada perusahaan yang menerapkan ASEAN CG
Scorecard.
B. Phenomena
Sudah banyak terjadi kasus mengenai manipulasi laporan keuangan yang melanda
dunia. Penelitian yang dilakukan oleh Association of Certified Fraud Examiners
(ACFE, 2014) memperkirakan kerugian yang terjadi akibat kecurangan dan
penyalahgunaan adalah 5% dari pendapatan tahunan. ACFE mengungkapkan ada
tiga kategori utama dalam kecurangan yang terjadi, terdiri dari: penyalahgunaan
aktiva (Asset Misappropiation), korupsi (Corruption), dan kecurangan laporan
keuangan (Financial Statement Fraud). Dari kumpulan kasus kecurangan yang
ditemukan oleh ACFE, sebesar 85% merupakan kasus penyalahgunaan aktiva
dengan kerugian rata-rata sebesar $130.000, 37% merupakan kasus korupsi dengan
kerugian rata-rata $200.000 dan sisanya sebesar 9% merupakan kasus kecurangan

23
 laporan keuangan dengan kerugian terbesar $1.000.000 dibandingkan kasus lainnya.
Dalam penjelasan di atas, dapat ditarik kesimpulan bahwa persentase terjadinya
manipulasi laporan keuangan cukup kecil namun kerugian yang ditimbulkan cukup
besar.
C. Theoretical Foundation, Hyphotesis, Variabels
1. Theoretical Foundation
Teori utama yang digunakan dalam penelitian ini yaitu Teori Keagenan (Agency
Theory) dan Fraud Model.
2. Hyphotesis
Hipotesis yang dikembangkan dalam penelitian ini yaitu:
H1 : Politisi CEO berpengaruh signifikan terhadap kecurangan laporan
keuangan.
H2 : Frekuensi kemunculan gambar CEO berpengaruh signifikan terhadap
kecurangan laporan keuangan.
H3 : Kebijakan hutang-piutang meragukan yang tidak diumumkan berpengaruh
signifikan terhadap kecurangan laporan keuangan.
H4 : Terbatasnya akses informasi entitas bertujuan khusus berpengaruh
signifikan terhadap kecurangan laporan keuangan.
H5 : Efektifitas pengawasan berpengaruh signifikan terhadap kecurangan
laporan keuangan.
H6 : Pergantian ketua auditor internal berpengaruh signifikan terhadap
kecurangan laporan keuangan.
H7 : Stabilitas keuangan berpengaruh signifikan terhadap kecurangan laporan
keuangan.
H8 : Tekanan eksternal berpengaruh signifikan terhadap kecurangan laporan
keuangan.
H9 : Kepemilikan manajerial berpengaruh signifikan terhadap kecurangan
laporan keuangan.
H10 : Pergantian kebijakan akuntansi perusahaan berpengaruh signifikan
terhadap kecurangan laporan keuangan.
H11 : Opini auditor berpengaruh signifikan terhadap kecurangan laporan
keuangan.

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 3. Variables
a. Variabel Dependen dalam penelitian ini yaitu kecurangan laporan keuangan
(fraudulent financial reporting) (Y).
b. Variabel Independen dalam penelitian ini yaitu POLCEO (X1), CEOPIC
(X2), UNDPOL (X3), SPVACC (X4), COMIC (X5), CHIA (X6), AGROW
(X7), LEV (X8), OSHIP (X9), ACCPOL (X10), OPNADT (X11), dan SIZE
(X12) sebagai variabel kontrol.
D. Methodology
Metodelogi yang digunakan dalam penelitian ini yaitu metode penelitian kuantitatif
dengan pendekatan statistik deskriptif dengan teknik analisis regresi menggunakan
IBM SPSS 21.0.
E. Data and Method
1. Populasi dan Sampel
Penelitian ini menggunakan sampel perusahaan yang menerapkan ASEAN CG
Scorecard di tahun 2014 dikarenakan untuk 50 perusahaan yang menerapkan
ASEAN CG Scorecard di tahun 2015 belum dikeluarkan oleh IICD (Indonesian
Institute for Corporate Directorship), dan belum dipublikasikan di website resmi
IICD. Pengambilan sampel menggunakan metode purposive sampling, sebagai
berikut: (a) Perusahaan yang menerapkan ASEAN CG Scorecard tahun 2014
dan diteliti selama tahun 2011-2015, (b) Menerbitkan laporan keuangan dan
laporan tahunan secara lengkap selama tahun 2011- 2015, (c) Perusahaan
tersebut terdaftar di Bursa Efek Indonesia selama periode penelitian, (d)
Perusahaan tersebut menggunakan mata uang rupiah di dalam laporan
keuangannya, (e) Memiliki data yang lengkap terkait dengan variabel-variabel
yang digunakan dalam penelitian.
2. Metode Pengumpulan Data
Metode pengumpulan data penelitian ini diperoleh melalui data perusahaan
seperti laporan keuangan perusahaan (data sekunder).
F. Findings
Hasil penelitian dalam penelitian ini yaitu (1) Variabel politisi CEO tidak
berpengaruh signifikan terhadap terhadap kecurangan laporan keuangan, (2)
Variabel frekuensi kemunculan gambar CEO tidak berpengaruh signifikan terhadap

25
 terhadap kecurangan laporankeuangan, (3) Variabel kebijakan hutang-piutang
meragukan yang tidak diumumkan tidak berpengaruh signifikan terhadap terhadap
kecurangan laporan keuangan, (4) Variabel terbatasnya akses informasi entitas
bertujuan khusus tidak berpengaruh signifikan terhadap terhadap kecurangan
laporan keuangan, (5) Variabel efektifitas pengawasan tidak berpengaruh signifikan
terhadap terhadap kecurangan laporan keuangan, (6) Variabel pergantian ketua
auditor internal tidak berpengaruh signifikan terhadap terhadap kecurangan laporan
keuangan, (7) Variabel stabilitas keuangan berpengaruh signifikan terhadap
kecurangan laporan keuangan, (8) Variabel tekanan pihak eksternal tidak
berpengaruh signifikan terhadap terhadap kecurangan laporan keuangan, (9)
Variabel kepemilikan manajerial tidak berpengaruh signifikan terhadap terhadap
kecurangan laporan keuangan, (10) Variabel pergantian kebijakan akuntansi
perusahaan tidak berpengaruh signifikan terhadap terhadap kecurangan laporan
keuangan, (11) Variabel opini audit tidak berpengaruh signifikan terhadap terhadap
kecurangan laporan keuangan.
G. Conclusions
Hasil penelitian menunjukkan bahwa hanya stabilitas keuangan yang diproksikan
dengan rasio perubahan total aset saja yang berpengaruh signifikan terhadap
kecurangan laporan keuangan. Sedangkan untuk variabel lainnya yaitu politisi CEO,
frekuensi kemunculan gambar CEO, kebijakan hutang-piutang meragukan yang
tidak diumumkan, terbatasnya akses informasi entitas bertujuan khusus, efektifitas
pengawasan, pergantian ketua auditor internal, tekanan pihak eksternal, kepemilikan
manajerial, pergantian kebijakan akuntansi perusahaan, serta opini audit tidak
berpengaruh signifikan terhadap kecurangan laporan keuangan.
H. Further Researchers
Penelitian ini memiliki keterbatasan antara lain: pertama sampel penelitian ini
merupakan perusahaan yang sudah memperoleh sertifikat ASEAN CG Scorecard,
dimana perusahaan tersebut sudah terbukti menjalankan GCG dengan baik. Oleh
karena itu, hasil penelitian yang diperoleh sebagian besar variabel independennya
tidak berpengaruh terhadap kecurangan laporan keuangan; kedua model Beneish
cocok digunakan untuk perusahaan manufaktur (Beneish et al., 2012) dan dalam
penelitian ini perusahaan yang dijadikan sampel merupakan perusahaan campuran

26
(banking/keuangan, manufaktur, dan lainnya); ketiga diperlukan variabel
pengukuran lainnya untuk fraud pentagon, dikarenakan variabel yang dipakai dalam
penelitian ini kurang cocok untuk digunakan di Indonesia; keempat kurangnya
referensi jurnal nasional dan internasional untuk pengukuran fraud pentagon yang
digunakan dalam penelitian ini. Oleh karena itu diharapkan pada penelitian
selanjutnya dapat melakukan beberapa hal, yakni: pertama diharapkan
menggunakan proksi variabel dependen yang menggunakan pengukuran rasio
keuangan dan akan lebih baik apabila analisa pengaruh fraud pentagon terhadap
kecurangan laporan keuangan juga menggunakan penyebaran kuesioner untuk lebih
meyakinkan pengukuran variabel independennya (mixed method); kedua agar
penelitian selanjutnya dapat memilih sampel penelitian perusahaan yang memiliki
net loss (mengalami kerugian finansial) sehingga akan mempengaruhi hasil
penelitian yang dihasilkan.

27
 REVIEW ARTIKEL NASIONAL

Judul : The analysis of the factor that causes fraudulent financial reporting with
fraud diamond
Penulis : Ni Komang Astri Yulistyawati, I Made Sadha Suardikha, I Putu Sudana
Tahun : 2019
Publikasi : Jurnal Akuntansi dan Auditing Indonesia Volume 23 Nomor 1
Reviewer : Ni Kadek Alit Agustini Witari (1981621009)

A. Area of interest
Artikel ini meneliti tentang unsur-unsur penyebab terjadinya kecurangan
dalam laporan keuangan. Area of interest dari penelitian ini adalah auditing
khususnya membahas tentang fraud.
B. Phenomena
Berdasarkan SAS No. 99 (AICPA, 2002) salah saji yang timbul dari
kecurangan pelaporan keuangan adalah salah saji atau penghilangan jumlah atau
pengungkapan yang disengaja dalam laporan keuangan untuk menipu pengguna
laporan keuangan. Saat ini sudah banyak kasus dan praktik terkait fraud, tidak
terkecuali dalam proses penyiapannya laporan keuangan. Meskipun laporan
akuntansi dan keuangan semakin komprehensif dan kompleks proses, masih banyak
celah bagi pihak tertentu untuk melakukan kecurangan laporan keuangan. Healy dan
Wahlen (1999) mengungkapkan bahwa dalam menjalankan perusahaan, manajer
dapat menggunakan pengetahuannya tentang bisnis dan peluangnya. Mereka harus
memilih metode pelaporan, estimasi, dan pengungkapan yang sesuai dengan
kebutuhan perusahaan ekonomi bisnis, yang berpotensi meningkatkan nilai akuntansi
sebagai bentuk komunikasi. Namun, penggunaan peringkat manajemen juga
menciptakan peluang untuk manajemen laba. Penting bagi manajemen untuk
memahami dampak yang dapat ditimbulkan dari kecurangan praktik pelaporan
keuangan di lingkungan perusahaan sehingga dapat dilakukan upaya deteksi dan
pencegahan dini. Menurut Wolfe dan Hermanson (2004), sifat dan kemampuan
pribadi seseorang sangat berperan besar dalam memungkinkan terjadinya kecurangan
meskipun tiga faktor kecurangan (tekanan, peluang dan rasionalisasi) mendukung.

28
 Wolfe dan Hermanson (2004) menyatakan bahwa kemungkinan terjadinya fraud
dapat terwujud jika CEO perusahaan memiliki keterampilan teknis untuk memahami
dan memanfaatkan kelemahan pengendalian internal yang ada. Jadi, kemampuan
CEO adalah yang utama faktor penentu apakah kelemahan pengendalian internal
pada akhirnya akan menimbulkan kecurangan. Wolfe dan Hermanson (2004) percaya
bahwa fraud triangle dapat ditingkatkan dengan mempertimbangkan elemen
kemampuan untuk meningkatkan, mencegah dan mendeteksi penipuan. Keempat
elemen ini disebut fraud diamond. Tujuan dari penelitian ini adalah untuk menguji
efektivitas fraud diamond sebagai alat analisis dalam pendeteksian kecurangan dan
mencegah pelaporan keuangan yang curang. Sehingga analisis fraud diamond bisa
bermanfaat untuk membantu menemukan penyebabnya perilaku curang dan
memberikan solusi serta upaya untuk menghilangkan penyebab tersebut
C. Theoretical Foundation, Research Question, Hyphotesis, Variabels
1. Theoretical Foundation
Landasan teori yang digunakan dalam penelitiannya ini adalah teori agensi di
mana dalam artikel dijelaskan definisi teori ini dan keterkaitannya dengan
kecurangan yang dapat terjadi karena adanya perbedaan kepentingan antara
pemilik dan agen yang menjalankan perusahaan. Dalam landasan teori ini juga
dijelaskan terkait definisi dari kecurangan serta unsur-unsur yang dapat
menyebabkan kecurangan berdasarkan fraud diamond. Dalam penelitian ini
kecurangan yang dilakukan pengujian adalah atas kecurangan pelaporan keuangan
dengan melihat unsur-unsur penyebabnya berdasarkan fraud diamond.
2. Research Question/Statement
Unsur-unsur apa saja dari fraud diamond (tekanan, peluang, rasionalisasi, dan
kemampuan) yang mempengaruhi pelaporan keuangan yang curang?
3. Hyphotesis
H1 : Tekanan berpengaruh positif terhadap kecurangan pelaporan keuangan
H2 : Peluang berpengaruh positif terhadap kecurangan pelaporan keuangan
H3 : Rasionalisasi berpengaruh positif terhadap kecurangan pelaporan keuangan
H4 : Kemampuan berpengaruh positif terhadap kecurangan pelaporan keuangan

29
 4. Variables
Variabel dependen dalam penelitian ini adalah kecurangan pelaporan keuangan
(Y) yang diproksikan dengan F-Score yang telah ditentukan oleh Dechow et al.
(2011). F-Score digunakan untuk mengukur kecurangan pelaporan keuangan
dilihat dari kualitas akrual dan kinerja keuangan. Kualitas akrual dihitung dengan
akrual RSST, yaitu perhitungan akrual milik Richardson et al. (2006), sedangkan
kinerja keuangan diukur berdasarkan pengukuran milik Skousen et al. (2009).
Selanjutnya variabel independen adalah sebagai berikut:
Tekanan (X1) dalam penelitian ini diproksikan dengan persentase kepemilikan
saham pada perusahaan yang dimiliki oleh orang dalam yaitu dengan menghitung
saham yang dimiliki oleh manajemen dibagi saham biasa yang beredar.
Peluang (X2) dalam penelitian ini diproksikan dengan rasio dari total persediaan
yaitu dengan membagi persediaan tahun ini dengan penjualan tahun ini dikurangi
pembagian persediaan dengan penjualan di tahun sebelumnya.
Rasionalisasi (X3) dalam penelitian ini, rasionalisasi diproksikan dengan Beneish
Model (1999) yaitu total accrual to total asset ratio.
Kemampuan (X4) dalam penelitian ini diproksikan dengan pergantian direksi
perusahaan. X4 diukur dengan menggunakan variabel dummy yaitu perusahaan
itu melakukan pergantian pengurus selama periode 2011-2014 akan diberi nilai 1,
sedangkan jika tidak ada perubahan pada direksi perusahaan selama periode
2011–2014 akan diberi nilai 0.
D. Methodology
Penelitian ini dilakukan dengan metode kuantitatif menggunakan teknik analisis data
regresi linier berganda.
E. Data and Method
1. Populasi dan Sampel
Jenis data yang digunakan dalam penelitian ini adalah data kuantitatif yang berupa
laporan keuangan perusahaan itu telah dipublikasikan di situs resmi Bursa Efek
Indonesia. Sedangkan sumber datanya adalah sekunder data yaitu Laporan
Keuangan Tahunan perusahaan manufaktur yang terdaftar di Bursa Efek
Indonesia. Populasi dalam penelitian ini adalah perusahaan non keuangan yang
bergerak di sektor manufaktur yang terdaftar di PT Bursa Efek Indonesia (BEI)

30
 periode 2011-2014. Sedangkan sampel dalam penelitian dipilih menggunakan
teknik nonprobability sampling dengan metode purposive sampling, dengan
kriteria sebagai berikut:
1) Perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia masing-masing
selama periode 2011-2014.
2) Perusahaan manufaktur yang mempublikasikan laporan keuangan tahunan di
website perusahaan atau website BEI selama periode 2011-2014 yang
dinyatakan dalam rupiah (Rp.).
3) Laporan keuangan tahunan yang memiliki data yang berkaitan dengan variabel
penelitian (data keseluruhan tersedia dalam publikasi selama periode 2011-
2014).
4) Perusahaan manufaktur yang tidak delisting dari BEI selama periode observasi
(2011-2014).
5) Perusahaan manufaktur yang memiliki insider ownership selama periode 2011-
2014.
Terdapat 106 perusahaan manufaktur yang terdaftar berturut-turut selama periode
pengamatan 2011-2014. Namun, dari total sampel hanya 19 perusahaan
manufaktur yang memenuhi semua kriteria untuk menentukan sampel penelitian.
Periode penelitian adalah empat tahun observasi (2011-2014) sehingga jumlah
sampel yang digunakan dalam penelitian ini penelitian berjumlah 76 sampel.
2. Metode Pengumpulan Data
Metode pengumpulan data penelitian ini diperoleh melalui data perusahaan
seperti laporan keuangan perusahaan (data sekunder).
F. Findings
Berdasarkan hasil pengujian hipotesis pertama (H1) dapat disimpulkan bahwa
tekanan diproksikan dengan persentase kepemilikan saham oleh orang dalam tidak
berpengaruh positif terhadap kecurangan pelaporan keuangan. Ini artinya hipotesis
pertama ditolak. Hasil penelitian ini dapat dijelaskan dengan pendekatan teori
keagenan. Tekanan muncul karena keinginan para eksekutif perusahaan untuk
mendapatkan kompensasi yang besar atas pekerjaannya. Berdasarkan teori keagenan,
membuat eksekutif senior menjadi pemilik bagian perusahaan melalui kompensasi
paket adalah salah satu cara untuk menjembatani konflik antara agen dan prinsipal.

31
Dengan membuat eksekutif senior menjadi pemilik bagian perusahaan, mereka akan
bekerja untuk meningkatkan kinerja keuangan entitas. Begitu, Ketika perusahaan
memiliki kinerja keuangan yang baik, itu juga akan menguntungkan para eksekutif
senior karena keuangan Kondisi entitas juga akan mempengaruhi kondisi
keuangannya sebagai pemilik sebagian perusahaan.
Berdasarkan hasil pengujian hipotesis kedua (H2) dapat disimpulkan bahwa peluang
diproksikan dengan rasio total persediaan berpengaruh positif terhadap kecurangan
pelaporan keuangan. Artinya yang hipotesis kedua diterima. Temuan penelitian ini
mendukung teori kecurangan yang digunakan dalam penelitian ini seperti yang
dikemukakan oleh ACFE (2012) bahwa penyelewengan aset merupakan salah satu
tipologi penipuan. Jika jumlah persediaan yang disimpan terlalu banyak, maka hal ini
akan mengurangi solvabilitas karena dana yang digunakan untuk menambah
persediaan harus bisa dialihkan penggunaannya untuk perluasan atau untuk
operasional perusahaan, dapat meningkatkan biaya penyimpanan, biaya sewa
gudang, dan biaya asuransi.
Jumlah persediaan berpengaruh signifikan terhadap kecurangan pelaporan keuangan.
Sehingga dapat disimpulkan bahwa peluang merupakan variabel utama yang
mendorong terjadinya kecurangan pelaporan keuangan.
Berdasarkan hasil pengujian hipotesis ketiga (H3) dapat disimpulkan bahwa
rasionalisasi yang diwakili oleh rasio total akrual terhadap total aset berpengaruh
positif terhadap pelaporan keuangan yang mengandung kecurangan. Ini artinya
hipotesis ketiga diterima. Temuan penelitian ini mendukung teori fraud diamond
yang digunakan dalam penelitian ini. Penelitian ini yang menyatakan bahwa
rasionalisasi sebagai salah satu unsur penipuan merupakan unsur penting dalam
terjadinya penipuan. Menurut Beneish (1999), total akrual akan mempengaruhi
pelaporan keuangan yang mengandung kecurangan karena akrual sangat dipengaruhi
oleh keputusan manajemen dalam merasionalisasi laporan keuangan.
Berdasarkan hasil pengujian hipotesis keempat (H4) dapat disimpulkan bahwa
kemampuan perubahan direksi perusahaan tidak berpengaruh positif terhadap
kecurangan pelaporan keuangan. Ini berarti bahwa hipotesis keempat ditolak.
Temuan dalam penelitian ini tidak dapat membuktikan bahwa kemampuan adalah
penyebabnya pelaporan keuangan yang curang. Hal ini kemungkinan besar karena

32
 pergantian dewan direksi di bidang manufaktur perusahaan sebagai sampel penelitian
merupakan pergantian direksi rutin dimana anggota dewan yang baru berasal dari
internal perusahaan. Setelah pergantian dewan direksi, beberapa anggota dewan
direksi lama direksi mendapatkan posisi baru di perusahaan sebagai anggota dewan
komisaris.
G. Conclusions
Berdasarkan hasil analisis dan pembahasan data, dapat disimpulkan sebagai berikut:
1) Tekanan tidak berpengaruh pelaporan keuangan yang curang. Ini menunjukkan
bahwa kepemilikan saham oleh orang dalam tidak serta merta memicu manajemen
atau eksekutif senior untuk melakukan pelaporan keuangan yang curang.
2) Peluang mempengaruhi pelaporan keuangan yang curang. Temuan ini
menunjukkan bahwa semakin besar peluang bagi manajemen untuk berkomitmen
kecurangan, semakin besar risiko terjadinya kecurangan pelaporan keuangan di
perusahaan. Dalam penelitian ini peluang diciptakan oleh lemahnya pengendalian
manajemen persediaan menjadi penyebab utama pelaku melakukan kecurangan
keuangan pelaporan.
3) Rasionalisasi berpengaruh pada kecurangan pelaporan keuangan. Temuan ini
menunjukkan bahwa rasionalisasi manajemen merupakan elemen penting dalam
terjadinya kecurangan pelaporan keuangan di perusahaan. Rasionalisasi
manajemen dalam penilaian subjektif dan pengambilan keputusan perusahaan
terkait penggunaan prinsip akrual terbukti meningkatkan risiko manajemen dalam
melakukan pelaporan keuangan yang mengandung kecurangan.
4) Kemampuan tidak mempengaruhi pelaporan keuangan yang mengandung
kecurangan. Ini menunjukkan bahwa penggantian direksi perusahaan bukan
merupakan indikasi utama bahwa telah terjadi kecurangan pelaporan keuangan
perusahaan. Hal ini dapat disebabkan karena pergantian direksi di perusahaan
sampel merupakan pergantian rutin, dimana anggota dewan baru berasal dari
internal perusahaan. Jadi alasan pergantian dewan direksi bukan karena direksi
lama memiliki kinerja yang buruk, tetapi karena peran jabatan dalam struktur
dewan direksi.

33
H. Recommendations
Direksi sebagai proksi untuk pengukuran kemampuan dalam penelitian ini setelah
proses uji analisis data dilakukan, maka pergantian direksi yang terjadi di perusahaan
sampel hanyalah pergantian direksi secara rutin. Berdasarkan hal tersebut maka saran
yang dapat diberikan kepada peneliti selanjutnya adalah peneliti bisa kemudian
pertimbangkan untuk menggunakan dewan direksi non-rutin sebagai proksi untuk
mengukur kemampuan
I. Further Researches
Untuk masa depan peneliti yang berminat melakukan penelitian serupa atau yang
ingin mengembangkan penelitian ini bisa mempertimbangkan berbagai teknik
analisis data dan proksi pengukuran, seperti menggunakan analisis regresi logistik,
menggunakan Model Jones yang dimodifikasi sebagai proksi untuk pelaporan
keuangan yang curang, dan proksi pengukuran lainnya yang dapat digunakan dalam
penelitian lebih lanjut.

34
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from Malaysia. Accounting Research Journal, 32(3), pp. 514-531, Emerald
Publishing Limited, 1030-9616.

Yulistyawati, N. K. A., Suardikha, I. M. S., & Sudana, I. P. 2019. The analysis of the
factor that causes fraudulent financial reporting with fraud diamond. Jurnal
Akuntansi dan Auditing Indonesia, 23(1), 1-10.
https://doi.org/10.20885/jaai.vol23.iss1.art

35

ARJ
32,3
514
Received 5 February 2018
Revised 23 June 2018
24 August 2018
Accepted 25 September 2018
Accounting Research Journal
Vol. 32 No. 3, 2019
pp. 514-531
© Emerald Publishing Limited
1030-9616
DOI 10.1108/ARJ-02-2018-0024
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1030-9616.htm
Corporate governance, board
ethnicity and financial statement
fraud: evidence from Malaysia
Noorul Azwin Binti Md Nasir
Universiti Malaysia Kelantan, Pengkalan Chepa, Malaysia
Muhammad Jahangir Ali
Department of Accounting, La Trobe University, Melbourne, Australia, and
Kamran Ahmed
Department of Accounting, La Trobe University College of Arts Social Sciences and
Commerce, Bundoora, Australia
Abstract
Purpose – This study aims to examine the relationship between the presence of a Malay director on the
board and financial statement fraud in Malaysia. Further, the authors investigate whether financial statement
fraud firms improve their governance mechanisms compared to non-fraud firms subsequent to the fraud year.
Design/methodology/approach – The authors use hand-collected data comprising 76 financial
statement fraud and 76 non-fraud firms over a period of eight years from 2001 to 2008.
Findings – Using a univariate and logistic regression model, the results demonstrate a significant positive
relationship between the proportion of Malay directors on the board and the financial statement fraud. The
authors also find that fraud firms significantly increase the proportion of independent directors on their
boards, increase the frequency of board and audit committee meetings and reduce duality subsequent to the
detection of financial statement fraud compared to the non-fraud firms.
Originality/value – The findings of the study are useful to policy-makers, regulators, firms and investors.
Keywords Corporate governance, Malaysia, Ethnicity, Financial statement fraud
Paper type Research paper
1. Introduction
Over the past decade, several cases of financial statement fraud involving Enron, Parmalat,
Global Crossing and WorldCom and their subsequent collapse have received considerable
attention from regulators, practitioners and academics all over the world. Emerging
countries such as Malaysia have experienced their share of financial fraud. KPMG Malaysia
(2009) estimated that the valuation arising from financial statement fraud was around
RM63.5m (approximately US$16m). Examples of high-profile firms that were recently
convicted for financial statement fraud in Malaysia are Gula Perak, MEMS Technology,
PuncakNiaga, Golden Land and Actacorp (Muhamad et al., 2009). Financial reporting fraud
has severe economic consequences. Firstly, it negatively affects employees, creditors and
The authors would like to acknowledge the comments and suggestions received from the reviewers of
the Accounting Research Journal and the participants at the seminar of Department of Accounting
and Data Analytics, La Trobe University, and AFAANZ Conference, 2014, on the earlier versions of
the paper.
investors, and secondly, it weakens the reliability of corporate financial statements and Board
confidence in financial markets (Perols and Lougee, 2011). ethnicity
Prior research argues that the reasons for financial statement fraud are a weak corporate
governance mechanism (García Lara et al., 2009). A weak corporate governance mechanism
may be described as having fewer independent directors on the board (Beasley, 1996), lack of
directors with financial expertise on the board (Agrawal and Chadha, 2005), firms whose
board members are highly dominated by the management (Dechow et al., 1996) and
infrequent number of board meetings (Xie et al., 2003). Furthermore, it is argued that 515
directors’ remuneration is likely related to financial statement fraud (Erickson et al., 2004).
The audit committee also plays an important role in the corporate governance mechanisms
to help detect financial statement fraud (Goodwin-Stewart and Kent, 2006). The smaller ratio
of independent directors on the audit committee (Abbott et al., 2002; Persons, 2005), audit
committee lacking accounting and financial expertise (Moyes and Hasan, 1996), few audit
committee meetings (Owens-Jackson et al., 2009) and larger external audit fees (Srinidhi and
Gul, 2006) indicate the existence of weak corporate governance mechanisms. Further,
Lennox and Pittman (2010) find that firms appointing Big 5 external audit firms are less
likely to be involved in financial statement fraud. It is also argued that firms may increase
the risks of financial statement fraud by outsourcing their internal audit services (Coram
et al., 2008). Although these studies broadly focus on developed countries, the uniqueness of
Malaysian institutional setting allows us to examine the effect of board ethnicity, especially
the Malay directors on the board and financial statement frauds.
Malaysia is an emerging country comprising people from different religious beliefs and
ethnic origin. The Malaysian Code of Corporate Governance (MCCG) is, however,
constructed following the context from the developed countries. It is argued that imitating
the corporate governance practice from countries that have different formation is
inappropriate with the Malaysian unique framework (Ponnu and Karthigeyan, 2010) and
may be the cause for financial statement fraud. This is consistent with the argument of
Aggarwal et al. (2008) who posit that corporate governance of a country is dependent on a
country’s laws, culture, norms and regulatory bodies which are responsible to enforce
corporate governance regulation as well firm-level mechanisms.
The Asian Roundtable on Corporate Governance (ARCG) issued a white paper on corporate
governance in Asia in 2003, containing a set of common policy, objectives and a number of
recommendations, emphasising on improving governance control mechanisms to protect
minority shareholders and improve financial reporting standards. Malaysia implemented most
of the recommendations, including the MCCG. Further, the government of Malaysia established
many agencies, such as the Companies Commission of Malaysia (CCM), Securities Commission
of Malaysia (SCM), Bursa Malaysia and Malaysian Institute of Accountants (MIA) to ensure
that financial reporting in Malaysian firms reflect acceptable global standards to retain and
attract potential investors. However, despite all these efforts, there has been an increasing
number of financial statement fraud cases in Malaysia (Lau and Ooi, 2016).
Using Malaysian data, Yatim et al. (2006) find that the ethnicity factor influences the
strength of corporate governance in a firm. Recently, Shan et al. (2013) investigated the
effects of internal governance mechanisms on fraud firms. Although prior research finds
that weak governance caused financial statement fraud, it is yet to be assessed how ethnicity
of board members affects the occurrence of financial statement fraud. We aim to fill this gap.
Further, despite the fact that many financial statement fraud firms are still in operation,
limited studies have been carried out to investigate the changes and improvements made in
the financial statement fraud firms’ corporate governance mechanisms subsequent to
financial statement fraud conviction by the regulatory authority. Farber (2005) argues that
ARJ little is known about the actions taken by the financial statement fraud firms to improve
32,3 their corporate governance mechanisms after committing financial statement fraud.
Therefore, we further investigate such changes in corporate governance mechanisms
implemented by the fraud firms subsequent to the financial statement fraud year.
Using a hand-collected sample comprising 76 financial statement fraud and 76 non-fraud
firms over a period of eight years from 2001 to 2008, our results demonstrate significantly
516 lower likelihood of financial statement fraud when firms have lower percentage of Malay
directors on board. We also find that fraud firms have significantly increased the proportion
of independent directors on the board, increased the frequency of board and audit committee
meetings and reduced duality following the detection of financial statement fraud compared
with the non-fraud firms.
Our study contributes to the body of research on corporate governance in several ways.
First, Malaysia is a unique country and profoundly influenced by the Malays as the main
ethnicity. The effect of the multicultural beliefs, values and norms from the different ethnic
backgrounds in corporate governance mechanisms is believed to result in differences in the
accounting practice (Ball et al., 2003). Evidence presented in our study enhances the
knowledge about the quality of the corporate governance mechanism in the ethnicity
context. Therefore, we argue that diverse institutional and cultural differences likely lead to
distinct relationship between corporate governance mechanisms and financial statement
fraud. Second, the outcomes of our study will provide some insights whether the corporate
governance practices of fraud firms have improved after the detection of fraud. This is due to
the fact that regulators such as Bursa Malaysia and Securities Commission are concerned to
improve the financial reporting quality in Malaysia. Lastly, the findings of our study will
help investors to become aware about weak corporate governance practices of a company
that may lead to financial statement fraud. Therefore, investors will likely invest in a
company which has better corporate governance practice.
The remainder of the paper is organised as follows. Section 2 presents prior research and
the development of hypotheses. Section 3 details the research methodology. We describe the
results of our study in Section 4. Section 5 concludes the paper.

2. Prior research and hypotheses development

2.1 Board ethnicity and financial statement fraud
Malaysia is multi-ethnic and multi-cultural society, and that diversity is operationalised in
this study. We argue that the ethnicity factor in the board of director structure impact on the
occurrence of financial statement fraud. The population in Malaysia is 28.3 million and
consists with three major races which are Malays (67.4 per cent), Chinese (24.6 per cent) and
Indians (7.3 per cent) (Department of Statistics Malaysia, 2013). Different beliefs and values
can be found being practiced for each ethnicity. Hofstede (1983) argues that difference in
value leads to different approaches in structuring firm, motivating individual in a firm and
dealing with issues in firm. Iskandar and Pourjalali (2000) also contend that every ethnic
group has dissimilar beliefs and practical values. To put it differently, it means that the
proportion of ethnicity on board results in dissimilar risk of committing financial statement
fraud. Gray (1988) developed the Hofstede–Gray framework, which states that the Malays
are more secretive compared to the Chinese, resulting lower disclosure. Moreover, Abdullah
(2006) provides evidence that the Malays have lower individualism characteristics compared
to the Chinese. The extant research documents a positive relationship between ethnic
diversity, internal diversity within Islam and firm financial performance in Malaysia
(Hassan and Marimuthu, 2018; Cheong and Sinnakkannu, 2014; Abdullah and Ismail, 2013a,
2013b). In contrast, Rahman and Ali (2006) find that firms with higher proportion of Malay Board
on board are likely to involve in earnings management. ethnicity
On the basis of the above discussion, we formulate the following hypothesis:

H1. Firms with lower proportion of Malay director on board is less likely to engage in
financial statement fraud.
517
2.2 Corporate governance following the detection of financial statement fraud
We further explore the corrective actions taken by firms following the financial statement
fraud year. It is argued that any corrective actions performed by the firm is a sign that it
takes corporate governance matters seriously (Farber, 2005). The regulatory body, the SCM,
significantly contributes to influence and became controlling mediators that prevent
financial statement fraud by sharing the best practices of corporate governance mechanisms
(Wahab et al., 2007). The SCM encourages firms to establish strong internal controls by
providing adequate training employees to recognize the early warning signs of financial
statement fraud. As the SCM and MIA exert pressure on fraud firms to improve their
corporate governance practices, it is expected that financial statement fraud firms are likely
to upgrade their governance quality after fraud has been detected, to avoid subsequent
financial statement irregularities being uncovered.
Firms that are sentenced with financial statement fraud conviction faced a number of
commonness. For instance, apart from public criticisms, the fraud firm may lose current and
potential investors, share prices falls, intense scrutiny by the auditor and license for operations
may be revoked. Thus, to gain public trusts and improve reputations, a number of fraud firms
make changes in their corporate governance mechanisms. A case study on Satyam Computers
Limited by Bhasin (2016) finds that the firm reappoints their board members and top-level
managers after the scandals. In addition, the firm has made a decision to separate the role of
CEO and chairman of the board. When the Enron Corporation collapsed, the chief financial
officer was replaced. According to Goldberg (2001), these changes were made to restore
investors’ confidence. Further, Christensen and Byington (2002) posit that the selection of a new
board member is to increase shareholders’ wealth through the engagement in decision-making
activities. Hence, we develop the following hypothesis:

H2. Financial statement fraud firms are more likely to improve their corporate
governance mechanisms compared to non-fraud firms subsequent to the fraud year.

3. Research design and methods

3.1 Sampling procedures
Similar to Agrawal and Chadha (2005), we examine the financial statement fraud firms
registered as public firms with the Company Registrar of Malaysia. We use two sources to
identify these firms. First, the list of firms that are involved in financial statement fraud is
retrieved from the SCM enforcement releases. As the information from the SCM is only
available starting from 2001, based on the information of the charges, we select the firms
that commit financial statement fraud from 2001 to 2008. The variables used in this study
are based on the year the fraud occurred. In most cases, the fraud firms identified in the SCM
press release are also reported in the SCM enforcement release. The second source list of
financial statement fraud firms list is from the Bursa Malaysia enforcement release. Like
Beasley (1996), in the case where a firm is found to commit financial statement fraud more
ARJ than once in the study period, only the first case is counted as the sample. Table I shows the
32,3 identification of fraud sample used in our study.

3.2 Control samples

We use a purposive sampling method (i.e. financial statement fraud firms) which involves a
one-to-one matching process. Following Beasley (1996), we identify the control samples[1]. We
518 use the score created by Charitou et al. (2004) to determine whether a firm is healthy or weak in
the selected fraud year and the year before, and only healthy firms are selected as the matched
control firm. Table II profiles the financial statement fraud firms and matching control firms.
The 76 financial statement fraud firms are matched with 76 firms free from financial statement
fraud charges and risks over eight years (608 firms). It shows that the financial statement fraud
and non-fraud firms do not differ significantly based on the total assets and revenue.

3.3 Dependent variable – financial statement fraud (FSF)

Following Treadway Commission (1987), we define a financial statement fraud (FSF) as
delays in disclosing information, failure to disclose information and fabrication of
accounting details. Firms are classified as delaying information disclosure when they are
involved in late announcement of purchase and sales activity and also fail to disclose
significant transactions within the stipulated period. Failure to disclose information refers to
activities such as concealment of share acquisitions and disposal as well as concealment of
purchasing and sales activity. In the matter of fabricating accounting details, firms fail to
provide factual, clear, unambiguous, accurate, succinct and sufficient financial statement
information. The firms are also suspected of providing inaccurate related party transactions.

3.4 Model specification

We use a binary-logit regression model to test the hypothesised relationship between
corporate governance mechanisms and the occurrence of an FSF. The model specification is
shown below:

FSF ¼ a þ b 1 DETHNICi þ b 2 DINDEPi þ b 3 DEXPERTi þ b 4 DINSIDEi

þ b 5 DUALITYi þ b 6 DMEETi þ b 7 DREMUNi þ b 8 AINDEPi

þ b 9 AEXPERTi þ b 10 AMEETi þ b 11 AETHNICi þ b 12 BIG4i

þ b 13 AFEEi þ b 14 AINTi þ b 15 LEVi þ b 16 RPTi þ b 17 SIZEi þ « i

(1)

where:
FSF = 1 for firm subject to FSF; otherwise, 0;
DETHNIC = the percentage of Malay directors on board;
DINDEP = the percentage of independent directors on the board;
DEXPERT = the percentage of directors with accounting or financial expertise;
DINSIDE = the percentage of directors who serve on the management;
DUALITY = 1 for chairman who also serves as the CEO; otherwise, 0;
DMEET = the number of boards meetings each year;
DREMUN = natural log of directors’ remuneration;
AINDEP = the percentage of independent directors on the audit committee;
Panel A: Identification of FSF firms from 2001 to 2008
Board
Source 1: SCM ethnicity
Number of firms in SCM enforcement releases 63
Less:
Private listed firms 22
Financial institutions/banks 4
Non-fraud cases 22 48
15 519
Add:
FSF reported in SCM press release, but not in enforcement release 10
Total number of FSF firms identified by the SCM 25
Source 2: Bursa Malaysia
Number of firms in Bursa Malaysia enforcement releases 896
Less:
Financial institutions/banks 10
Non-fraud cases 806 816
Total number of fraud firms identified by Bursa Malaysia 80
115
Less:
FSF reported in both SCM and Bursa Malaysia enforcement releases (redundant cases) 8
Total number of FSF firms identified 97
Less:
Unavailable/incomplete data 21
Final FSF sample 76
Panel B: Number of FSF firms: based on the year in which fraud was committed
Year SCM Bursa Malaysia Total (%)
2001 2 5 7 9.2
2002 1 4 5 6.6
2003 2 6 8 10.5
2004 3 7 10 13.2
2005 0 4 4 5.3
2006 2 5 7 9.2
2007 2 17 19 25.0
2008 1 15 16 21.1
Total 13 63 76 100.0
Panel C: FSF firms by industry and year
Industry 2001 2002 2003 2004 2005 2006 2007 2008 Total
Agriculture, forestry and fishing 1 0 0 1 1 0 2 2 7
Construction 1 1 1 0 1 2 2 1 9
Manufacturing 4 2 3 5 1 1 10 9 35
Services 0 0 1 3 1 1 3 1 10
Wholesale trade 1 1 0 0 0 3 1 1 7
Real estate 0 1 3 1 0 0 1 2 8
Total 7 5 8 10 4 7 19 16 76 Table I.

AEXPERT = the percentage of audit committee members with accounting or financial

expertise;
AMEET = The number of audit committee meetings yearly;
AETHNIC = the percentage of Malay in audit committee; BIG4 = 1 for firms that appoint
Big 4 audit firms; otherwise, 0;
AINT = 1 for outsourcing internal audit function; otherwise, 0;
AFEE = natural log of audit fees;
ARJ Ringgit Malaysia (RM) in thousands
32,3 76 fraud firms 76 Non-fraud firms
Mean Mean t-statistic
(Median) (Median) z-value
{SD} {SD}
Min Min
520 [Max] [Max]

Total assets 399,834 375,555 0.396

(213,293) (95,217) 0.440
{387,197} {368,664}
56,105 71,166
[1,251,526] [1,271,439]
Revenue 166,159 211,488 1.371
(88,020) (149,741) 0.201
{183,659} {222,115}
7,076 13,019
[642,702] [848,248]
Match based on USSIC codes: No. of firms
Four-digit 37
Table II. Three-digits 17
Matching of total Two-digit 22
assets, revenue and Total 76
SIC code between Notes: FSF firms are matched with control firms on the basis of year, total assets, SIC code and listing
FSF and non-fraud group. The t-statistic is for the difference between the means of the matched pairs. The z-value is for the
firms Mann–Whitney signed rank test to evaluate differences in medians

LEV = total debts to total assets;

RPT = related party transaction to total assets;
SIZE = natural log of total sales; and
« = error term.
We further investigate the changes in corporate governance mechanisms in FSF firms. The
analysis uses a one-to-one sample matching procedure. Cross-sectional analysis and
univariate mean comparison are conducted on FSF firms and control firms to detect possible
weaknesses in the practices of corporate governance mechanisms. Then, the mechanisms of
corporate governance after a year of fraud committed are compared with corporate
governance practices during the fraud year. To ensure the improvement adds value and
meets the benchmark, the post-corporate governance mechanisms should be at least similar
to the non-fraud firms during the fraud year.

4. Results and discussion

4.1 Descriptive statistics
Table III reports that Malay directors on board (DETHNIC) is found to be higher in the FSF
firms compared to the non-fraud firms. For other corporate governance variables, it
demonstrates that the non-fraud firms have better corporate governance mechanisms
compared to the FSF firms with regard to DEXPERT, DINSIDE and DMEET. The table also
shows that directors in FSF firms received less remuneration compared to those working in
non-fraud firms. Although the MCCG suggests that all audit committee members should be
non-executive and the majority are independent (2007, p. 14), the descriptive results show that a
Variables Mean Median SD Skewness Minimum Maximum Board
ethnicity
Panel A: Fraud year, FSF firms
Governance variables
DETHNIC 47.489 40.000 24.962 0.736 16.667 100.000
DINDEP 43.588 42.857 13.917 0.328 16.667 62.500
DEXPERT 34.295 33.333 17.018 0.425 0.000 57.143
DINSIDE 39.250 33.333 18.658 0.823 16.667 80.000
DMEET 5.116 5.000 2.620 0.678 0.000 8.000
DREMUN 5.876 5.983 0.437 1.091 4.972 6.324 521
AINDEP 74.879 75.000 15.709 0.877 33.333 100.000
AEXPERT 41.787 50.000 23.974 0.394 0.000 66.670
AMEET 4.406 5.000 1.856 1.615 0.000 6.000
AETHNIC 46.063 50.000 32.284 0.014 0.000 100.000
AFEE 4.651 4.544 0.494 1.128 4.114 5.782
Other variables
ASSETS (RM) 517,084,523 209,036,000 1,043,588,916 5.708 15,585,000 7,776,683,000
SALES (RM) 206,852,231 90,854,000 331,965,118 3.480 367,000 1,964,975,000
LogRPT 0.170 0.013 0.446 2.681 0.001 1.485
Panel B: Fraud year, non-fraud firms
Governance variables
DETHNIC 34.126 33.333 20.729 0.307 0.000 71.429
DINDEP 40.863 42.857 17.073 1.352 30.000 83.333
DEXPERT 41.928 42.857 16.602 0.331 20.000 71.429
DINSIDE 34.115 33.333 18.172 0.434 0.000 57.143
DMEET 5.159 5.000 3.046 1.678 4.000 13.000
DREMUN 6.385 6.107 1.255 2.010 5.371 9.567
AINDEP 76.783 66.667 15.497 0.637 60.000 100.000
AEXPERT 57.729 66.667 24.413 0.457 33.330 100.000
AMEET 4.536 5.000 0.946 1.379 4.000 7.000
AETHNIC 42.101 33.333 25.713 0.307 0.000 75.000
AFEE 4.427 4.398 0.358 0.452 3.696 4.914

Other variables
ASSETS (RM) 469,229,877 195,739,000 855,260,102 5.831 36,748,000 6,531,008,000
SALES (RM) 264,168,207 163,022,000 422,332,744 4.468 8,856,000 2,901,183,000
LogRPT 0.053 0.021 0.073 1.620 0.000 0.223
Panel C: Fraud year, combine all samples
Governance variables
DETHNIC 40.807 33.333 23.823 0.657 0.000 100.000
DINDEP 45.410 42.857 15.626 0.819 16.667 83.333
DEXPERT 38.114 37.500 17.183 0.072 0.000 71.429
DINSIDE 36.683 33.333 18.529 0.221 0.000 80.000
DMEET 5.232 5.000 2.945 0.790 0.000 13.000
DREMUN 6.140 6.015 0.981 2.658 4.972 9.567
AINDEP 74.360 75.000 15.885 0.134 33.333 100.000
AEXPERT 49.517 50.000 26.075 0.052 0.000 100.000
AMEET 4.493 5.000 1.491 1.656 0.000 7.000
AETHNIC 44.082 50.000 29.145 0.048 0.000 100.000
AFEE 4.539 4.477 0.444 0.866 3.696 5.782
Other variables
ASSETS (RM) 493,157,200 205,151,500 950,681,021 5.776 15,585,000 7,776,683,000
SALES (RM) 235,510,219 116,049,000 379,462,868 4.200 367,000 2,901,183,000
LogRPT 0.111 0.016 0.324 3.942 0.000 1.485

Notes: Where: DINDEP = the percentage of independent directors on the board, DEXPERT = the percentage of
directors with accounting or financial expertise, DINSIDE = the percentage of directors who serve on the
management, DETHNIC = the percentage of Malay directors on board, DMEET = the number of board
meetings yearly, DREMUN = natural log of director’s remuneration, AINDEP = the percentage of independent Table III.
directors on the audit committee, AEXPERT = the percentage of audit committee members with accounting or
financial expertise, AETHNIC = the percentage of Malay auditor in committee, AMEET = the number of audit Descriptive statistics
committee meetings yearly, AFEE = natural log of audit fees, ASSET = the value of total assets, SALES = the of FSF and non-fraud
value of total sales, RPT = related party transactions firms
ARJ number of FSF firms have only 33.33 per cent of independent audit committee directors. As
32,3 expected, there are cases where audit committee in FSF firms do not have members with
accounting or financial expertise (AEXPERT), have less audit committee meetings (AMEET)
and pay higher audit fees (AFEE) compared to the non-fraud firms.

4.2 Univariate statistics

522 Independent sample t-tests are conducted to examine the differences the corporate
governance mechanisms between FSF and non-fraud firms during the fraud year. The table
confirms that the corporate governance mechanisms, including DETHNIC, DEXPERT,
DREMUN, AEXPERT, AMEET, BIG4 and AINT, in non-fraud firms are stronger than the
FSF firms. These results are consistent with Farber (2005), who shows that FSF firms have
weaker corporate governance mechanisms compared to non-fraud firms in the year of fraud.
Interestingly, the results show that the percentage of independent directors on the board
(DINDEP) is greater in FSF firms. Furthermore, FSF firms have less DUALITY because they
generally separate the chairman and CEO positions. These results suggest that it is not
sufficient to rely only on independent directors and avoiding duality to improve the quality
of financial reporting (Table IV).

4.3 Correlation matrix

Table V shows that the FSF is positively is related to DETHNIC, DIINSIDE and RPT, but
negatively related to DMEET, DREMUN, AINDEP, AEXPERT, AMEET, BIG4 and AFEE.
The highest absolute correlation of between AEXPERT and DEXPERT is 0.577. The results
presented in Table VI indicate that none of the VIF values exceeded the critical value of 10,
indicating that multicollinearity does not constitute a problem in the model[2].

4.4 Regression results

4.4.1 Associations between ethnicity and financial statement fraud. Table VI confirms that
the proposition of positive relationship between the proportion of Malay directors on board

Independent variables FSF (T0) Non-fraud (T0) t-statistic Mean difference

Continuous variables
DETHNIC 47.489 34.126 3.421*** 13.363
DINDEP 43.588 40.863 1.299***
DEXPERT 34.295 41.928 2.667*** 7.633
DINSIDE 39.250 34.115 1.638 5.134
DMEET 5.116 5.159 0.1333 5.134
DREMUN 5.876 6.385 3.361*** 0.509
AINDEP 74.879 76.783 0.644 1.903
AEXPERT 41.787 57.729 4.084*** 15.942
AMEET 4.406 4.536 0.587** 0.130
AETHNIC 47.512 42.101 1.056 5.411
AFEE 4.651 4.427 3.052** 0.224
Table IV.
Independent sample Dummy variables (%) (%) (%)
t-test: Corporate DUALITY 18.88 20.29 0.528 1.41
governance BIG4 53.62 78.26 3.139* 24.64
AINT 56.52 53.62 0.340 2.90
mechanisms between
N 76 76
FSF and non-fraud
firms during the FSF Notes: ***Significant at the 1 per cent level, **significant at the 5 per cent level, *significant at the 10 per
year cent level. See Table III for variables’ definitions
Variables FSF AETHNIC DINDEP DEXPERT DINSIDE DUALITY DMEET DREMUN AINDEP AEXPERT

FSF 1 0.068 0.118 0.223* 0.182** 0.103 0.277*** 0.297*** 0.205** 0.381***
DETHNIC 0.065 0.177** 0.089 0.138 0.228*** 0.218** 0.038 0.032 0.067
DINDEP 1 0.177** 0.221** 0.48 0.342*** 0.165* 0.28*** 0.209**
DEXPERT 1 0.083 0.107 0.343*** 0.065 0.157* 0.577***
DINSIDE 1 0.002 0.214** 0.123 0.047 0.042
DUALITY 1 0.011 0.073 0.077 0.091
DMEET 1 0.045*** 0.218*** 0.0478***
DREMUN 1 0.109 0.211**
AINDEP 1 0.376
AEXPERT 1
AMEET
AETHNIC
BIG4
AFEE
AINT
LEV
RPT
SIZE

Notes: ***Correlation is significant at the 0.01 level (two-tailed), **correlation is significant at the 0.05 level (two-tailed), *correlation is significant at the 0.10
level (two-tailed). FSF = 1 for subject of FSF; otherwise, 0. See Table III for other variables’ definitions
(continued)

Pearson correlation
coefficient matrix
Table V.
523
ethnicity
Board
 32,3
ARJ

524

Table V.
Variables AMEET BIG4 DETHNIC AFEE AINT LEV RPT SIZE

FSF 0.176** 0.26*** 0.068 0.268*** 0.037 0.181 0.181** 0.192**

DETHNIC 0.035 0.034 0.065 0.125** 0.133 0.195** 0.161 0.004
DINDEP 0.069 0.034 0.116 0.136 0.018 0.08 0.032 0.062
DEXPERT 0.042 0.012 0.047 0.099 0.15* 0.055 0.007 0.007
DINSIDE 0.061 0.045 0.058 0.097 0.04 0.069 0.089 0.059
DUALITY 0.009 0.079 0.065 0.202** 0.07 0.011 0.072 0.047
DMEET 0.293 0.031 0.115 0.095 0.058 0.001 0.131 0.313***
DREMUN 0.12 0.093 0.098 0.124 0.182** 0.082 0.038 0.38***
AINDEP 0.074 0.051 0.024 0.071 0.094 0.055 0.004 0.104
AEXPERT 0.124 0.059 0.065 0.089 0.123 0.112 0.037 0.177
AMEET 1 0.13 0.124 0.14 0.083 0.051 0.158* 0.307
AETHNIC 1 0.103 0.18** 0.126 0.128 0.097 0.107
BIG4 1 0.045 0.065 0.041 0.111 0.109
AFEE 1 0.199** 0.196** 0.11 0.198**
AINT 1 0.152* 0.119 0.19**
LEV 1 0.2** 0.061
RPT 1 0.02
SIZE 1
 95% Confidence
Board
Predicted Standard Odds interval for EXP(B) ethnicity
Variables signs Coefficient errors ratio Lower Upper VIF

Constant ? 3.960 0.360 0.019

DETHNIC þ 0.083 13.076*** 1.086 1.039 1.136 2.943
DINDEP  0.015 0.479 0.985 0.943 1.028 1.215
DEXPERT  0.010 0.206 0.990 0.948 1.034 1.292 525
DINSIDE þ 0.057 10.610*** 1.058 1.023 1.095 1.254
DUALITY þ 0.529 0.516 1.697 0.401 7.186 1.124
DMEET  0.046 0.101 0.955 0.718 1.269 1.614
DREMUN  1.630 5.126** 0.196 0.048 0.803 1.336
AINDEP  0.012 0.338 0.988 0.950 1.028 1.204
AEXPERT  0.035 4.995** 0.966 0.937 0.996 1.654
AMEET  0.482 4.252** 0.618 0.391 0.976 1.563
AETHNIC þ 0.032 5.729** 0.969 0.944 0.994 2.565
BIG4 – 1.937 10.279*** 0.144 0.044 0.471 1.117
AFEE þ 3.284 11.919*** 26.675 4.135 172.077 1.291
AINT þ 1.270 3.881** 3.560 1.006 12.591 1.17
LEV ? 0.188 0.276 1.207 0.598 2.434
RPT ? 1.144 1.036 3.138 0.347 28.397
SIZE ? 0.156 0.057 1.169 0.301 4.540
x 2 test of model fit (omnibus test) 81.35***
Hosmer–Lemershow goodness of fit 7.978
Pseudo R2 0.663
% of correct prediction 83.3
N 152

Notes: FSF ¼ b þ b 1 DINDEPi þ b 2 DEXPERTi þ b 3 DETHNICi þ b 4 DINSIDEi

þ b 5 DUALITYi þ b 6 DMEETi þ b 7 DREMUNi þ b 8 AINDEPi þ b 9 AEXPERTi

þ b 10 AETHNICi þ b 11 AMEETi þ b 12 BIG4i þ b 13 AINTi þ b 14 AFEEi

Table VI.
Logit regression
þ b 15 LEVi þ b 16 RPTi þ b 17 SIZEi þ « i
results on FSF and
***significant at the 1 per cent level, **significant at the 5 per cent level. See Table III for variables’ corporate governance
definitions mechanisms

and the occurrence of an FSF. The results generated for this issue are probably resulted from
the original characteristics of Malay being secretive in character (Hofstede, 1983), which lead
to weak disclosure practice (Haniffa and Cooke, 2002).
In respect of other corporate governance variables, the results in Table VI indicate that
directors on the board who serve on the management (DINSIDE) are more likely to be involved in
an FSF. The table also shows that the firms with high percentage of audit committee members
with accounting and financial expertise, higher number of audit committee meetings (AMEET)
and higher directors’ remuneration (DREMUN) are less likely to be involved in an FSF. This
result supports H1 and is consistent with studies by Cohen et al. (2002), Moyes and Hasan (1996),
Owens-Jackson et al. (2009) and Guerrero (2004). It is, therefore, important to ensure the value of
directors’ remuneration is appropriate with the responsibilities held and contributions delivered.
We also find that the proportion of Malay in audit committee (DETHNIC) is negatively
associated with the FSF. This is due to the fact that the ethnic audit committee members are
bound to the profession, position held and strive to deliver their duties proficiently.
ARJ Furthermore, Table VI documents that the FSF cases are positively associated with audit
32,3 fees (AFEE), indicating that firms’ higher audit fees are more likely to report an FSF than
those firms not involved in the FSF. The finding is comparable to Geiger and Rama (2003)
who suggest that an appropriate amount of audit fees should be paid to the external auditor
so that the reports from audit works are not biased. It is also found that firms that outsource
their internal audit service are more likely to be involved in an FSF. Therefore, it is advisable
526 to retain a permanent internal audit function if firms are keen to minimize an FSF. This
finding is related to those of Abbott et al. (2007), Coram et al. (2008) and James (2003) who
emphasise that outsourcing internal audit function increases the risks of an FSF. Finally, we
find that firms using the services of a BIG 4 auditor will be less likely to engage in an FSF.
Prior research suggests that the external auditor’s ability to understand the client’s strategic
plans will avert the risk of an FSF (Nieschweitz et al., 2000; Lennox and Pittman, 2010).
However, DINDEP, DEXPERT, DUALITY, DMEET and AINDEP are not significantly
related to the occurrence of an FSF. These results are consistent with prior research,
including Chapple et al. (2007), Beasley et al. (2000), Beasley (1996), Agrawal and Chadha
(2005), Crutchley et al. (2007) and Owens–Jackson et al. (2009).
4.4.2 Comparisons of corporate governance mechanisms between financial statement
fraud firms during and subsequent to the fraud year. Table VII documents that FSF firms
have improved their corporate governance mechanisms after the FSF year. The mean
percentages of DINDEP, DEXPERT, DINSIDE, DMEET, AINDEP and AEXPERT have
significantly increased after the FSF has occurred. This result is consistent with Farber
(2005), Dunn (2004) and Dechow et al. (1996). Our results suggest that FSF firms increase the
percentage of independent directors, increase their boards’ competence by recruiting
directors who are literate in accounting and financial matters, reduce the domination of
insiders on the board to minimise FSF risks. In contrast, DETHNIC, DREMUN, AMEET and
AETHNIC do not show statistically significant results. However, the results of the mean

Independent variables FSF (T0) FSF (Tþ1) t-statistic Predicted signs Mean difference

Continuous variables
DETHNIC 47.489 45.839 1.366 – 1.650
DINDEP 43.588 46.356 2.075** þ 2.768
DEXPERT 34.295 40.265 2.713*** þ 5.970
DINSIDE 39.250 36.472 2.025** – 2.777
DMEET 5.116 6.275 2.597** þ 1.159
DREMUN 5.876 5.880 0.116 þ 0.004
AINDEP 74.879 80.029 2.150** þ 5.150
AEXPERT 41.787 49.130 2.615** þ 7.343
AMEET 4.406 5.174 2.922 þ 0.768
AETHNIC 47.512 47.440 0.030 – 0.072
AFEE 4.651 4.666 0.351 – 0.014
Dummy variables (%) (%) (%)
DUALITY 18.88 13.04 2.046** – 5.84
Table VII. BIG4 53.62 50.72 1.236 þ 2.90
AINT 56.52 57.97 0.275 – 1.45
Pair-matched sample
N 76 76
t-test: post-fraud
corporate governance Notes: ***Significant at the 1 per cent level, **significant at the 5 per cent level. See Table III for variables’
mechanisms definitions
tests support the assumption that FSF firms will improve their corporate governance Board
mechanisms subsequent to the occurrence of fraud. ethnicity
It is argued that high audit fees are likely to influence the true and fair audit decision
(Geiger and Rama, 2003). Nevertheless, univariate mean test finds that FSF firms tend not to
employ Big 4 audit firms after an FSF has occurred. Apart from the reluctance to hire any of
the Big 4 audit firms, FSF firms outsourced their internal audit function (AINT). The result
of logit regression is supported by Abbott et al. (2007), Coram et al. (2008) and James (2003).
They argue that it is more effective to have a permanent internal audit function or system in 527
place, rather than outsourcing it.
4.4.2.1 Comparisons of corporate governance mechanisms between financial statement
fraud firms after the fraud year and non-fraud firms during the fraud year. An independent
sample t-test is conducted to find the difference in corporate governance mechanisms for the
FSF and non-fraud firms. This will distinguish the level of corporate governance
mechanisms between the FSF and non-fraud firms at in the year after fraud (tþ1) and non-
fraud firms at the year of fraud (t0). Table VIII provides evidence that the corporate
governance mechanisms in terms of DINDEP, DMEET, AMEET and DUALITY in FSF
firms after the fraud year are better and stronger than the non-fraud firms during the year of
fraud. These results suggest that a number of corporate governance mechanisms have
improved in the FSF firms and better-practiced than the non-fraud firms. It is evident that
FSF firms make more effort to improve their corporate governance mechanisms so that their
financial reporting systems function better.
Nevertheless, Table VIII demonstrates that a number of corporate governance variables,
including DEXPERT, DETHNIC, DINSIDE, DREMUN, AEXPERT, AETHNIC, AFEE,
BIG4 and AINT, are weaker in regard to FSF firms even after the fraud year. The possible
explanation for lacking these corporate governance mechanisms is that firms have only a
limited understanding of the best corporate governance practices. The findings further
suggest that improvements need to be emphasised by the FSF firms if they want better
corporate governance practices to minimise such fraud.

Continuous variables Non-fraud (t0) FSF (tþ1) t-statistic Predicted signs Mean difference

DETHNIC 34.126 45.839 2.913*** – 11.713

DINDEP 40.863 46.356 2.559** þ 5.493
DEXPERT 41.928 40.265 0.525 þ 1.662
DINSIDE 34.115 36.472 0.771 – 2.357
DMEET 5.159 6.275 2.421** þ 1.116
DREMUN 6.385 5.880 3.296*** þ 0.505
AINDEP 76.783 80.029 1.226 þ 3.246
AEXPERT 57.729 49.130 2.062** þ 8.599
AMEET 4.536 5.174 2.379** þ 0.638
AETHNIC 42.101 47.440 1.079 – 5.338
Dummy variables (%) (%) (%)
DUALITY 20.29 13.04 1.233** – 7.25
BIG4 78.26 50.72 3.503** þ 27.54 Table VIII.
AINT 53.62 57.97 0.856 – 4.35
Independent sample
N 76 76
t-test: post-fraud
Notes: ***Significant at the 1 per cent level, **significant at the 5 per cent level. See Table III for variables’ corporate governance
definitions mechanisms
ARJ 4.5 Robustness checks
32,3 To generate robust results, our study has addressed normality, multicollinearity and
heteroscedasticity issues. The variables in a regression can be endogenous for several reasons,
including omitted variables and measurement errors (Green, 2008). The Hausman test is one that
helps to determine possible endogeneity problems in a regression model. In the test, the predicted
errors of each independent variable are determined. In our study, all variables are exogenous,
528 except for the variables of the percentage of directors who serve on the management (DINSIDE)
and selecting one of the Big 4 audit firms as external auditor (BIG4). Table IX presents the
t-statistic results and significance level for the corporate governance variables used in this study.
To examine the level of significance of the endogenous variables, two-stage least-squares
(2SLS) regression is conducted. The results of the 2SLS show the coefficient regarding the
percentage of directors who serve on the management is 4.171, which is not statistically
significant (p-value 0.668) to the choice of selecting a Big 4 audit firm as an external auditor.
This outcome also shows a coefficient on selecting the Big 4 audit firms as external auditors
is –0.002, which is also not statistically significant (p-value 0.756) to the percentage of
directors serving on the management. This suggests that the variables included in the
regression model are not endogenous.
5. Conclusion
We examine the relationship between corporate governance mechanisms, especially the
presence of a Malay director on the board FSF in Malaysia. We also investigate whether
changes in corporate governance mechanisms made by the fraud firms subsequent to the
FSF year occurred. The sample consists of 76 FSF and 76 non-fraud firms over a period of
eight years from 2001 to 2008. Using a univariate and logistic regression model, our results
demonstrate a significantly positive relationship between the proportion of Malay directors
on the board and the incidence FSF. This may be due to the fact that Malays are secretive,
which results weak disclosure practice, hence, associated with an FSF.
These findings of this study are likely to help policy-makers and regulators in improving
corporate governance practices for FSF firms. For example, the SCM may direct the agency
to focus on corporate governance attributes considered in this study, which needs to be re-
examined and restructured for producing better-quality financial reporting. The results also
indicate that FSF firms change their corporate governance mechanisms following the FSF

Variables t-statistic Significance level

DETHNIC 3.767 0.052

DINDEP 0.758 0.384
DEXPERT 0.533 0.465
DINSIDE 4.834 0.028**
DUALITY 0.318 0.573
DMEET 2.600 0.107
DREMUN 3.643 0.056
AINDEP 0.009 0.923
AEXPERT 2.481 0.115
AMEET 0.050 0.822
AETHNIC 1.826 0.177
BIG4 7.797 0.005**
AFEE 3.160 0.075
AINT 0.713 0.398
Table IX.
Endogeneity test Notes: **Significant at the 5 per cent level. See Table III for variables’ definitions
year. Auditors may use our study for assessing and evaluating the changes made in a firm’s Board
corporate governance mechanisms and determine whether such changes reduce an FSF. ethnicity
Similarly, the main responsibilities of the CCM are to assist businesses becoming registered
and to ensure firms operate according to the legislation and have a corporate governance
team. The findings of our study may help firms to be more aware when hiring directors on
their boards through the evidence of good corporate governance practice.
The results presented here must be considered in the context of the limitations of this
study. The current study did not consider whether the fraud firms started committing frauds 529
several years before they were identified as fraud firms by SCM and Bursa Malaysia or
began improving their corporate governance practices before detection as a financial fraud
firm by the SCM and Bursa Malaysia due to the lack of disclosure.

Notes
1. Industry code: If no four-digit SIC code firm match is identified, the three-digit SIC code is used
followed by a two-digit SIC code. Firm size: Firms are considered similar in size if the total assets are
within 630 per cent of the total assets for the fraud firm in the year preceding the FSF. Listing group:
The common stock of the FSF firm and its matched non-FSF firm trade on similar listing group
(public or non-public) and the same stock exchange (main market or ACE market). Period: Each non-
FSF firm identified in Steps 1 to 3 is matched with the year of the fraud firm commit in the FSF.
2. In a correlation test, Cooper and Schindler (2008) suggest that multicollinearity may be a problem
if the p-value is greater than 0.8 in the correlation matrix formed by the independent variables.

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Corresponding author
Muhammad Jahangir Ali can be contacted at: m.ali@latrobe.edu.au

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Contents lists available at ScienceDirect

Accounting, Organizations and Society

journal homepage: www.elsevier.com/locate/aos

Evidence on how different interventions affect juror assessment of

auditor legal culpability and responsibility for damages after auditor
failure to detect fraud*
Timothy Brown a, Tracie M. Majors c, Mark E. Peecher b, *
a
University of South Carolina, USA
b
Deloitte Professor of Accountancy, University of Illinois at Urbana-Champaign, USA
c
University of Southern California, USA

a r t i c l e i n f o a b s t r a c t

Article history: Prior research shows that, under realistic conditions, jurors overly harshly evaluate audit firm culpability
Received 26 November 2018 when financial statement fraud emerges after issuance of a clean audit opinion. In two experiments, we
Received in revised form test theory-based predictions that three topical regulatory factors can reduce jurors’ assessments of audit
7 August 2020
firm culpability as well as predictions about two key mediators through which these factors effectively
Accepted 9 August 2020
Available online xxx
operate. The three factors are an auditor judgment rule (AJR) prohibiting juror second-guessing of auditor
judgments made in good faith and with a reasonable basis, a critical audit matter (CAM) disclosure in the
audit report that pertains to the disputed area, and a juror negligence training (JNT) in which jurors learn
and apply legal concepts before the case evaluation. The two mediators are jurors’ perceptions that the
audit firm missed a readily detectable fraud (detectability) and tacitly assented to management’s
potentially fraudulent actions (acquiescence). Finally, we also test a “reactance-effects” prediction
whereby, even while the AJR and JNT interventions decrease assessed auditor culpability on average, we
expect the interventions will simultaneously increase assessed damages among the relatively small
subset of jurors finding against the audit firm in their presence relative to jurors finding against the audit
firm in their absence. Results support our predictions and also demonstrate that the mediators of
perceived detectability and acquiescence can underlie these effects.
© 2020 Elsevier Ltd. All rights reserved.

1. Introduction attorneys, interpret complex evidence, and ultimately reach con-

Juror evaluations of audit firm culpability when material mis-
statements arise after issuance of clean audit opinions are critical
tasks. Jurors receive instruction from judges as to the applicable
legal standard(s), hear arguments from plaintiff and defendant
* defensive auditing, such as avoiding clients who create value for
We appreciate helpful comments from anonymous reviewers, EB Alterio, Tim
Bauer, Sarah Bonner, Tony Bucaro, Nicole Cade, Brooke Elliott, Cassandra Estep,
Kirsten Fanning, Gary Hecht, Frank Hodge, Kim Ikuta, Bob Lawless, Andy Leipold,
Zoe-Vonna Palmrose, Jennifer Robbennolt, and Ken Trotman, as well as participants
at the 2014 American Accounting Association Audit Midyear meeting, the 2015
International Symposium on Audit Research, the Indiana University Audit Readings
Group, the University of Illinois College of Law Faculty Retreat, and workshop
participants at University of Illinois at Urbana-Champaign, University of Southern
California, and University of Washington.
* Corresponding author.
E-mail addresses: Timothy.Brown@moore.sc.edu (T. Brown), tmajors@marshall.
usc.edu (T.M. Majors), peecher@illinois.edu (M.E. Peecher).
clusions about culpability. Jurors’ conclusions, unfortunately, are
error-prone and unfairly harsh on auditors under many realistic
conditions (Donelson, Kadous, & McInnis, 2014). One remarkable
finding, for example, is that jurors hold auditors more culpable
when they objectively perform higher quality audits (Backof, 2015;
Maksymov & Nelson, 2017; Reffett, 2010). Jurors’ dysfunctional
culpability conclusions create incentives for auditors to engage in
society but present heightened auditor business risk and avoiding
innovative audit tests that would better address underlying
misstatement risk factors in favor of customary, standard tests
(Kang, Trotman, & Trotman, 2015; Peecher, Solomon, & Trotman,
2013). Uncertainty about the soundness of jurors’ conclusions in-
tensifies audit firms’ legal exposure, which heightens concern that
top talent will leave the profession in favor of less litigious voca-
tions (DeFond & Zhang, 2014; Donelson, 2013; Petersen, 2017;
Pozen, 2008; Treasury 2008; Turley, 2007). These collective

https://doi.org/10.1016/j.aos.2020.101172
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Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
2 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
concerns motivate continued investigation of interventions that
can reduce jurors’ culpability assessments and the key mediators
through which they operate.
Drawing from psychology research on lay persons’ judgments of
blameworthiness (Laurent, Nun ~ ez, & Schweitzer, 2016; Nun ~ ez,
Laurent, & Gray, 2014), we posit that two key mediators drive the
extent to which jurors find defendant audit firms culpable:
perceived fraud detectability and auditor acquiescence. We define
detectability as juror beliefs supporting the idea that the auditor
missed a readily detectable fraud, for example, because the auditor
should have foreseen that an alternative audit approach was war-
ranted. We define acquiescence as juror beliefs supporting the idea
that the auditor tacitly assented to management’s potentially
fraudulent actions, for example, by permitting aggressive ac-
counting. Nun ~ ez et al. (2014) clarify that one can conceptualize both
theorized mediators using culpable control theory, in particular, the
“blame validation hypothesis.” This hypothesis posits that, absent
any interventions, jurors’ cognitive processing favors concluding
that the audit firm defendant is to blame for the outcome (Alicke,
2000). Perceived detectability and acquiescence both elevate ju-
rors’ perceived control that the audit firm had over detecting the
material misstatement, which would have averted the third parties’
financial damages.
We advance the literature by examining three highly topical
interventions that could reduce perceived detectability and acqui-
escence and that audit regulators, standard setters, or the courts
could implement or already have begun to implement: an auditor
judgment rule (AJR), critical audit matters (CAMs), and juror
negligence training (JNT). An AJR has been proposed as a way to
mitigate excessive auditor legal exposure (similar rules already
exist for directors and psychotherapists), CAMs recently have
become mandatory (PCAOB, 2019), and juror trainings recently
have been implemented in various jurisdictions (Civil Jury Project,
2019). While our hypotheses focus on the individual effects of these
three factors and corresponding mediators, we also explore
research questions about how an AJR could interact with JNT and
CAMs.
An AJR stems from the business judgment rule, which prescribes
that corporate directors’ professional judgments should not be
second-guessed, so long as the judgments are reasonable and made
in good faith. The AJR aligns with arguments by audit commenta-
tors (e.g., Treasury, 2008; Turley, 2007), psychology scholars (e.g.,
Mumpower & Stewart, 1996), and neuroscientists (e.g., Burton,
2008) that the presence of alternative reasonable judgments (and
actions) that the auditor could have made are not, in themselves,
signs of negligence. We expect the AJR to reduce jurors’ culpability
assessments through weakening perceived detectability, the latter
occurring as jurors more fully recognize that auditors must make
tough judgment calls under conditions of high complexity and
uncertainty. Such conditions favor the existence of multiple
reasonable alternative audit actions and conclusions. Similarly, we
expect the AJR’s directive to not second-guess auditors assuming
that the auditor exercised good faith and made reasonable judg-
ments to reduce culpability assessments through weakening
perceived acquiescence, implicitly creating a default position that
the auditor acted in good faith.
Our second regulatory factor is a CAM, a newly required
disclosure in U.S. public company audit reports (PCAOB, 2019). We
expect that a CAM in the disputed area will reduce culpability as-
sessments by weakening perceived detectability, as it will cause
jurors to concede that the fraud remained undetected despite the
audit firm having understood that the area was sufficiently com-
plex and challenging to warrant public disclosure to creditors and
investors. We also expect the CAM will reduce culpability assess-
ments by weakening perceived acquiescence, as jurors likely will
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
doubt that audit firms would disclose a CAM for an area in which
they are tacitly assenting to potential management fraud.
Our third regulatory factor of JNT is whether jurors, prior to the
case evaluation, complete a training on negligence concepts. An
extensive line of legal literature has found that jury instructions
confuse untrained jurors and fail to improve their understanding of
legal concepts (e.g., Kramer & Koenig, 1990, p. 429; see Gordon,
2014). Practicing attorneys have echoed these concerns and have
called for creative means to facilitate juror learning of legal concepts
to apply to case facts (Aveni, Hood, & Sledge, 2017). These practi-
tioner views are consistent with legal scholar arguments that juror
instructions are ineffective in large part because they are not
structured with juror learning in mind (see Gordon, 2014). A JNT
could compensate for these deficiencies by giving jurors an op-
portunity to apply concepts, in practice cases varying in complexity.
Practice cases also could help jurors realize that cases are often not
clear-cut and involve complexity, leading to less extreme judg-
ments (see Gordon, 2014). Anticipated advantages of a JNT vis- a-vis
traditional juror instructions are likely one key reason that orga-
nizations like the Civil Jury Project at the New York School of Law are
dedicated to developing and disseminating innovations such as JNT.
Revisiting our Hypothesis, we expect that JNT will reduce culpa-
bility assessments by weakening perceived detectability, as it will
help jurors more fully realize that audit professionals must make
tough judgment calls under uncertainty (i.e., limiting fore-
seeability) and that multiple reasonable audit judgments and ac-
tions typically exist. We expect the latter belief to also reduce
assessed culpability by weakening perceived acquiescence.
Finally, while we predict that the AJR and JNT will, on average,
reduce jurors’ culpability assessments, psychology theory moti-
vates predicting that these interventions will cause reactance effects
in a relatively small subset of jurors. These interventions implicitly
advocate for the audit firm and could be viewed as prohibitive by
some jurors; research has shown reactance in response to
persuasive messages (e.g., Fitzsimons & Lehmann, 2004; Pham,
Mandel, & Morales, 2016) as well as to legal admonitions to ju-
rors (see Lieberman & Arndt, 2000). Psychology theory predicts
that jurors experiencing reactance will view these interventions as
a threat against their autonomous freedom to evaluate the case and
so experience motivated arousal to act against the threat (e.g.,
Brehm & Brehm, 1981). As a result, a reasonable means of identi-
fying jurors who likely experienced reactance is to focus only on
those who found against the audit firm (in the presence of the
intervention). Among these jurors experiencing reactance, we
predict their strong urge to “do something” to restore that freedom
by acting against the intervention (Brehm & Brehm, 1981, p. 392)
will also lead them to assign greater damages (relative to jurors also
finding against the audit firm, but in the absence of the interven-
tion). Psychology theory suggests that this increase in damages
could be driven by juror cognition or occur as a direct consequence
of the intervention (see Rosenberg & Siegel, 2018). Therefore, we
predict that the effect of the AJR and JNT on jurors’ damage as-
sessments will operate through perceptions of detectability, per-
ceptions of acquiescence, and/or directly.
We conduct two experiments to test our predictions. Lay jurors
(Mechanical Turk participants) assess an audit firm’s culpability in a
lawsuit under U.S. state common law where management
committed material financial-statement fraud that the audit firm
failed to detect. In experiment one, we manipulate whether jurors
make evaluations under an AJR (or simple ordinary negligence),
and whether the audit firm has issued a CAM in the area of dispute
(or CAMs do not exist). In experiment two, we again manipulate an
AJR, and whether jurors complete a JNT (versus a control training).
Our primary dependent variables are jurors’ culpability assess-
ments (on a 100-point probability scale) and, among jurors finding
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
against the audit firm, damages assessments (on a scale from $0 to
$9 million). We use post-test questions to elicit jurors’ mediating
beliefs related to perceived detectability and acquiescence.
As predicted, an AJR and a CAM each reduce assessed audit firm
culpability in experiment one. Results in experiment two reproduce
this AJR effect and reveal a diminishing-form interaction between
the AJR and the JNT. Specifically, while the AJR and the JNT each
decrease culpability assessments in isolation, neither does so in the
presence of the other. Evidence indicates that the AJR, CAM, and JNT
reduce culpability assessments by weakening perceived detect-
ability. The AJR and JNT also operate by weakening perceived
acquiescence, but a marginally significant interaction suggests that
their joint effect is less than the sum of their individual effects. Also
as predicted, the AJR and JNT cause reactance effects. Among the
relatively smaller subset of jurors finding against the audit firm,
assessed damages are higher given the presence than the absence
of an AJR or JNT. Reactance arises as a result of the AJR effect
elevating perceived acquiescence (experiment one) and detectability
(experiment two). The latter mediating effect of perceived detect-
ability, however, ebbs in the presence of the JNT. There is also a
direct effect of the AJR, JNT, and their diminishing form interaction
on damages.
Our theory and findings contribute to audit research and prac-
tice. We advance theory by grounding our hypotheses in recent
advances in psychology about how lay persons actually think,
which diverges from what the law stipulates, about intentional and
unintentional drivers of negligence (Laurent et al., 2016; Nun ~ ez
et al., 2014). Specifically, we identify the conceptual mediators of
perceived detectability and acquiescence and measure each with
post-test questions that have the common thread of being in-
dicators of juror thinking that maps into these conceptual media-
tors. Using factor analysis and SEMs, we support the validity of our
measures and show that these mediators can underlie how our
three manipulated factors affect jurors’ assessments of audit firm
culpability and damages in the case of undetected fraud. Our
findings build on prior auditor litigation research that has exam-
ined effects of individual indicators of perceived detectability
(Cornell, Warne, & Eining, 2009; Reffett, 2010), as well as effects of
perceived foreseeability directly elicited from jurors (Backof, 2015;
Gimbar, Hansen, & Ozlanski, 2016; Vinson, Robertson, & Cockrell,
2019). There is a dearth of research finding effects of perceived
acquiescence e our findings offer a new measure for future research
to consider, and join Brandon & Mueller (2006) who develop a
composite measure of acquiescence with indicators of audit firm
objectivity, independence, and lack of self-interest. In addition to
researchers, audit firms and their attorneys would also find these
results of interest. Awareness of specific blame-inducing mediators
could help attorneys craft better arguments to win over jurors,
improving their position in both trials and settlements (Maksymov,
Lowe, Peecher, Pickerd, & Reffett, 2019).
We also advance the literature by hypothesizing and experi-
mentally examining how three factors, two being new to the audit
litigation literaturedan AJR and a JNTdinfluence juror assess-
ments of auditor culpability and damages. Moreover, while prior
studies also have shown that CAMs can decrease culpability as-
sessments (Brasel, Doxey, Grenier, & Reffett, 2016; Kachelmeier,
Rimkus, Schmidt, & Valentine, 2019), their focus is on how CAMs
alter evaluators’ beliefs related to plaintiffs (i.e., the plaintiff was
warned). While we also demonstrate that CAMs decrease culpa-
bility, we focus on how CAMs reduce culpability assessments by
generating more positive beliefs about the audit firm’s conduct.
Our theory and findings related to reactance effects offer con-
tributions as well. To our knowledge, research identifying in-
terventions to reduce unwarranted auditor legal exposure (e.g.,
Clarkson, Emby, & Watt, 2002; Cornell et al., 2009; Grenier, Lowe,
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
3
Reffett & Warne 2015; Kadous, 2001) have not considered that
some interventions that reduce culpability assessments on average
can trigger reactance effects at the same time. We predict reactance
to prevail among a small subset of jurors who, as a consequence of
the interventions, find against the audit firm and then assign
greater damages (relative to had the intervention been absent).
Moreover, our identification of reactance as a source of greater
damages contributes new evidence to the few auditor litigation
studies focusing on damage awards, as those studies instead
examine factors that logically align with greater assessments of
audit firm responsibility (Backof, 2015; Brandon & Mueller, 2006;
Peecher & Piercey 2008; Lyubimov, Arnold, & Sutton, 2013) or
reflect the “deep pockets” argument (Lowe, Reckers, &
Whitecotton, 2002). This finding is also highly relevant to the
topical debate over whether defendants such as audit firms ought
to face the same versus separate jurors or juries to decide on
culpability versus damages (e.g., Abramowicz & Abramowicz,
2018). Indeed, our findings suggest that, in the presence of in-
terventions such as an AJR or JNT, adding new jurors or an entirely
new jury for damages may well result in damage assignments that
are more consistent with the law.
Finally, we also build on the legal literature in motivating our
predictions for reactance (e.g., Lieberman & Arndt, 2000). While
older legal studies examine stark factors such as commands to
disregard previous convictions (Pickel, 1995) or inadmissible evi-
dence (Wolf & Montgomery, 1977), newer studies consider more
subtle factors such as tactical attorney objections (Reed &
Bornstein, 2018). By studying reactance effects for the first time
in an audit litigation setting, we also contribute to the broader legal
literature. We show that an AJR (which is specifically applicable to
auditing) and a JNT (which is a stiffer litmus test for reactance, as it
is applicable only in a general sense) both can trigger reactance,
underscoring a fairly pervasive need to account for reactance
effects.
2. Theoretical development
2.1. Background on auditor litigation and theory for juror
evaluations
Litigation is a key disciplining force motivating auditors to
provide high quality audits for investors and other stakeholders
(Palmrose, 1988). When a material misstatement emerges after
issuance of an audit firm’s clean opinion, both sides of a dispute
want to understand how jurors would evaluate audit firm culpa-
bility.1 As part of their evaluation process, jurors receive in-
structions from judges as to the applicable legal standard(s), hear
plaintiff and defendant attorney arguments, interpret complex
evidence, and, ultimately, reach conclusions about the extent to
which the audit firm is culpable. Unfortunately, substantial evi-
dence indicates that jurors’ evaluations are frequently susceptible
to cognitive biases, rife with judgment errors and deviations from
legal standards, and tend to be unfairly harsh on audit firms under
many realistic conditions (Donelson et al., 2014).
Jurors’ volatile and unfairly harsh conclusions can undermine
incentives to provide high-quality audits. They encourage defensive
auditing, which can entail avoiding clients who create value for
1
While most auditor litigation is settled (e.g., Donelson, 2013; Palmrose, 1991), it
remains foundational to understand how various factors influence judgments of lay
jurors (Donelson et al., 2014). Further, experienced attorneys approach each dispute
as if it would go to trial and, when deciding on settlement terms, focus on the
uncertain expectations of juror assessments of auditor culpability and damages
(Maksymov et al., 2019).
4 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
society but pose greater business risk, relying only on standardized
audit tests and ignoring innovative tests that are higher quality
(Peecher et al., 2013; Kang et al., 2015), and even doing less
investigatory work (Reffett, 2010). Related, high litigation risk can
motivate top talent to leave the audit profession (Treasury 2008;
Pozen, 2008; Donelson, 2013; DeFond & Zhang, 2014; Maksymov
et al., 2019). These consequencesdand annual legal costs
increasing approximately 2 billion from 1999 to 2007 for Big 4 audit
firmsdhave prompted calls for litigation reforms (Treasury 2008;
Donelson et al., 2014).2 As a result, studies have identified in-
terventions to reduce jurors’ culpability assessments, such as
redirecting negative affect that jurors feel during trial deliberations
away from defendant auditors (Kadous, 2001), stressing the seri-
ousness of jurors’ evaluation task (Clarkson et al., 2002), apology
and first-person justification tactics by audit firms (Cornell et al.,
2009), and using credible court-appointed experts (Grenier, Lowe,
Reffett, & Warne, 2015).
The above-mentioned concerns about juror biases also resonate
with culpable control theory’s blame validation Hypothesis (Alicke,
2000). This hypothesis holds that jurors evaluating a defendant’s
culpability when a negative outcome occurs (e.g., an auditor when
a material misstatement due to fraud leads to plaintiff losses) will
enter “blame validation mode,” in which their cognitive processing
is geared towards blaming the defendant (Alicke, 2000). Under
volitional outcome control (Alicke, 2000), jurors will engage in
greater cognitive processing to assign blame to the defendant to the
extent that their beliefs support the idea that the defendant could
control the negative event (e.g., the auditor could control whether
the fraud was detected).
Indeed, recent psychology research on lay persons’ judgments of
blameworthiness (Nun ~ ez et al., 2014; Laurent et al., 2016) suggests
that jurors’ supportive beliefs will be of two kinds: those sup-
porting the idea that the audit firm’s actions led to missing a readily
detectable fraud and those supporting the idea that the audit firm
acquiesced to management’s potential perpetuation of the fraud,
that is, tacitly assented.3 Nun ~ ez et al. (2014) draw on culpable
control theory (Alicke, 2000) and intentionality research (Malle &
Holbrook, 2012; Malle & Knobe, 1997; Malle & Nelson, 2003) to
develop and test a framework about factors that influence lay
persons’ beliefs of negligence. Key factors in their framework are:
(1) knowledge of the action-consequence relationship (e.g., evalu-
ators’ assessments of whether the auditor understood that their
approach, such as taking a sample, in theory could lead to unde-
tected fraud), (2) awareness of the possible scope of their actions
(e.g., evaluators’ assessments of whether the auditor should have
been aware that their actions enhanced the chance of fraud sur-
viving the audit), and desire for the outcome (e.g., evaluators’ as-
sessments of whether the auditor acquiesced to management’s
3
While it may seem incredulous that jurors would believe that audit firms would
tacitly assent to potential fraud, there is little evidence auditors have dominating
incentives to detect fraud. Auditors are ineligible for qui tam rewards, and regula-
tors pay no fraud-finding fees. Much fraud is thought to go undetected (Dyck,
Morse, & Zingales, 2017). When auditors successfully detect fraud, they face
expensive lawsuits in which plaintiffs allege that auditor negligence kept them
from finding it earlier, suspension of payment of audit fees, and dismissal as the
auditor of record (Peecher et al., 2013). Recent evidence suggests that the market
penalizes audit firms for detecting lesser infractions than financial statement fraud
e audit firms who report a material weakness in one client have a harder time
finding new clients at competitive fees (Cowle & Rowe, 2019). Indeed, some claim
that auditors’ best defense in the case of undetected fraud is ignorance or plausible
deniability (Coffee, 2004), which aligns with the finding that jurors penalize au-
ditors more for investigating fraud risks (Reffett, 2010).
4
Given the audit firm’s status as a professional expert, we expect jurors to
perceive the knowledge dimension to be consistently high in the audit litigation
setting.
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
fraud). Negligence is higher when knowledge and awareness are
higher; intentionality is higher when all three are higher (Nun ~ ez
et al., 2014).4
Applying this theory to auditor litigation, our first theoretical
mechanism is detectability, defined as jurors’ beliefs supporting the
idea that the auditor missed a readily detectable fraud. These be-
liefs relate to awareness, whereby jurors perceive that the auditor
should have foreseen that their actions would lead to the fraud
going undetected, increasing blame (Lagnado & Channon, 2008;
Nun ~ ez et al., 2014).5 Key is that the juror does not need to believe
that the auditor was aware of the fraud, but rather, that they should
have been aware that their decisions could lead to fraud surviving
the audit. Our second theoretical mechanism is acquiescence, which
relates to desire. Jurors engaging in this reasoning will perceive that
the auditor tacitly assented to management’s potential fraudulent
actions (Nun ~ ez et al., 2014). Indeed, practicing attorneys have
analogized auditors missing material fraud as the proverbial “os-
trich putting its head in the sand” e depicting the auditor as a
willfully disinterested ostrich (Aveni et al., 2017, p. 12).6
To summarize, we theorize that jurors’ assessments of audit firm
defendant culpability will operate through beliefs that the audit
firm missed a readily detectable fraud and acquiesced to manage-
ment’s potential fraud. Following, we propose hypotheses for how
the regulatory factors of an auditor judgment rule (AJR), critical
audit matters (CAMs), and a juror negligence training (JNT) will
reduce jurors’ culpability assessments through weakening
perceived detectability and acquiescence. We then develop theory
and propose hypotheses for how we expect the AJR and JNT to
trigger reactance among a subset of jurors, leading to, among those
jurors who find against the audit firm, greater damages as a
consequence of these interventions.
2.2. The effect of an auditor judgment rule (AJR)
An AJR would stipulate that jurors should not second-guess
audit firm judgments, provided the judgments were made in
good faith and with a reasonable basis. An AJR aligns with argu-
ments by audit commentators (Treasury 2008; Turley, 2007), psy-
chology scholars (e.g., Mumpower & Stewart, 1996), and
neuroscientists (e.g., Burton, 2008) that the presence of alternative
reasonable judgments (and actions) that the auditor could have
made are not, in themselves, signs of inferior performance. We base
our AJR on the existing business judgment rule (e.g., Arsht, 1979;
Bainbridge, 2004), which mandates that corporate directors who
make judgments with a reasonable basis and with good faith must
not have their judgments second-guessed or be held liable for
third-party losses. A variant of this rule has been extended to
5
For example, if a person firing a gun harms someone, evaluators may assess
high foreseeability even if the person believed that the gun was not loaded (as the
person should have checked whether the gun was loaded) (Nun ~ ez et al., 2014).
Given auditors are professionals, we expect jurors will engage in this thinking (as
would occur with a gun expert in the example; see Nun ~ ez et al., 2014).
6
At a theoretical level, we position detectability and acquiescence to be concep-
tually different constructs. Jurors could believe that the audit firm should have
foreseen that their actions would lead to missing fraud without believing that the
audit firm did so knowingly. Moreover, if jurors believe that the audit firm acqui-
esced to management, whether the auditors also designed a substandard audit
approach for detecting fraud becomes less relevant. Relatedly, Laurent, Nun ~ ez, &
Schweitzer (2015) find in a case with similar characteristics to ours (i.e., the
agent had limited actual awareness) that lay persons’ beliefs about desire and
awareness are unrelated. Nonetheless, the constructs can be related; Laurent et al.
(2015) also document a positive relation between perceived awareness and desire
in a case whereby the agent had full awareness (i.e., was aware that she was
cooking with an oil containing an allergen of a dinner guest). We thus theoretically
assume that detectability and acquiescence readily differ, but examine whether there
is empirical overlap in a factor analysis reported in the method section.
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
psychotherapists who likewise need considerable latitude in pro-
fessional judgment (Peecher et al., 2013). While the rule does not
extend to all medical professionals, some legal scholars have
argued that it should (O’Connell & Boutros, 2002), and the “two
schools of thought” doctrine for medical malpractice lawsuits
similarly recognizes discretion in professional judgment (Brown,
1993). Also of relevance is Kang et al. (2015), who find that an
AJR (pertaining to courts and inspectors) increases audit committee
members’ level of accountability, and that an AJR makes them more
comfortable with auditors’ use of innovative audit procedures.
We predict that an AJR will reduce assessed auditor culpability
by weakening jurors’ perceptions of detectability and acquiescence.
The detectability mechanism pertains to jurors’ motivation to
develop beliefs that the fraud was readily anticipatable and
detectable had the auditor selected alternative or incremental audit
actions. However, an AJR emphasizes that society recognizes that
auditors have to make tough judgment calls that inherently are
fraught with substantial uncertainty (i.e., limiting detectability). An
AJR also implies that multiple judgments simultaneously are
reasonable, which we predict to weaken perceived detectability.
We also expect an AJR to weaken jurors’ beliefs that the audit
firm acquiesced to management’s potential fraud. The AJR implic-
itly stipulates a default assumption that the audit firm acted in good
faith absent contrary evidence. While absent an AJR, jurors may
intuitively reach beliefs consistent with the audit firm tacitly
assenting to management’s potentially fraudulent actions, we
expect an AJR’s imposition of this default of good faith will reduce
this tendency. We also expect that an AJR’s emphasis on multiple,
reasonable judgments will counter juror reasoning that the audit
firm intentionally selected a lax audit approach or permitted use of
a questionable accounting treatment, both of which suggest
acquiescence to the client steps potentially used to perpetuate the
fraud. These collective arguments lead to our first Hypothesis:
Hypothesis 1a. Jurors evaluating audit firm culpability under an
AJR will make lower culpability assessments than jurors evaluating
culpability under simple ordinary negligence.
Hypothesis 1b. The above hypothesized effect will operate
through weakening perceived detectability and acquiescence.
In the following subsections, we consider two additional regu-
latory factors that could reduce jurors’ culpability assessments: a
critical audit matter disclosure (CAM) in the auditor’s report and a
juror negligence training (JNT). We hypothesize effects of each
factor individually, as well as pose research questions for whether
they could interact with an AJR.
2.3. The effect of CAM disclosures
CAM disclosures in the auditor’s report are required for accel-
erated filers and are defined as matters arising during the audit that
were communicated to the audit committee and pertain to ac-
counts or disclosures that are material and involve particularly
challenging, subjective, or complex professional judgment (PCAOB,
2019).7 Understanding how CAMs affect jurors is important as there
have been concerns that CAMs unfairly could increase audit firms’
legal exposure (see Gaetano, 2014; Katz, 2014; Tysiac, 2013). Audit
firms’ comment letters about the CAM requirement emphasize
7
CAMs will be required for all filers, starting as of fiscal year-end December 15,
2020. They are already required for accelerated filers with a year-end date of June
30, 2019 or later. CAMs must include (1) the area of the CAM, (2) the principal
considerations that led the auditor to determine that the matter is a CAM, (3) how
the CAM was addressed in the audit, and (4) reference to the relevant financial
statement accounts or disclosures (PCAOB, 2019).
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
5
such concerns (Deloitte, 2016; EY 2016; KPMG, 2016; PwC, 2016).
One letter notes that CAM information could be “fodder” for
plaintiffs (EY 2016). Another letter suggests that disclosure of ac-
tions taken to address CAM risk areas could undermine auditors’
professional judgment when others allege that they should have
performed additional, or different, procedures (PwC, 2016).
We examine effects of whether the audit firm issued a CAM in
the area under dispute, compared to a regime without CAMs. We
predict that a CAM will reduce jurors’ culpability assessments by
weakening perceived detectability and acquiescence.8 By disclosing
a CAM (in the area under dispute), the audit firm is publicly
communicating to creditors and investors that they view the area
under dispute as difficult, subjective, and complex. Indeed, by
making such a publicly observable disclosure to financial-
statement users of the steps used to address the area of the audit
(PCAOB, 2019), the audit firm is signaling a belief that their audit
action steps were appropriate to address any fraud risk as well as
their understanding that the area was particularly risky and diffi-
cult to audit. Thus, we expect CAMs to weaken jurors’ belief that the
audit firm missed a readily detectable fraud. We also expect that
CAMs will weaken perceived acquiescence. We conjecture that ju-
rors would consider it unlikely that an audit firm would be so bold
as to give acquiescence for management to perpetuate fraud that
pertains to an area that they themselves highlight to users via a
CAM. In addition, the active nature of disclosing a CAM is incon-
sistent with the avoidant nature of tacitly assenting to manage-
ment’s potential fraud. These collective arguments lead to our
second Hypothesis:
Hypothesis 2a. Jurors evaluating audit firm culpability when the
audit firm disclosed a CAM in their report will make lower culpa-
bility assessments than jurors evaluating culpability in a regime in
which CAMs do not exist.
Hypothesis 2b. The above hypothesized effect will operate
through weakening perceived detectability and acquiescence.
Our prediction for CAMs features a priori tension. Prior research
shows that jurors may view CAMs as evidence that plaintiffs were
warned that the area under dispute was potentially problematic
(Brasel et al., 2016; Kachelmeier et al., 2019). While these studies
show this “plaintiff warning effect” leads to CAMs reducing jurors’
culpability assessments (i.e., by elevating the fraud’s foreseeability
to plaintiffs), it also is plausible that when considering jurors’ as-
sessments of audit firm conduct, a CAM could increase blame
assigned to auditors. That is, a CAM could make it seem to jurors
that the auditors should have invested more effort as they were
well aware the area was potentially problematic. If so, this finding
would support earlier concerns that CAMs could increase second-
guessing of auditor judgments (e.g., PwC 2016).9
We also investigate whether a CAM and AJR could interact. An
AJR and CAM have differing characteristics that could lead to
8
Our focus on CAMs as an action audit firms can take to reduce their legal
exposure resonates with prior studies examining other relief-inducing mechanisms
such as auditor use of a high-quality decision aid (Lowe et al., 2002), compliance
with industry norms (Kadous & Mercer, 2012), use of a technical expert (Grenier,
Pomeroy, & Stern, 2015), documentation in workpapers that they complied with
audit standards (Backof, 2015), and use of an external specialist (Brown, Grenier,
Pyzoha, & Reffett, 2019).
9
Relatedly, studies have documented CAMs increasing culpability assessments
by elevating perceptions of auditor foreseeability (Backof, Bowlin, & Goodson, 2018;
Gimbar et al., 2016). Kachelmeier et al. (2019) document that CAMs increase
culpability when the area involves dichotomous classification (due to counterfac-
tual reasoning), but decrease culpability when the area involves measurement
uncertainty as is the case in our study (by warning the plaintiff). Vinson et al. (2019)
find that removing a CAM, and issuing multi-year CAMs, increases culpability.
6 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx

distinct main effects. For example, an AJR is an intervention that is deliberately selected a lax audit approach or permitted client use of
administered as a part of the trial, whereas a CAM is an action taken a questionable accounting treatment. This leads to the third
by the auditor prior to any lawsuit. Nonetheless, they could interact. Hypothesis:
For example, an AJR highlights the importance of considering the
Hypothesis 3a. Jurors who have completed a JNT will make lower
reasonableness of the auditor’s judgment process e if a CAM signals
culpability assessments than jurors who have not completed a JNT.
the auditor’s confidence that their actions were reasonable, this
could lead to a stronger effect of the AJR in the presence of a CAM. Hypothesis 3b. The above hypothesized effect will operate
Due to this ambiguity, we pose a research question: through weakening perceived detectability and acquiescence.
Research Question 1. Will the effects of a CAM and AJR on We also investigate whether JNT and an AJR could interact. An
culpability assessments interact? Will any observed interaction AJR and JNT have differing characteristics that could lead to distinct
operate through perceived detectability and acquiescence? main effects. For example, an AJR is a regulatory directive that is
administered as a part of the trial, whereas a JNT is an intervention
2.4. The effect of JNT jurors experience before the trial. Nonetheless, due to their overlap,
they could interact. For example, an AJR and JNT both highlight the
The third regulatory factor that we examine is whether jurors importance of considering reasonableness of the auditor’s judg-
complete a negligence training prior to the case evaluation. A JNT ment process, such that there may be little incremental effect of
would be intended to overcome deficiencies in juror judgment that one intervention in the presence of the other. Due to this ambiguity,
have been observed repeatedly with traditional juror instructions. we pose a research question:
Specifically, a stream of literature shows that jury instructions are Research Question 2: Will the effects of a JNT and an AJR on
confusing for jurors, and as such, fall short of facilitating compre- culpability assessments interact? Will any observed interaction
hension of legal concepts critical for jurors’ evaluations (e.g., operate through perceived detectability and acquiescence?
Kramer & Koenig, 1990, p. 429; Gordon, 2014). One key identified
reason for this deficit is that instructions simply communicate in-
formation such as pertinent definitions; that is, they are missing
critical structure and elements that have been shown in educa-
2.5. Considering reactance effects induced by the AJR and JNT
tional psychology to facilitate learning, such as realistic examples
interventions
and opportunities to apply defined concepts (see Gordon, 2014).10
This concern has been echoed by practicing attorneys (Aveni
Above, we develop hypotheses that, on average, the AJR and JNT
et al., 2017). Indeed, legal scholars argue that first letting jurors
will cause jurors to reduce culpability assessments. However, we
apply concepts in several cases (some more complex), would help
now develop theory to predict that a subset of jurors will experi-
them better understand concepts and more fully realize that cases
ence reactance effects in response to the dictatorial aspects of the
frequently are not clear-cut and involve complexity, reducing the
AJR and JNT interventions.11 Reactance theory posits that when an
extremity of judgments (Gordon, 2014).
individual feels that their freedom to behave as chosen is restricted
A JNT provides the above advantages over traditional in-
by a source, they will enter a motivational state to regain the
structions, which is likely a key reason why organizations such as
restricted freedom by acting against the source of the threat
the Civil Jury Project at the New York School of Law, which has a
(Brehm, 1966). The AJR and JNT implicitly advocate for the audit
network of over 300 state and federal judges as advisors, develop
firm. For example, the AJR mandates that audit firms cannot have
and disseminate trial innovations like our JNT (Civil Jury Project,
their judgments second-guessed so long as they were made in good
2019). Also, several real-world courts have begun implementing
faith and with a reasonable basis. The JNT advises jurors about how
such innovations. Examples include the District Court of Western
they should analyze and interpret evidence, specifically directing
Washington, which currently administers a juror training (including
them to consider that professionals must make difficult judgments
a video) on how to effectively perform their task and avoid un-
and recognize that there are often no clear correct answers. Thus,
conscious bias (U.S. District Court of Western Washington, 2019), as
jurors who experience reactance to the AJR or JNT are likely to, as a
well as the District Court of Northern Illinois, which administers a
consequence, find against the audit firm. Importantly, comparing
(different) JNT video as part of juror orientation (U. S. District Court
jurors finding against the audit firm in the presence of the inter-
of Northern Illinois, 2019).
vention (a proxy for reactance to the intervention) to jurors finding
Importantly, the JNT that we examine includes the above ad-
against the audit firm absent the intervention (who were not
vantages. Thus, we expect our JNT to reduce culpability assess-
reacting to the intervention) allows for observing reactance effects.
ments by weakening perceived detectability and acquiescence. More
Two streams of literature are germane to our theory. One, psy-
specifically, JNT will help jurors better realize that audit pro-
chology researchers have identified reactance in response to
fessionals make tough judgment calls under high uncertainty (i.e.,
persuasive messages (even subtle or implied pressure, such as a
by imparting this concept and having jurors work through a com-
one-sided messages), recommendations, and informational ap-
plex case involving professionals), weakening perceived detect-
peals (e.g., Fitzsimons & Lehmann, 2004; Pham et al., 2016; Reich &
ability. Working through multiple cases, and considering each side,
Robertson, 1979). The AJR and JNT could be viewed through this
will likely also help jurors more readily understand that multiple
lens, given that they implicitly advocate for the audit firm. Two,
reasonable audit approaches exist, also weakening perceived
legal studies have identified reactance among jurors who receive
detectability. We expect the latter aspect of JNT will also weaken
admonitions or seemingly prohibitive instructions related to their
perceived acquiescence, countering beliefs that the auditor
case evaluations (see Lieberman & Arndt, 2000; Lieberman & Sales,
1997). For example, jurors receiving prohibitive admonitions that
10
Psychology theory supports that learners can apply acquired knowledge from
cognitive elaboration that occurs earlier when operationalizing concepts using
11
examples (e.g., Paas & Van Merrienboer, 1994; Ward & Sweller, 1990). Examples We do not expect a CAM to cause reactance since, unlike the AJR and JNT, it
provide concrete memory traces so that learners can more easily access and apply does not stipulate constraints on how jurors should think and reason. However, we
concepts during subsequent reasoning processes (Bonner, 1999). do explore whether disclosure of a CAM influences damages.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
they must disregard legally irrelevant factors, such as previous
convictions (Pickel, 1995), pre-trial publicity (Kerr, Kramer, Carroll,
& Alfini, 1991), inadmissible testimony (Wolf & Montgomery, 1977),
and the defendant’s race (Shaw & Skolnick, 1995) weight that factor
more heavily, relative to jurors not receiving the admonition. These
studies theorize that jurors view such admonitions as a threat to
their capability to evaluate the evidence “fairly” (i.e., as they
personally see fit) and if so, may reassert control by rejecting the
admonition and showing an amplified response in the opposite
direction than advocated for by the admonition.
Importantly, not all jurors will experience reactance; we expect
that jurors on average will comply with the AJR and JNT, reducing
culpability assessments (and verdicts against the audit firm).12
However, psychology theory motivates that the subset of jurors
who do experience reactance in response to the intervention have
entered a state of motivational arousal, invoking the urge to “do
something” that opposes the ideas advocated by the intervention
(Brehm & Brehm, 1981, p. 392). As a consequence, we predict these
jurors will assess greater damages for the audit firm to pay, relative
to jurors also finding against the audit firm, but in the absence of
the intervention. Psychology theory suggests that reactance effects
could operate through juror cognition and/or as a direct conse-
quence of the intervention. Thus, the interventions could increase
damages through elevating perceived detectability and/or acquies-
cence. The AJR and JNT could also directly increase damages.13, 14
Stated formally:
Hypothesis 4a. Among jurors finding against the audit firm, ju-
rors making their evaluations under an AJR will assign more
damages than jurors making their evaluations under simple ordi-
nary negligence. This effect could operate through perceived
detectability, through perceived acquiescence, and/or directly.
Hypothesis 4b. Among jurors finding against the audit firm, ju-
rors who have completed a JNT will assign more damages than
jurors who have not completed a JNT. This effect could operate
through perceived detectability, through perceived acquiescence,
and/or directly.
Finally, we investigate whether an AJR and JNT interact. Psy-
chology research on reactance has shown that, as the burden
imposed by the threat increases, for example due to a request
12
We identify reactance using a proxy of jurors who find against the audit firm in
the presence of the intervention. Psychology research suggests that jurors most
likely to experience reactance are those who had initial expectations that they
would have large autonomy in their case evaluation (Brehm & Brehm, 1981), are
highly committed to the juror task (Zemack-Rugar, Moore, & Fitzsimons, 2017), and
have predisposed notions toward the plaintiff being culpable so are personally
committed to finding against them (Fitzsimons, 2000; Fitzsimons & Lehmann,
2004). Recent research also finds that jurors low in need for cognition are more
prone to reactance (Matsuo & Itoh, 2017).
13
Only a few studies have identified factors leading to higher damages, and these
factors generally logically align with greater assessments of audit firm re-
sponsibility. The factors include higher perceived audit firm responsibility (Lowe
et al., 2002), client importance conveying lack of independence (Brandon &
Mueller, 2006), lack of documentation supporting compliance with standards
(Backof, 2015), outsourcing (Lyubimov et al., 2013), and domestic insourcing
(Lyubimov et al., 2013). An exception is larger audit firm size (Lowe et al., 2002),
which reflects the “deep pockets” argument. The dearth of evidence on damages in
the studies discussed earlier on interventions may be due to an implicit assumption
that the interventions will have similar directional effects on culpability assess-
ments and damages, and not separately considering jurors based on whether or not
they experienced reactance.
14
It is an interesting question as to whether, within the subsample of jurors
finding against the audit firm, reactance could lead jurors experiencing the inter-
vention to incrementally assess greater auditor firm culpability (i.e., on a contin-
uous scale), relative to jurors not experiencing the intervention. We explore this
possibility in the results.
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
7
requiring more cognitive resources from the individual (Rains &
Turner, 2007), reactance effects can amplify. If jurors view the AJR
and JNT as additive threats (i.e., each imposing a distinct burden),
they may not interact. However, because an AJR and JNT commu-
nicate similar concepts, one might not present any an incremental
threat in the presence of the other, suggesting an interaction. Due
to this ambiguity, we pose a research question.
Research Question 3: Will the effects of an AJR and JNT on
damages assessments interact? Will any observed interaction
operate through perceived detectability, through perceived
acquiescence, and/or directly?
3. Method
3.1. Participants and task overview
We conduct two experiments. Experiment one (two) includes
239 (353) participants from Amazon’s Mechanical Turk (MTurk)
who act as jurors.15 MTurks have been shown to be representative
of the general U.S. population (Paolacci, Chandler, & Ipeirotis, 2010).
We required our participants to be U.S. citizens, which captures
jury-eligibility. We also required them to have a 95 percent
approval rate (Brandon, Long, Loraas, Mueller-Phillips, & Vansant,
2014), which increased our confidence that they diligently would
complete the experiment. As an ex post check, participants had to
answer review questions periodically throughout the case evalua-
tion (n ¼ 21); in support of diligent completion, their accuracy rates
are quite high at 96 (92) percent in experiment one (two).16
Participants in both experiments assume the role of a juror in a
trial under U.S. state common law and are given background in-
formation (i.e., about the audit process, what happens in the event
of an audit failure, and the standard of care they should use in their
evaluation).17 They read a case about the audit of a mining com-
pany, a fraud perpetuated by management that the audit firm failed
to detect, and a lawsuit filed by a creditor who lost money due to
reliance on the materially misstated financial statements. They
then read a transcript, including opening and closing arguments
from plaintiff and defense attorneys, expert testimony on behalf of
the plaintiff and defendant, and cross-examination of expert
witnesses.18
3.2. Design and manipulations
Both experiments use a 2  2 between-participants design. In
experiment one, we manipulate whether jurors make evaluations
under an auditor judgment rule (AJR) versus simple ordinary
negligence, and whether the audit firm issued a critical audit
matter (CAM) in the area of dispute versus CAMs do not exist. In
experiment two, we again manipulate an AJR, and whether jurors
15
Participants spend roughly 1 h on the task and receive $5.00 ($6.00)
compensation in experiment one (two), resulting in a reasonable effective hourly
wage relative to MTurk norms (see Brandon et al., 2014; also see Grenier, Reffett,
Simon, & Warne, 2018).
16
Results for tests of main hypotheses are similar when including accuracy as a
covariate in the ANOVAs.
17
See Donelson et al. (2014), and more recently, Grenier et al. (2018), for dis-
cussion supporting examining assessments made by individual jurors as a proxy for
deliberating juries.
18
The basic case is from Kadous (2000), and adaptations have been used in later
studies examining juror evaluations of auditors (e.g., Hetrick, Peecher, Reffett, &
Zimbelman, 2019; Reffett, 2010). We adapt the case for our setting and
manipulations.
8 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
complete a juror negligence training (JNT) versus control training.19
To manipulate an AJR (in both experiments), we alter the stan-
dard of care that participants are directed to use in evaluating the
audit firm’s culpability (see Appendix 1). In the no AJR condition,
participants are directed to use an ordinary negligence standard, in
which they are to compare the audit firm’s judgments and behav-
iors to those that would be employed by a reasonable, prudent
audit firm in the same circumstances. In the AJR condition, par-
ticipants are directed that, so long as the auditor had good faith and
a reasonable basis for their decisions, they generally cannot have
their judgments second-guessed by the courts or be held respon-
sible for third-party losses. We provide an illustrative example in
both conditions, in light of the earlier discussion that examples are
necessary to facilitate juror comprehension of legal concepts
(Gordon, 2014). In experiment one, we make the case materials
realistic by reinforcing the manipulated standard in attorney ar-
guments, consistent with practice, whereas in experiment two, we
use a starker manipulation that, though less realistic, enhances
internal validity. Together, our two AJR manipulations provide a
reproducibility and robustness test, consistent with recent calls
underscoring the importance of reproducibility (Hail, Lang, & Leuz,
2020).20
To manipulate a CAM (experiment one only), we alter whether
the auditor disclosed a CAM (in the disputed area, as well as an
unrelated area), compared to a regime in which CAMs do not exist.
Participants in the CAM condition are informed about this
requirement and view the CAMs in the audit firm’s report, while
participants in the No CAM condition view a standard auditor’s
report (see Appendix 2).21 We hold information about audit firm
actions constant across conditions by communicating to all par-
ticipants that the audit firm identified two important issues in the
audit (the two issues disclosed as CAMs). All participants view
auditor communications about these issues with the audit com-
mittee, which includes the information disclosed in the audit firm’s
report (i.e., in the CAM condition).
To manipulate JNT (experiment two only), we alter whether
participants complete a training on negligence concepts before the
case evaluation. Participants in the JNT condition learn about the
concepts of negligence and reasonableness. They apply these con-
cepts in four legal cases, two simple and two more complex (one
with professionals), from actual law school materials (Robbennolt,
19
We include manipulation checks in both experiments. For all manipulations, a
chi-square test supports the distribution being different across conditions (all
p < 0.001). Results include all participants, and are robust to controlling for whether
the participant passed manipulation checks.
20
For example, in experiment one, in the no AJR condition, the plaintiff attorney
argues that the auditor did not exercise the same degree of care that other prudent
auditors would have used (i.e., meets the criteria of ordinary negligence), but in the
AJR condition, the plaintiff attorney argues that the auditor lacked a reasonable
basis and good faith for their decisions (i.e., is not entitled to protection under the
AJR). We use a similar approach with the CAM manipulation to realistically capture
how CAMs would emerge in practice. By contrast, in experiment two, jurors are
simply informed of the relevant standard; it is not reinforced in the attorney
arguments.
21
While the CAM standard was not finalized as of the time we conducted the
experiment, we drafted our CAMs based on the PCAOB’s intended requirements,
and they largely reflect the finalized standard (PCAOB, 2019).
22
An additional 173 participants completed a JNT that also included, for the two
ambiguous cases, verdicts and the court’s reasoning in support of their decision
(both ruling in favor of the defendant). We report results only for the version of the
JNT without this verdict information, as (1) it has higher internal validity (given it
does not also manipulate provision of court-approved verdicts and reasoning) and
(2) it is most comparable to the control training (which does not include an au-
thority figure’s decision and reasoning). However, we note that culpability assess-
ments are no different across the two versions of the JNT (p ¼ 0.653). Results for
tests of hypotheses are similar when including these participants in the JNT con-
dition. We do not discuss this additional training further.
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
2012).22 Participants in the no JNT condition complete a training on
social norms, the unwritten rules of society (Cialdini & Trost, 1998),
that is similar on key dimensions except the central issue being
social norms.23 At least 4 h later, participants complete their case
evaluations. Importantly, the multiple-hour delay reduces the
salience of the specific cases discussed in the materials, clears
working memory, and rules out simple priming as an alternative
explanation, while allowing the overall concepts presented in the
training to remain.
3.3. Dependent variable and other measures
Both experiments use the same measures. The first dependent
variable is assessed Audit Firm Culpability. We ask participants “On a
scale between 0 and 100, how probable is it that Jones & Company
[the audit firm] was negligent in their performance of Big Time
Gravel’s audit (0 ¼ Jones & Co. was certainly not negligent,
100 ¼ Jones & Company was certainly negligent).”24 The second
dependent variable is Audit Firm Damages. We ask participants
“Imagine that you will be able to impose damages on Jones &
Company to pay to compensate Bierhoff Inc. [the plaintiff] for its $9
million loss. On the scale below, please indicate how much money,
if any, you would be willing to require that Jones & Company pay
Bierhoff Inc.? Remember that the principle of proportional liability
applies (as discussed earlier).” Participants indicate an amount
between $0 and $9 million, in $1 million increments.25
To capture our hypothesized mediator of perceived Detectability,
we ask participants five questions (on 100-point scales). Other Audit
Firm Detect Fraud is measured with: “What percentage of other
auditors would have detected the environmental restoration lia-
bility fraud if they had conducted the audit of Big Time Gravel’s
financial statements?” Other Audit Firm Anticipate Fraud is
measured with: “How likely do you believe it is that other auditors
would have anticipated the possibility that Big Time Gravel might
fraudulently understate their environmental restoration liability by
lying about the number of quarries that could be restored using the
23
We chose this setting for the control training to hold effort required and factors
of concern constant. However, it could have invoked additional concern about so-
cial welfare, which could itself increase culpability assessments vis-a -vis the JNT
condition. That participants in this condition (relative to the JNT condition) report
that they thought less about the training while completing their case evaluation in
the second stage of the experiment (p < 0.001) and that the training was less
relevant to the case evaluation task (p < 0.001) helps to rule out this happening
consciously. Importantly, culpability assessments of jurors in the first experiment
(in the No CAM condition), none of whom received a training, are similar to
culpability assessments of jurors in the second experiment who receive the control
training (means of 48.28 and 46.84 in the No AJR condition, and means of 35.07 and
35.00 in the AJR condition). The similarity in culpability assessments helps to rule
out this alternative explanation.
24
Consistent with prior auditor litigation studies using SEM (Backof, 2015; Reffett,
2010), we use the continuous measure of jurors’ culpability assessments as the
dependent variable given it is more appropriate for SEM (e.g., Kline, 2015). Results
for tests of hypotheses are similar with an alternate dependent variable combining
Audit Firm Culpability and the juror’s verdict decision. We combine these variables
using a factor score based on a polychoric correlation matrix, which appropriately
combines dichotomous and continuous variables (see Lorenzo-Seva & Ferrando,
2015). In addition, we note that, with the exception of the effect of the CAM,
tests for direct effects of our independent variables (i.e., not considering mediation)
obtain using the binary dependent variable of jurors’ verdicts. With respect to the
CAM effect, its result is directionally correct, but not statistically significant (one-
tailed p ¼ 0.197). Stronger results using our continuous measure of assessed
culpability is consistent with Grenier et al.’s (2018) observation that continuous
measures of juror culpability assessments have the advantage of being more sen-
sitive than binary measures at detecting the presence of hypothesized effects.
25
Proportionate liability is consistent with the U.S. Private Securities and Litiga-
tion Reform Act of 1995 and instructs jurors to allocate damages based on the
auditor’s share of the responsibility for the plaintiff’s loss (see King & Schwartz,
1997). Jurors are typically given discretion in this task (Wissler, Hart, & Saks, 1999).
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx 9

Table 1
Preliminary factor analysis (principal components) to support theoretical assignment of indicators on assigned latent factors.

Panel A. Preliminary Factor Analysis for Experiment 1

Detectability Acquiescence

Other Audit Firm Anticipate Fraud 0.75 0.27

Alternative Actions Leading to Detection 0.72 0.05
Fraud Was Detectable 0.66 0.31
Other Audit Firm Detect Fraud 0.63 0.59
Close to Detecting Fraud 0.48 0.14
Audit Firm Knew About Fraud 0.25 0.79
Regulator Challenges Accounting Treatment 0.10 0.72
Audit Firm Chose Inappropriate Test 0.57 0.43

Panel B. Preliminary Factor Analysis for Experiment 2

Detectability Acquiescence

Other Audit Firm Anticipate Fraud 0.77 0.14

Alternative Actions Leading to Detection 0.62 0.16
Fraud Was Detectable 0.79 0.04
Other Audit Firm Detect Fraud 0.76 0.44
Close to Detecting Fraud 0.61 0.10
Audit Firm Knew About Fraud 0.43 0.72
Regulator Challenges Accounting Treatment 0.07 0.79
Audit Firm Chose Inappropriate Test 0.39 0.68

The above factor analysis uses principal components analysis with quartimax rotation and supports our theoretical assignment of each indicator to its respective factor. The
bolded factor loadings represent the loading of the indicator on its assigned factor. Panel A (Panel B) displays the rotated factor loadings for experiment 1 (experiment 2).
Detectability is a latent factor composed of (on 100-point scales) jurors’ (1) beliefs that other audit firms would have detected the fraud (Other Audit Firm Detect Fraud), (2)
beliefs that other audit firms would have anticipated the fraud (Other Audit Firm Anticipate Fraud), (3) frequency of thinking about alternative actions the audit firm could have
taken (Alternative Actions Leading to Detection), (4) beliefs that the audit firm was close to detecting the fraud (Close to Detecting Fraud), and (5) beliefs that the audit firm was
responsible for detecting the fraud (Fraud Was Detectable). Theoretically, this mediator represents jurors’ perceptions that the audit firm missed a readily detectable fraud.
Acquiescence is a latent factor composed of (on 100-point scales) jurors’ beliefs that (1) the audit firm knew about the fraud prior to issuing the unqualified opinion (Audit Firm
Knew About Fraud), (2) the regulator frequently challenged the client’s accounting treatment (Regulator Challenges Accounting Treatment), and (3) the audit firm’s testing
approach was inappropriate (Audit Firm Chose Inappropriate Test). Theoretically, this mediator represents jurors’ perceptions that the audit firm tacitly assented to man-
agement’s potentially fraudulent actions.

lake method?” These questions capture beliefs that other audit
firms would have detected the fraud, thus reflecting higher
perceived detectability. Alternative Actions Leading to Detection is
measured with: “Please indicate how frequently, while making
your judgments, you thought about actions the auditors could have
taken or done differently, which may have allowed the auditors to
detect the fraud perpetuated at Big Time Gravel?” Close to Detecting
Fraud is measured with: “How close or far do you believe the au-
ditors from Jones & Company were to detecting the fraud?” These
questions capture indicators of counterfactual thinking (see Reffett,
2010), which reflects beliefs that the negative outcome could have
been avoided, such that the fraud was perceived as more detect-
able. Finally, Fraud Was Detectable is measured with: “Based on the
information presented, what was the auditor’s level of re-
sponsibility to detect that Big Time Gravel had understated their
restoration liability by lying about the number of quarries that
could be restored using the lake method?” This question captures a
belief that the audit firm was capable of detecting the fraud, indi-
cating higher perceived detectability.
To capture our hypothesized mediator of perceived Acquies-
cence, we ask participants three questions (on 100-point scales).
Audit Firm Knew About Fraud is measured with: “How likely do you
believe it is that the auditors from Jones & Company knew about
Big Time Gravel’s fraud prior to issuing an unqualified opinion for
Big Time Gravel’s financial statements?” Regulator Challenges Ac-
counting Treatment is measured with: “Based on the information
presented in the case, how frequently do you believe the EPA
prevents mining companies from using the lake method to restore
one of their inactive quarries?” Audit Firm Chose Inappropriate Test
is measured with (reverse-score): “How appropriate is hiring an
environmental testing laboratory to test for hazardous materials in
Big Time Gravel’s inactive quarries as a test for understatement of
environmental restoration liabilities?” The first question reflects
perceived auditor complicity; the latter two reflect perceived
acquiescence to management by allowing a questionable ac-
counting treatment and choosing a lax audit approach.
To substantiate the appropriateness of our theoretical assign-
ment of indicators to Detectability or Acquiescence, we conduct a
preliminary factor analysis (see Table 1). We use a principal com-
ponents analysis with quartimax rotation, which simplifies inter-
pretation and aligns with our expectation that only two factors will
emerge (e.g., Abdi, 2003). As shown in Panel A (for experiment 1)
and Panel B (for experiment 2), two factors do emerge, and the
indicators load strongly on their assigned factors; all loadings are
greater than 0.40 (see Nunnally, 1978). This analysis supports our
assignment of the indicators to the respective factors.26
4. Results
4.1. Tests of hypotheses for culpability assessments e experiment
one
Descriptive statistics for the dependent variable of Audit Firm
Culpability are presented graphically in Fig. 1 and tabulated in
26
Since we posit that Detectability and Acquiescence differ, we exclude covariances
between these two overall latent factors in subsequently discussed SEMs. However,
to improve fit, we incorporate three error term covariances between particular
questions and latent factors in these SEMs. One, Audit Firm Chose Inappropriate Test
also negatively loads on Detectability, which could reflect a view that, to the extent
the auditor’s testing approach was considered appropriate, the fraud was perceived
as more readily detectable. Two, Audit Firm Knew About Fraud also loads positively
on Detectability, which could reflect a view that outright complicity implies that the
fraud was detectable had the auditor actually been trying to detect it. Three, Other
Audit Firm Detect Fraud also loads positively on Acquiescence, which could reflect a
view that if a larger percentage of non-acquiescing auditors detected the fraud, the
defendant more likely was acquiescent.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
10 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx

50 50

45 45

40 40
Juror Culpability Assessment

Juror Culpability Assessment

35 35

30 30
No AJR No CAM
25 25
AJR CAM
20 20

15 15

10 10

5 5

0 0

Fig. 1. Main Effects of an AJR and a CAM on Jurors’ Culpability Assessments e Experiment One
The above graphs display descriptive statistics for the dependent variable of jurors’ culpability assessments in experiment one. Specifically, we ask jurors to report, on a scale from
0 to 100, how probable it is that the audit firm was negligent in their performance of the audit (where 0 indicates certainly not negligent and 100 indicates certainly negligent).
Jurors determine an audit firm’s culpability in a lawsuit under U.S. state common law. Management committed material financial-statement fraud that the audit firm failed to detect.
We manipulate whether jurors are making evaluations under an auditor judgment rule (AJR) versus simple ordinary negligence, and whether the audit firm issued a critical audit
matter (CAM) in the area of dispute versus CAMs do not exist. In light of Hypothesis 1a and Hypothesis 2a predicting main effects, we display the results for each independent
variable collapsed across the other independent variable. The first graph displays the effect predicted in Hypothesis 1a: that an AJR will reduce jurors’ culpability assessments. The
second graph displays the effect predicted in Hypothesis 2a: that a CAM will reduce jurors’ culpability assessments.

Table 2
Tests of Hypothesis 1a and 2a, and of Research Question 1 e experiment one.

Panel A. Descriptive Statistics for Jurors’ Assessed Audit Firm Culpability: Mean, Standard Deviation, Number of Participants

Critical Audit Matter Auditor Judgment Rule

No Auditor Judgment Rule Auditor Collapsed Across AJR

Judgment
Rule

No Critical Audit Matter 48.28 (32.40) n ¼ 67 35.07 (30.70) n ¼ 54 42.39 (32.20) n ¼ 121
Critical Audit Matter 37.51 (28.76) n ¼ 53 31.42 (31.51) n ¼ 65 34.15 (30.33) n ¼ 118
Collapsed Across CAM 43.53 (31.18) n ¼ 120 33.08 (31.06) n ¼ 119

Panel B. ANOVA Results

df Sum of Squares Mean Square F statistic p-value

AJR (Hypothesis 1a) 1 5504.39 5504.39 5.73 0.009

CAM (Hypothesis 2a) 1 3077.07 3077.07 3.20 0.038
AJR  CAM (Research Question 1) 1 747.89 747.89 0.78 0.378*
Error 235 225752.35 960.65
Corrected Total 238 236106.19

We conduct an ANOVA to test Hypotheses 1a and 2a, and Research Question 1. The dependent variable is assessed Audit Firm Culpability. We ask jurors to report, on a scale
from 0 to 100, how probable it is that the audit firm was negligent in their performance of the audit (where 0 indicates certainly not negligent and 100 indicates certainly
negligent). Jurors determine an audit firm’s culpability in a lawsuit under U.S. state common law. Management committed material financial-statement fraud that the audit
firm failed to detect. We manipulate whether jurors are making evaluations under an auditor judgment rule (AJR) versus simple ordinary negligence, and whether the audit
firm issued a critical audit matter (CAM) in the area of dispute versus CAMs do not exist. Descriptive statistics are reported in Panel A. Panel B reports our test of Hypothesis 1a,
that is, the main effect of the AJR reducing Audit Firm Culpability. Panel B also reports our test of Hypothesis 2a, that is, the main effect of the CAM reducing Audit Firm Culpability.
Panel B also reports our test of Research Question 1, that is, the AJR  CAM interaction. P-values are one-tailed for directional predictions, except those with a *.

Table 2, Panel A. Panel B reports results of an Analysis of Variance (two-tailed p ¼ 0.378).

(ANOVA) to test Hypotheses 1e2 with independent variables
indicating whether the juror made evaluations under an AJR and
whether the auditor’s report included a CAM. In support of
Hypothesis 1a, there is a main effect of the AJR reducing assessed
Audit Firm Culpability (p ¼ 0.009) (43.53 vs. 33.08 percent).27 In
support of Hypothesis 2a, there is a main effect of the CAM reducing
assessed Audit Firm Culpability (p ¼ 0.038) (42.39 vs. 34.15 percent).
With respect to RQ1, the AJR  CAM interaction is insignificant
We next conduct a structural equations model (SEM) to test the
hypothesized mediators of jurors’ beliefs about detectability and
acquiescence. Fig. 2 displays the model. The chi-squared test reveals
good fit (c2(34) ¼ 44.35, p ¼ 0.110), as do other standard measures
(Comparative Fit Index, CFI ¼ 0.99; Root Mean Square Error of
Approximation, RMSEA ¼ 0.036; Standardized Root Mean Square
Residual, SRMR ¼ 0.043) (Parry, 2019).28 The AJR and CAM each

27 28
All p-values are one-tailed for directional predictions unless otherwise Consistent with the factor analysis, all indicators significantly load on their
specified. assigned latent factors in the SEMs.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx 11

Fig. 2. Structural Equations Models to Test Hypothesis 1b and Hypothesis 2b e Experiment One
Fig. 1 describes the experimental setting, independent variables, and dependent variable. The SEM above displays (within the full sample) how the AJR and CAM each reduce juror
assessments of Audit Firm Culpability. Detectability and Acquiescence are latent factors representing, respectively, jurors’ perceptions that the audit firm defendant missed a readily
detectable fraud and jurors’ perceptions that the audit firm defendant tacitly assented to management’s potential fraud. Table 1, Panel A defines the indicators for each latent
variable and displays a preliminary factor analysis supporting the assignment of indicators to their respective factors. All indicators load significantly on their assigned factor. The
model shows good fit (c21(34) ¼ 44.35, p ¼ 0.110; CFI ¼ 0.99; RMSEA ¼ 0.036; SRMR ¼ 0.043). The paths depicted with green (blue) bolded arrows represent support for our
hypotheses that our independent variables will reduce culpability assessments through weakening perceived detectability (acquiescence). P-values are one-tailed for directional
predictions. (For interpretation of the references to colour in this figure legend, the reader is referred to the Web version of this article.)

Reproduced Effect of AJR (within No JNT condition) Effect of JNT (within No AJR condition)
50 50

45 45
Juror Culpability Assessment

Juror Culpability Assessment

40 40

35 35

30 30
No AJR No JNT
25 25
AJR JNT
20 20

15 15

10 10

5 5

0 0

Fig. 3. Simple Effects of an AJR and a JNT on Jurors’ Culpability Assessments e Experiment Two
The above graphs display descriptive statistics for the dependent variable of jurors’ culpability assessments in experiment two. The dependent variable and experimental setting are
the same as in experiment one (see Fig. 1). We manipulate whether jurors are making evaluations under an auditor judgment rule (AJR) versus simple ordinary negligence, and
whether the juror completed a juror negligence training (JNT) versus control training on social norms in advance of the case evaluation. In light of the observed diminishing form
AJR  JNT interaction, we present the effect of each intervention in the absence of the other intervention. The first graph displays our reproducibility test of the effect predicted in
Hypothesis 1a: that an AJR will reduce jurors’ culpability assessments (within the No JNT condition). The second graph displays the effect predicted in Hypothesis 3a: that a JNT will
reduce jurors’ culpability assessments (within the No AJR condition).

weaken jurors’ perceived Detectability (p’s of 0.042 and 0.028), and

the AJR also weakens jurors’ perceptions of Acquiescence
29
Given evidence that negative affect can strengthen jurors’ assessments of
(p ¼ 0.022). Perceived Detectability and Acquiescence each increase
auditor culpability (Kadous, 2001), we examine effects of including a mediator assessed Audit Firm Culpability (both p < 0.001).29
variable capturing jurors’ self-reported negative feelings toward the auditor, as well
as the plaintiff. All model results for experiment one and two are robust to inclusion
of these mediators.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
12 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx

Table 3
Tests of Hypothesis 1a and 3a, and of Research Question 2 e experiment two.

Panel A. Descriptive Statistics for Jurors’ Assessed Audit Firm Culpability: Mean, Standard Deviation, Number of Participants

Juror Negligence Training Auditor Judgment Rule

No Auditor Judgment Rule Auditor Collapsed Across AJR

Judgment
Rule

No Juror Negligence Training 46.84 (34.81) n ¼ 85 35.00 (29.88) n ¼ 90 40.75 (32.81) n ¼ 175
Juror Negligence Training 36.99 (30.11) n ¼ 89 38.24 (28.54) n ¼ 89 37.61 (29.26) n ¼ 178
Collapsed Across JNT 41.80 (32.77) n ¼ 174 36.61 (29.18) n ¼ 179

Panel B. ANOVA Results

df Sum of Squares Mean Square F statistic p-value

AJR (Hypothesis 1a) 1 2472.18 2472.18 2.59 0.054

JNT (Hypothesis 3a) 1 963.66 963.66 1.01 0.158
AJR  JNT (Research Question 2) 1 3774.20 3774.20 3.96 0.047*
Error 349 332664.73 953.19
Corrected Total 352 339725.14

Panel C. Simple Effects

AJR (within No JNT condition) (Hypothesis 1a) t(352) ¼ 2.53; p ¼ 0.006

AJR (within JNT condition) t(352) ¼ 0.27; p ¼ 0.788*
JNT (within No AJR condition) (Hypothesis 3a) t(352) ¼ 2.10; p ¼ 0.018
JNT (within AJR condition) t(352) ¼ 0.70; p ¼ 0.484*

We conduct an ANOVA to test Hypotheses 3a, the reproducibility of Hypothesis 1a, and Research Question 2. The dependent variable and experimental setting for experiment
two are the same as in experiment one (see Table 2). We manipulate whether jurors are making evaluations under an AJR (or simple ordinary negligence), and whether the
juror completes a JNT (or control training) prior to the case evaluation. Descriptive statistics are reported in Panel A. Panels B and C report our test of the reproducibility of
Hypothesis 1a, that is, the effect of the AJR reducing Audit Firm Culpability. Panels B and C also report our test of Hypothesis 3a, that is, the effect of the JNT reducing Audit Firm
Culpability. Panel B reports our test of Research Question 2, that is, the AJR  JNT interaction. P-values are one-tailed for directional predictions, except those with a *.

4.2. Tests of hypotheses for culpability assessments e experiment
two
We now turn to tests of Hypothesis 3 and of the reproducibility
and robustness of Hypothesis 1 (i.e., given we manipulate an AJR in
both experiments). Descriptive statistics for the dependent variable
of Audit Firm Culpability are graphically presented in Fig. 3 and
tabulated in Table 3, Panel A. Panel B reports results of an ANOVA
with independent variables for the AJR and whether the juror
completed JNT. With respect to RQ2, there is a diminishing form
AJR  JNT interaction (two-tailed p ¼ 0.047) e the AJR and JNT each
reduce culpability assessments, but their joint effect is less than the
sum of their individual effects. Given this interaction, we examine
simple effects for hypothesis tests when only one intervention is
present (see Table 3, Panel C). Again in support of Hypothesis 1a,
there is a simple effect of the AJR reducing assessed Audit Firm
Culpability (p ¼ 0.006) (46.84 vs. 35.00 percent). In support of
Hypothesis 3a, there is a simple effect of the JNT reducing assessed
Audit Firm Culpability (p ¼ 0.018) (46.84 vs. 36.99 percent). There is
no significant effect of either intervention in the presence of the
other (smallest two-tailed p ¼ 0.484), such that the results collec-
tively support the diminishing form interaction.
We conduct a SEM to test the hypothesized mediators, also
including the AJR  JNT interaction term. Fig. 4 displays the model.
The model shows good fit (c2(38) ¼ 48.73, p ¼ 0.114; CFI ¼ 0.99;
RMSEA ¼ 0.028; SRMR ¼ 0.037). The AJR and JNT each reduce
perceived Detectability (respective p’s of 0.020 and 0.001), which
increases assessed Audit Firm Culpability (p < 0.001). There is a
diminishing form AJR  JNT interaction on Acquiescence that ap-
proaches marginal significance (two-tailed p ¼ 0.125), and the JNT
also reduces perceived Acquiescence (p ¼ 0.003); perceived Acqui-
escence increases assessed Audit Firm Culpability (p ¼ 0.001). Finally,
there is a marginally significant, diminishing form AJR  JNT
interaction that directly affects assessed Audit Firm Culpability
(two-tailed p ¼ 0.068), and also a significant, negative direct effect
of the AJR on assessed Audit Firm Culpability (p ¼ 0.013).
4.3. Tests of hypotheses for damages assessments e experiment one
We now test our reactance prediction for the AJR, that is,
Hypothesis 4a. We also explore whether the CAM affects damages.
Descriptive statistics for the dependent variable of Audit Firm
Damages (for jurors finding against the auditor) are presented
graphically in Fig. 5 and tabulated in Table 4, Panel A. Panel B re-
ports results of an ANOVA with the independent variables of AJR
and CAM. In support of Hypothesis 4a, there is a main effect of the
AJR increasing assigned Audit Firm Damages (p ¼ 0.040) (4.43 vs.
5.43 million). As expected, there is no main effect of the CAM
(p > 0.500) (4.78 vs. 4.85 million). Fig. 6 displays a SEM to explore
mediation. The model shows good fit (c2(43) ¼ 50.78, p ¼ 0.194;
CFI ¼ 0.96; RMSEA ¼ 0.045; SRMR ¼ 0.073). The AJR increases
perceived Acquiescence (p ¼ 0.050), which increases assessed Audit
Firm Culpability (p ¼ 0.047), which increases Audit Firm Damages
(p < 0.001); Acquiescence also marginally increases Audit Firm

2
One legal expert, who is a former in-house legal counsel of 19 years at a Big n
firm (Petersen, 2017), believes that a nontrivial likelihood exists that catastrophic
audit litigation will wipe out another large audit firm. Donelson (2013) develops a
range of estimated likelihoods that runs from remote (0.6 percent over five years) to
considerably higher (14.1 percent over five years) if partner retirement benefits
were removed as this would result in a less stringent threshold for liquidation (i.e.,
whereby a majority of partners rationally would vote to liquidate the firm).

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx 13

Fig. 4. Structural Equations Models to Test Hypothesis 1b, Hypothesis 3b, and Research Question 2 e Experiment Two
Figs. 1 and 3 describes the experimental setting, independent variables, and dependent variable. The SEM above displays (within the full sample) how the AJR and JNT (and their
interaction) influence Audit Firm Culpability. Detectability and Acquiescence are latent factors representing, respectively, jurors’ perceptions that the audit firm missed a readily
detectable fraud and tacitly assented to management’s potential fraud. Table 1, Panel B defines the indicators for each latent variable and displays a preliminary factor analysis
supporting the assignment of indicators to their respective factors. All indicators load significantly on their assigned factor. The model shows good fit (c2(38) ¼ 48.73, p ¼ 0.114;
CFI ¼ 0.99; RMSEA ¼ 0.028; SRMR ¼ 0.037). The paths depicted with green (blue) bolded arrows represent support for our hypotheses that our independent variables will reduce
audit firm culpability through weakening perceived detectability (acquiescence). Paths depicted with black bolded arrows are other theory-consistent significant paths. To minimize
clutter, the direct JNT to Audit Firm Culpability link (p > 0.500) is not tabulated. P-values are one-tailed for directional predictions, except those with a *. (For interpretation of the
references to colour in this figure legend, the reader is referred to the Web version of this article.)

7 7

6 6
Damages Assessment (in millions)

Damages Assessment (in millions)

5 5

4 4
No AJR No CAM
AJR CAM
3 3

2 2

1 1

0 0

Fig. 5. Main Effects of an AJR and a CAM on Jurors’ Damages Assessments e Experiment One
The above graphs display descriptive statistics for the dependent variable of jurors’ damages assessments (for jurors finding against the audit firm) in experiment one. Specifically,
we ask jurors to report, on a scale from $0 to $9 million, the amount of damages that the audit firm (under proportionate liability) should be required to pay the plaintiff. The
independent variables are defined in the notes to Fig. 1. In light of predicting only a main effect of the AJR, we display the results for each independent variable collapsed across the
other independent variable. The first graph displays the effect predicted in Hypothesis 4a: that an AJR will increase jurors’ damages assessments. For completeness, the second graph
displays the effect of a CAM, which we expect to be insignificant.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
14 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx

Table 4
Tests of Hypothesis 4a e experiment one.

Panel A. Descriptive Statistics for Jurors’ Assigned Audit Firm Damages (for Jurors Finding Against the Audit Firm): Mean, Standard Deviation, Number of Participants

Critical Audit Matter Auditor Judgment Rule

No Auditor Judgment Rule Auditor Collapsed Across AJR

Judgment
Rule

No Critical Audit Matter 4.41 (2.65) n ¼ 32 5.44 (2.36) n ¼ 18 4.78 (2.57) n ¼ 50

Critical Audit Matter 4.46 (2.50) n ¼ 24 5.41 (2.85) n ¼ 17 4.85 (2.66) n ¼ 41
Collapsed Across CAM 4.43 (2.56) n ¼ 56 5.43 (2.57) n ¼ 35

Panel B. ANOVA Results

df Sum of Squares Mean Square F statistic p-value

AJR (Hypothesis 4a) 1 21.18 21.18 3.14 0.040

CAM 1 0.00 0.00 0.00 0.986*
AJR  CAM 1 0.04 0.04 0.01 0.940*
Error 87 586.24 6.74
Corrected Total 90 607.82

We conduct an ANOVA to test Hypothesis 4a. The dependent variable is jurors’ assigned Audit Firm Damages. Specifically, we ask jurors to report, on a scale from $0 to $9
million, the amount of damages that the audit firm (under proportionate liability) should be required to pay the plaintiff. The independent variables and experimental setting
are defined in Table 2. Descriptive statistics are reported in Panel A. Panel B reports our test of Hypothesis 4a, that is, the main effect of the AJR increasing Audit Firm Damages. P-
values are one-tailed for directional predictions, except those with a *.

Fig. 6. Structural Equations Models to Test Mediators in Hypothesis 4a e Experiment One

Figs. 1 and 5 describes the experimental setting, independent variables, and dependent variable. The SEM above displays (for jurors finding against the audit firm) how the AJR and
CAM influence Audit Firm Damages. Fig. 2 and Table 1, Panel A define the latent factor mediators of perceived Detectability and Acquiescence. All indicators load significantly on their
assigned factor. The model shows good fit (c2(43) ¼ 50.78, p ¼ 0.194; CFI ¼ 0.96; RMSEA ¼ 0.045; SRMR ¼ 0.073). The paths depicted with blue bolded arrows represent effects due
to elevated perceived Acquiescence in response to the independent variables; the path depicted with a purple bolded arrow shows how the CAM directly, marginally reduces Audit
Firm Culpability. Paths depicted with black bolded arrows are other theory-consistent significant paths. P-values are one-tailed for directional predictions, except those with a *. (For
interpretation of the references to colour in this figure legend, the reader is referred to the Web version of this article.)

Damages directly (p ¼ 0.064).30 4.4. Tests of hypotheses for damages assessments e experiment two

We now test our reactance prediction for the JNT, that is,
Hypothesis 4b, and test the reproducibility of Hypothesis 4a.
Descriptive statistics for the dependent variable of Audit Firm
30
While the CAM does not affect damages assessments, the SEM shows that it
Damages (for jurors finding against the auditor) appear in Panel A of
marginally increases perceived Acquiescence (two-tailed p ¼ 0.070); this is consis- Table 5, and graphically in Fig. 7. Panel B reports results of an
tent with the earlier counterargument that jurors could assess high blame if an ANOVA with the independent variables of AJR and JNT. In support of
audit firm identifies an area as a CAM but fails to perform sufficient procedures to Hypothesis 4a, there is a marginally significant main effect of the
address this known risky area (and empirically, this invokes suspicion of tacit
AJR increasing Audit Firm Damages (p ¼ 0.066) (5.00 vs. 5.79
permission). The lack of overall increase in damages with a CAM is likely because
the CAM also marginally reduces culpability assessments (two-tailed p ¼ 0.104). million). In support of Hypothesis 4b, there is a significant main
The latter finding may reflect jurors’ application of proportionate liability. That is,
while deeming the audit firm culpable, jurors may also believe that the audit firm
deserves at least some proportionate credit for warning investors.

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx 15

Table 5
Tests of Hypothesis 4a and 4b, and of Research Question 3 e experiment two.

Panel A. Descriptive Statistics for Jurors’ Assigned Audit Firm Damages (for Jurors Finding Against the Audit Firm): Mean, Standard Deviation, Number of Participants

Juror Negligence Training Auditor Judgment Rule

No Auditor Judgment Rule Auditor Collapsed Across AJR

Judgment
Rule

No Negligence Training 4.45 (2.39) n ¼ 47 5.70 (2.81) n ¼ 30 4.94 (2.62) n ¼ 77

Negligence Training 5.84 (2.22) n ¼ 31 5.88 (2.47) n ¼ 32 5.86 (2.33) n ¼ 63
Collapsed Across JNT 5.00 (2.41) n ¼ 78 5.79 (2.62) n ¼ 62

Panel B. ANOVA Results

df Sum of Squares Mean Square F statistic p-value

AJR (Hypothesis 4a) 1 14.08 14.08 2.31 0.066

JNT (Hypothesis 4b) 1 20.79 20.79 3.41 0.034
AJR  JNT (Research Question 3) 1 12.54 12.54 2.06 0.154*
Error 136 829.61 6.10
Corrected Total 139 887.85

Panel C. Simple Effects

AJR (within No JNT condition) (Hypothesis 4a) t(139) ¼ 2.17; p ¼ 0.016

AJR (within JNT condition) t(139) ¼ 0.06; p ¼ 0.477
JNT (within No AJR condition) (Hypothesis 4b) t(139) ¼ 2.44; p ¼ 0.008
JNT (within AJR condition) t(139) ¼ 0.28; p ¼ 0.390

We conduct an ANOVA to test Hypothesis 4b, the reproducibility of Hypothesis 4a, and Research Question 3. The dependent variable and experimental setting for experiment
two are the same as in experiment one (see Tables 2 and 4). The independent variables are defined in Table 3. Descriptive statistics are reported in Panel A. Panels B and C
report our tests of the reproducibility of Hypothesis 4a, that is, the effect of the AJR increasing Audit Firm Damages. Panels B and C report our test of Hypothesis 4b, that is, the
effect of the JNT increasing Audit Firm Damages. Panels B and C report our test of Research Question 3, that is, the AJR  JNT interaction. P-values are one-tailed for directional
predictions, except those indicated by a *.

Effect of JNT (within No AJR condition)

Reproduced Effect of AJR (within No JNT condition)
7 7

6 6
Damages Assessments

Damages Assessment (in millions)

5 5

4 4
No AJR No JNT
AJR JNT
3 3

2 2

1 1

0 0

Fig. 7. Simple Effects of an AJR and a JNT on Jurors’ Damages Assessments e Experiment Two
The above graphs display descriptive statistics for the dependent variable of jurors’ damages assessments (for jurors finding against the audit firm) in experiment two. The
dependent variable and experimental setting are the same as in experiment one (see Fig. 5). The independent variables are defined in Fig. 3. In light of the potential diminishing
form AJR  JNT interaction, we present the effect of each intervention in the absence of the other intervention. The first graph displays our reproducibility test of the effect predicted
in Hypothesis 4a: that an AJR will increase jurors’ damages assessments (within the No JNT condition). The second graph displays the effect predicted in Hypothesis 4b: that a JNT
will increase jurors’ damages assessments (within the No AJR condition).

effect of the JNT increasing Audit Firm Damages (p ¼ 0.034) (4.94 vs.
5.86 million).31 For RQ3, there is an AJR x JNT diminishing form
interaction that is beginning to approach marginal significance
(two-tailed p ¼ 0.154). Panel C shows that the simple effect of the
31
Within jurors finding for the audit firm, the AJR reduces culpability assessments
(respective one-tailed p’s in experiment 1 and 2 of 0.038 and 0.050). Moreover, the
JNT (in experiment 2) reduces culpability assessments in this subsample as well
(one-tailed p ¼ 0.032). This test compares jurors not experiencing reactance in
response to receiving the intervention to jurors finding for the audit firm (even
though not receiving the intervention). That the interventions continue to have an
effect in this subsample underscores their power.
AJR (absent the JNT) is significant (p ¼ 0.016), as is the simple effect
of the JNT (absent the AJR) (p ¼ 0.008); however, there is little effect
of either in the presence of the other (smallest p ¼ 0.390). Overall,
the findings mirror the interactive findings for culpability
assessments.
Fig. 8 displays an SEM to explore mediation, also including the
AJR  JNT interaction. The model shows good fit (c2(50) ¼ 54.84,
p ¼ 0.296; CFI ¼ 0.99; RMSEA ¼ 0.026; SRMR ¼ 0.058). There is a
diminishing form AJR  JNT interaction (two-tailed p ¼ 0.014) and
marginally significant, positive effect of the AJR (p ¼ 0.060) on
perceived Detectability, which positively affects assessed Audit Firm
Culpability (p ¼ 0.028), which then increases assigned Audit Firm

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
16 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx

Fig. 8. Structural Equations Models to Test Hypothesis 4a, Hypothesis 4b, and Research Question 3 e Experiment Two
Figures 1, 5, and 7 describes the experimental setting, independent variables, and dependent variable. The SEM above displays (within jurors finding against the audit firm) how the
AJR and JNT (and their interaction) influence Audit Firm Damages. Fig. 4 and Table 1, Panel B define the latent variable mediators of perceived Detectability and Acquiescence. All
indicators load significantly on their assigned factor. The model shows good fit (c2(50) ¼ 54.84, p ¼ 0.296; CFI ¼ 0.99; RMSEA ¼ 0.026; SRMR ¼ 0.058). The paths depicted with green
bolded arrows represent effects due to elevated perceived Detectability in response to the independent variables (and their interaction). Paths depicted with black bolded arrows are
other theory-consistent significant paths. P-values are one-tailed for directional predictions, except those with a *. To minimize clutter, the AJR, JNT, and AJR x JNT links to
Acquiescence are not tabulated (all p > 0.500); as such, the link from Acquiescence to Audit Firm Culpability is also not tabulated. (For interpretation of the references to colour in this
figure legend, the reader is referred to the Web version of this article.)

Damages (p < 0.001). Moreover, there is also a direct effect of the
AJR x JNT diminishing form interaction (two-tailed p ¼ 0.065) on
assigned Audit Firm Damages, as well as positive direct effects of the
AJR (p ¼ 0.002) and the JNT (p ¼ 0.002) on Audit Firm Damages.
Collectively, the findings from both experiments suggest that
reactance (1) can be activated by the AJR or JNT, (2) does not appear
to be additive across the interventions, (3) can operate through
elevated perceptions that the auditor missed a readily detectable
fraud or tacitly assented to management’s potential fraud, and (4)
can occur directly. For the direct effect, it is unclear whether jurors
are consciously reacting against the interventions and penalizing
the audit firm as a consequence, or doing so subconsciously; future
research is needed to explore this question, given its ramifications
for potential interventions that could mitigate reactance effects.
5. Discussion and conclusions
Despite being highly susceptible to error and often unfairly
harsh on auditors in realistic conditions (Donelson et al., 2014),
anticipated juror conclusions about auditor culpability and re-
sponsibility for damages for undetected financial-statement fraud
substantially influence trial outcomes and out-of-court settlements
(Maksymov et al., 2019). Dysfunctional juror conclusions also
heighten the risk of actions that impair audit quality, such as
defensive auditing and talent leaving the audit profession for
alternative vocations (DeFond & Zhang, 2014; Peecher et al., 2013;
Petersen, 2017; Treasury 2008; Turley, 2007). At the same time,
three topical factors have emerged that could reduce jurors’ as-
sessments of auditor culpability: an auditor judgment rule (AJR),
critical audit matter (CAM) disclosures, and a juror negligence
training (JNT). We examine effects of these three factors, guided by
advances in psychology theory about how lay individuals naturally
assess negligence (Nun ~ ez et al., 2014). By doing so, we not only
predict that each factor will decrease culpability assessments but
also predict two key mediators that reveal how this decrease arises
e by weakening jurors’ perceptions of fraud detectability and
auditor acquiescence. Finally, we examine whether the AJR and JNT
interventions can cause reactance in a subset of jurors, predicting
that this will lead to higher damages assigned to the auditor by
jurors finding against the audit firm despite the presence (versus
absence) of the interventions.
Results from two experiments show that the AJR, CAM, and JNT
each reduce jurors’ culpability assessments. There is also a dimin-
ishing form interaction whereby the AJR and JNT each decrease
culpability assessments in isolation, but neither does so in the
presence of the other. SEM findings show that the AJR, CAM, and
JNT each reduce culpability assessments through weakening
perceived detectability; the AJR and JNT also operate through
weakening perceived acquiescence, though a marginally significant
interaction suggests that their joint effect is less than the sum of
their individual effects. Consistent with reactance, among jurors
finding against the audit firm, those experiencing the AJR or JNT
assign higher damages. SEMs reveal that the AJR effect can operate
through elevated perceived acquiescence and detectability, with the
latter effect ebbing in the presence of the JNT. There is also a direct
effect of the AJR, JNT, and their diminishing form interaction on
damages.
Our findings illuminate the complexity of implementing juror-
based interventions as a means to reduce auditor legal exposure:
while these interventions may reduce culpability assessments for
the average juror, it is altogether possible that a subset of jurors
could view the stipulations within the interventions as a threat to
their autonomy to evaluate the case facts as they see fit, experience
reactance, and as a consequence, find against the audit firm and
assign greater damages (relative to had the interventions been
absent). Our identification of robust reactance effects with two

Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
distinct interventionsdan AJR that pertains to auditing specifically
and appears as a directive in the case evaluation, and a JNT that is
not specific to auditing and administered in advance of the case
evaluationdprovide evidence of the robustness of reactance ef-
fects. This finding is concerning: while interventions like an AJR
and JNT may reduce perceptions of auditor culpability on average,
litigation costs in expectation may not actually decrease as a result.
We also note that, had the interventions not induced reactance,
even more jurors likely would have found for the audit firm as a
result of their presence.
This study’s findings highlight the value of future research
examining antecedents and moderators of reactance effects. We
identify reactance using an empirical proxy of jurors who find
against the audit firm in the presence of the intervention, and
future research could shed insight on theoretical attributes of those
jurors most likely to exhibit reactance. Future research could also
test the effectiveness of theoretically motivated reducers of reac-
tance effects, perhaps reducers of jurors’ expectations of having
high autonomy in the first place. Relatedly, the legal literature
suggests reducers such as additional explanation as to the reason
underlying the directive, or encouraging jurors to make a public
commitment to honor the directive (Lieberman & Arndt, 2000).
Building on this research, future studies could examine other forms
of our AJR and JNT that seem less dictatorial to jurors and/or
incorporate these reducers in an attempt to identify a boundary
condition to the reactance effects that our study documents.
We believe that our theory and findings contribute to the audit
litigation literature and to audit practice. We introduce an AJR and
JNT to the audit litigation literature, and practitioners likely will
have an interest in the reactance effects we document. Further,
audit researchers and regulators also may find our CAM results to
be interesting. Our findings reinforce results from prior studies that
CAMs can reduce auditor legal liability (Brasel et al., 2016;
Kachelmeier et al., 2019), and offer new evidence that, in addition
to providing relief through beliefs that plaintiffs (e.g., investors)
were warned, CAMs can also reduce culpability assessments by
weakening jurors’ beliefs that the auditor missed a highly detect-
able fraud. More generally, our theory on jurors’ perceptions of
detectability and acquiescence advances the audit litigation litera-
ture by being grounded in recent psychology research showing
how lay persons actually think about negligence (Nun ~ ez et al.,
2014), and we expect our method could be adapted by future re-
searchers in this area. Importantly, the psychology research we rely
on is based on lay person views of negligence more generally, and is
not confined to litigation. Given the ubiquitous nature of blame
when decisions turn out poorly, researchers could adapt our
theoretical mediators and indicators for other areas of accounting.
As one example, researchers could examine whether investors’
blaming of CEOs after events such as restatements (e.g., Elliott,
Hodge, & Sedor, 2012) operates via perceived detectability (i.e.,
the CEO should have foreseen the errors and/or irregularities) and
acquiescence (i.e., the CEO tacitly approved the errors and/or
irregularities).
Our study is subject to limitations that in turn offer opportu-
nities for future research. One limitation is reliance on lay jurors,
which motivates questions about how our interventions would
influence participants with greater legal knowledge who are
involved in audit disputes. Along these lines, we explored (as a
follow up of experiment one) how novice attorneys (i.e., law stu-
dents) reacted to an AJR and CAM. Findings (untabulated) show
that law students’ culpability assessments are unaffected by an AJR,
consistent with these more sophisticated participants already un-
derstanding the concepts communicated by the AJR. Interestingly,
the law students reacted to CAMs quite differently depending on
the date of data collection, which spanned two years. Those in the
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
17
earlier group, which coincided with robust, public debate about
whether CAMs would be an unfair roadmap to litigation versus a
relief-inducing aid for audit firms (PCAOB, 2014), were more likely
to find for the audit firm with a CAM. By contrast, those in the later
group, which occurred during a lengthy lull period in which CAMs
were not (publicly) discussed, were more likely to find against the
audit firm with a CAM. These divergent findings raise the possibility
that changing environmental factors can influence how sophisti-
cated parties react to CAMs. They also build on Kachelmeier et al.
(2019) who identify group-specific differences in how analysts,
business attorneys, and plaintiff attorneys respond to CAMs.
These exploratory findings with law students, when coupled
with our theory and experimental findings pertaining to lay jurors,
motivates research that moves beyond the litigation setting to shed
light on how other participants react to regulatory factors such as a
CAM and AJR, and mediators of these effects. Reflecting this, Kang,
Piercey, & Trotman (2020) document a backfiring effect whereby an
AJRdby activating auditors’ directional goals pertaining to defen-
sibility of their judgmentsdcauses them to avoid innovative pro-
cedures and choose customary tests, particularly when audit risk is
high. Underscoring its robustness, this finding occurs in spite of the
auditors viewing the innovative procedures as more effective, and
even when the auditors are provided national office assurance of
the procedures’ reasonableness. Thus, while our findings indicate
that an AJR would likely reduce juror second-guessing (at least
among jurors not experiencing reactance), it appears that auditors’
behavior reflects a divergent belief that an AJR invokes greater need
to defend their professional judgments to third parties.
In addition to Kang et al.’s (2020) proposal to examine valuable
interventions aimed at remedying this effect of an AJR, a natural
next step would be melding the literature streams related to these
two regulatory factors and considering how an AJR affects auditors’
judgments about which areas to select for CAM disclosure. Future
research could examine whether auditors believe that CAMs
weaken jurors’ or investors’ perceptions of detectability and/or
acquiescence if a material fraud were to come to light later, and
whether an AJR’s activation of defensibility concerns affects audi-
tors’ strategy of which areas to select as CAMs e for example,
enacting a strategy of issuing many CAMs versus a strategy of
selectively issuing CAMs in the areas that auditors view as intro-
ducing the greatest fraud risk. However, if auditors’ views instead
reflect the earlier-discussed audit firm concerns about CAMs
leading to third party second-guessing, the effect of an AJR on au-
ditors’ CAM-related decisions could be diametrically different.
Appendix A. Supplementary data
Supplementary data to this article can be found online at
https://doi.org/10.1016/j.aos.2020.101172.
APPENDIX 1. Auditor Judgment Rule (AJR) Manipulation
No AJR Condition
Auditor Standard of Care:
Assume that, when an audit failure occurs, jury members should
evaluate auditors using an ordinary negligence standard. Liability
under ordinary negligence compares the auditor’s judgments and
behaviors to those that would be reached by a “reasonable, prudent
auditor.” Public accountants who audit financial statements hold
themselves out as possessing special skills and knowledge as
commonly possessed by other auditors in the auditing profession.
If the auditor fails to exercise due care that a reasonable, prudent
auditor would exercise in the same circumstances, the auditor can
be held liable to investors and other third parties for ordinary
18 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
negligence. For example, if an auditor fails to detect a material
overstatement in accounts receivable because of failure to examine
subsequent cash receipts from customers, but a reasonable, pru-
dent auditor would have examined subsequent cash receipts, the
auditor is negligent.
If a jury finds that an auditor failed to exercise due care (was
guilty of ordinary negligence), the jurors will then decide the
amount of damages the auditor will be required to pay the
plaintiffs.
AJR Condition
Auditor Standard of Care:
Assume that, when an audit failure occurs, jury members should
evaluate auditors using an auditor judgment rule standard. Liability
under an auditor judgment rule is similar in spirit to a business
judgment rule, which specifies that directors of a company who
make judgments that are within their authority and for which there
is a reasonable basis generally cannot have their judgments second-
guessed by the courts or be held responsible for subsequent third-
party losses. The only exceptions are when directors do not act in
good faith or intentionally do not act in the best interest of the
company.
Assume that the auditor judgment rule now exists because the
long-standing business judgment rule recently was extended to
auditor judgment via a landmark appellate court case, Smith & Co.
Accounting Firm vs. United States (2012):
In the auditor judgment rule, courts will now defer to the decisions
of independent auditors absent their bad faith or self-interest.
Many of the considerations cited as justifications for the business
judgment rule are applicable to the present case. For example, as
with business decisions, the court is not particularly qualified to
review auditors’ decisions, which often require significant judg-
ment and are made under uncertainty … and ‘after the fact liti-
gation is a most imperfect device to evaluate’ those decisions, as in
the corporate setting … Finally, policy considerations favor giving
auditors, as well as corporate directors, significant discretion to use
the best judgment, recognizing that ‘a rule which penalizes the
choice of seemingly riskier alternatives may not be in the interest’
of parties or society.
In summary, the auditor judgment rule specifies that auditors
making decisions in good faith, with a reasonable basis for such
decisions, generally cannot have their judgments second-guessed
by the courts or be held responsible for third-party losses.
Even if one or more other reasonable, prudent auditors would
have reached a different judgment or act differently in the same
circumstances, the auditor still is not necessarily liable to investors
or other third parties under the auditor judgment rule. For
example, if an auditor fails to detect a material overstatement in
accounts receivable because of failure to examine subsequent cash
receipts from customers, but another reasonable, prudent auditor
would have examined subsequent cash receipts, the auditor still
would not be held liable so long as he decided to not examine cash
receipts in good faith and had a reasonable basis for not doing so.
The auditor judgment rule recognizes that reasonable persons can
reach different, good-faith judgments.
If a jury finds that an auditor failed to make decisions in good
faith, or lacked a reasonable basis for their decisions (was guilty of
negligence, i.e., not protected under the auditor judgment rule), the
jurors will then decide the amount of damages the auditor will be
required to pay the plaintiffs.
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
APPENDIX 2. Critical Audit Matter (CAM) Manipulation
No CAM Condition
Report of Jones & Company Public Accounting Firm.
We have audited the accompanying balance sheets of Big Time
Gravel as of December 31, 2011 and 2010, and the related state-
ments of income, retained earnings, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of ma-
terial misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting prin-
ciples used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above pre-
sent fairly, in all material respects, the financial position of Big Time
Gravel as of December 31, 2011 and 2010, and the results of its
operations and its cash flows for the years then ended in confor-
mity with accounting principles generally accepted in the United
States of America.
Jones & Company.
February 28, 2012.
CAM Condition
Report of Jones & Company Public Accounting Firm.
We have audited the accompanying balance sheets of Big Time
Gravel as of December 31, 2011 and 2010, and the related state-
ments of income, retained earnings, and cash flows for the years
then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of ma-
terial misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting prin-
ciples used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above pre-
sent fairly, in all material respects, the financial position of Big Time
Gravel as of December 31, 2011 and 2010, and the results of its
operations and its cash flows for the years then ended in confor-
mity with accounting principles generally accepted in the United
States of America.
Critical Audit Matters
The standards of the PCAOB require that we communicate in our
report critical audit matters relating to the audit of the current
period’s financial statements or state that we determined that there
are no critical audit matters. Critical audit matters are those matters
addressed during the audit that (1) involved our most difficult,
subjective, or complex judgments; (2) posed the most difficulty to
us in obtaining sufficient appropriate evidence; or (3) posed the
most difficulty to us in forming our opinion on the financial
statements. The critical audit matters communicated below do not
 T. Brown et al. / Accounting, Organizations and Society xxx (xxxx) xxx
alter in any way our opinion on the financial statements, taken as a
whole.
Environmental Restoration Liability
We determined that our evaluation of Big Time Gravel’s (the
Company’s) environmental restoration liability was a critical audit
matter in the audit of the Company’s financial statements as of and
for the fiscal year ended December 31, 2011.
The Company has seven inactive quarries that will need to be
restored back to an environmentally friendly state. Accordingly, the
Company has recorded an environmental restoration liability of $2
million dollars. Management has taken the position that all seven
quarries can be restored by allowing each quarry to fill up with
water to create a lake, which is known as the “lake method” of
restoration. However, if any of the inactive quarries tap into haz-
ardous materials, the Environmental Protection Agency (EPA) will
likely not allow the Company to use the lake method. If this occurs,
the Company will be required to restore any quarry that tapped into
hazardous materials by filling that quarry with dirt and planting
grass & trees, which is significantly more expensive than the lake
method. Because the Company will likely have to pay more than the
amount of the environmental restoration liability if the EPA de-
termines that the Company cannot use the lake method to restore
all seven of their inactive quarries, we determined that there is a
high degree of uncertainty associated with this liability.
To evaluate if the Company’s assumption that all seven quarries
can be restored using the lake method is appropriate, we judg-
mentally performed a portfolio of audit procedures around the
environmental restoration liability throughout the course of our
fieldwork. These procedures consisted of interviews with Company
management and hiring an environmental specialist to conduct
testing in this area. Because of the uncertainty associated with the
environmental restoration liability, we had to make difficult and
subjective judgments in evaluating if the.
Company’s assumption that all seven quarries can be restored
using the lake method is appropriate. This uncertainty also created
difficulty as we were obtaining sufficient appropriate evidence to
support management’s assumption that the lake method can be
used to restore all seven quarries.
The Company’s accounting policy for the environmental resto-
ration liability is discussed in Note 1 to the financial statements.
Property Valuation
We determined that our evaluation of Big Time Gravel’s (the
Company’s) property valuation was a critical audit matter in the
audit of the Company’s financial statements as of and for the fiscal
year ended December 31, 2011.
Approximately 50% of the Company’s Property, Plant, and
Equipment is 100,000 acres of land that is recorded at a value of $18
million. The dollar amount recorded for this land is based on the
assertion that the land is capable of being mined. However, certain
factors, such as being close to a residential neighborhood or local
environmental regulations, could compromise the land’s suitability
for being mined. If any such factors exist, it is probable that the
land’s value would be overstated and would need to be written
down. Therefore, we determined that there is a high degree of
uncertainty with respect to the recorded value of the land.
To evaluate the Company’s assumption that the land is capable
of being mined, we judgmentally performed a portfolio of audit
procedures around the land’s value. These procedures consisted of
interviews with Company management and hiring a specialist to
conduct further testing in this area. Because of the uncertainty
associated with the land’s value, we had to make difficult and
subjective judgments in evaluating if the Company’s assumption
that the land is suitable for mining is appropriate. This uncertainty
also created difficulty as we were obtaining sufficient appropriate
evidence to support management’s assumption that the land is
Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
19
capable of being mined.
The Company’s accounting policy for property valuation is dis-
cussed in Note 3 to the financial statements.
Jones & Company.
February 28, 2012.
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Please cite this article as: Brown, T et al., Evidence on how different interventions affect juror assessment of auditor legal culpability and
responsibility for damages after auditor failure to detect fraud, Accounting, Organizations and Society, https://doi.org/10.1016/j.aos.2020.101172
 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Published every June and December

JURNAL ASET (AKUNTANSI RISET)

ISSN:2541-0342 (Online). ISSN:2086-2563 (Print). http://ejournal.upi.edu/index.php/aset

Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan

Menggunakan Beneish Model Pada Perusahaan Yang Menerapkan Asean
Corporate Governance Scorecard

Aprilia
Universitas trisakti jakarta
mm_lea88@ymail.com

Abstract. The purpose of this study is to determine the effect of analysis fraud pentagon toward
fraudulent financial reporting using beneish model to the companies have implemented ASEAN CG
Scorecard fraud pentagon measured by arrogance, competence, opportunities, pressure and
rationalization. The method of sampling used purposive sampling method. The sample consists of 50
predicated companies ASEAN CG Scorecard and the companies was listed on the stock. Exchange in
2011-2015. This researchtopics which contain in the library as well as other information from the official
website and the internet. The result of this research is that only the financial stability has significant
influence toward fraudulent financial reporting which proxied by beneish models. Meanwhile, the other
variabel do not have a significant effect toward fraudulent financial reporting.

Keywords: Fraud Diamond, Fraud Pentagon, Fraudulent Financial Reporting, Beneish Model, and
ASEAN CG Scorecard

Abstrak.Tujuan dari penelitian ini adalah untuk mengetahui pengaruh analisa fraud pentagon terhadap
kecurangan laporan keuangan dengan menggunakan beneish model pada perusahaan yang menerapkan
ASEAN CG Scorecard. Fraud pentagon diukur dengan arogansi, kompetensi peluang tekanan (stabilitas
keuangan, rasio leverage dan rasio kepemilikan) dan rasionalisasi. Metode pengambilan sampel
menggunakan metode purposive sampling (metode yang menggunakan kriteria tertentu). Sampel terdiri
dari 50 perusahaan berpredikat ASEAN CG Scorecard dan perusahaan yang tercatat di Bursa Efek di
2011-2015. Penelitian ini menggunakan IBM SPSS 21.0 dan menggunakan berbagai jurnal dan referensi
yang berkaitan dengan topic penelitian yang terdapat di perpustakaan serta informasi lain dari situs resmi
internet. Hasil dari penelitian ini adalah bahwa hanya stabilitas keuangan memiliki pengaruh yang
signifikan terhadap kecurangan laporan keuagan yang ditunjukkan oleh Beneish Model. Sementara itu,
variabel lain tidak memiliki pengaruh yang signifikan terhadap kecurangan laporan keuangan.

Kata kunci: Fraud Diamond, Fraud Pentagon, Kecurangan Laporan Keuangan, Beneish Model, dan
ASEAN CG Scorecard

Corresponding Author. mm_lea88@ymail.com

How To Site This Article. Aprilia. Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan
Keuangan Menggunakan Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate
Governance Scorecard. Jurnal Akuntansi Riset. Program Studi Akuntansi. Fakultas Pendidikan Ekonomi
dan Bisnis Universitas Pendidikan Indonesia, 9 (1), 101-132
History Of Article. Received: 21-11-2016, Revision: 08-12-2016, Published: 14-02-2017

101 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017

APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

PENDAHULUAN ACFE mengungkapkan ada tiga

kategori utama dalam kecurangan yang
Beberapa tahun yang lalu
terjadi, terdiri dari: penyalahgunaan
perekonomian di Indonesia mengalami
aktiva (Asset Misappropiation), korupsi
masa sulit yaitu krisis ekonomi yang
(Corruption), dan kecurangan laporan
terjadi pada tahun 1998. Seiring
keuangan (Financial Statement Fraud).
berjalannya waktu, perekonomian
Dari kumpulan kasus kecurangan yang
Indonesia perlahan-lahan mulai bangkit
ditemukan oleh ACFE, sebesar 85%
kembali. Keadaan perekonomian
merupakan kasus penyalahgunaan
membawa banyak pengaruh bagi
aktiva dengan kerugian rata-rata sebesar
perusahaan-perusahaan di Indonesia.
$130.000, 37% merupakan kasus
Salah satu pengaruh yang paling nyata
korupsi dengan kerugian rata-rata
yaitu keadaan ekonomi mempengaruhi
$200.000 dan sisanya sebesar 9%
kinerja perusahaan di Indonesia. Kinerja
merupakan kasus kecurangan laporan
perusahaan tercerminkan dari laporan
keuangan dengan kerugian terbesar
keuangan perusahaan, hal ini tentunya
$1.000.000 dibandingkan kasus lainnya.
menjadi perhatian investor dalam
Dalam penjelasan di atas, dapat ditarik
memutuskan untuk menanamkan
kesimpulan bahwa persentase terjadinya
sahamnya di perusahaan tersebut.
manipulasi laporan keuangan cukup
Laporan keuangan menjadi tolak ukur
kecil namun kerugian yang ditimbulkan
dari efisiensi dan efektifitas kinerja
cukupbesar.
suatu perusahaan, dan diharapkan
Kecurangan dapat terjadi di semua
laporan keuangan dapat berfungsi
jenis perusahaan, mulai dari perusahaan
secara maksimal dalam memberikan
kecil sampai perusahaan go public yang
informasi yang dibutuhkan oleh pihak
telah terdaftar di bursa efek dunia, hal
berkepentingan.
ini tak terkecuali dapat terjadi di
Untuk menilai kewajaran dalam
Indonesia. Banyaknya kasus
laporan keuangan dibutuhkan penilaian
kecurangan yang terjadi di Indonesia
dari seseorang yang ahli dan
merupakan salah satu bukti bahwa
independen dalam melakukan
adanya kegagalan audit atas laporan
pemeriksaan laporan keuangan tersebut.
keuangan, disini fungsi auditor
Audit atas laporan keuangan diperlukan
eksternal dinilai kurang maksimal
untuk mendeteksi dan mencegah
karena belum mampu mendeteksi dan
terjadinya kecurangan laporan keuangan
mencegah adanya kecurangan yang
yang disajikan oleh pihak manajemen
dilakukan oleh manajemen perusahaan.
perusahaan. Audit atas laporan
Adapun faktor-faktor yang
keuangan diperlukan untuk meyakinkan
menyebabkan terjadinya kecurangan
investor bahwa informasi yang
(fraud) disebut dengan segitiga
disajikan pihak manajemen perusahaan
kecurangan (fraud triangle) yang
tidak bias dan dapat dipercaya. Sudah
kemudian berkembang menjadi fraud
banyak terjadi banyak kasus mengenai
diamond dan perkembangan model
manipulasi laporan keuangan yang
fraud terbaru adalah fraud pentagon
melanda dunia. Penelitian yang
ditemukan oleh Jonathan Marks (2012).
dilakukan oleh Association of Certified
Fraud Examiners (ACFE, 2014)
KAJIAN LITERATUR
memperkirakan kerugian yang terjadi
Teori Keagenan (Agency Theory)
akibat kecurangan dan penyalahgunaan
adalah 5% dari pendapatan tahunan.

102 | JURNAL ASET (AKUNTANSI RISET) Vol.9 | No.1 | 2017

 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132
Agency Theory ditemukan oleh
Michael C. Jensen dan William H.
Meckling tahun 1976. Agency theory
menunjukkan bahwa perusahaan dapat
dilihat sebagai suatu hubungan kontrak
(loosely defined) antara pemegang atau
pemilik saham dengan pihak
operasional perusahaan. Suatu
hubungan agensi muncul ketika satu
atau lebih individu yang disebut
pelaku (principals),memperkerjakan
satu atau lebih individu lain yang
disebut agen, untuk melakukan semua
kegiatan operasional perusahaan atas
nama principals dalam kapasitasnya
mengambil keputusan. Prinsipal
sebagai pemilik modal atau perusahaan
memiliki akses dan ingin mengetahui
informasi-informasi yang berkaitan
dengan perusahaannya, sedangkan
agen sebagai pelaku riil dalam
kegiatan operasional perusahaan dan
tentunya mengetahui informasi
berkaitan dengan operasi dan kinerja
perusahaan secara menyeluruh.
Keadaan seperti ini disebut sebagai
asimetri informasi (pihak manajemen
memiliki informasi yang tidak
diketahui oleh pemegang saham).
Pihak manajemen yang dipekerjakan
oleh pemegang saham diberikan
sebagian kekuasaan untuk mengambil
keputusan terbaik bagi kepentingan
prinsipal. Dalam prakteknya,
teorikeagenan menyatakan akan sulit
untuk mempercayai manajemen
(agent) akan selalu bertindak
berdasarkan kepentingan pemegang
saham (principal). Disinilah akan
timbul benturan kepentingan, dimana
manajemen akan bertindak demi
kepentingan pribadi dan tidak
memaksimalkan kepentingan
pemegang saham. Dari adanya
benturan kepentingan ini, akan timbul
sifat-sifat mementingkan diri sendiri
dalam diri manajemen. Manajemen
akan bertindak demi kepentingan
103 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017
sendiri tanpa memikirkan kepentingan
prinsipal. Hal tersebut akan
memancing timbulnya beberapa sifat
yang dapat memancing terjadinya
kecurangan. Sebagaimana telah
diketahui bahwa kecurangan terjadi
akibat adanya beberapa faktor (fraud
triangle) yang sekarang telah
berkembang menjadi fraud pentagon.
Teori keagenan menjadi faktor
terbentuknya sifat-sifat yang
dijabarkan secara rinci di dalam fraud
model. Eisenhardt, 1989 membagi tiga
jenis sifat dasar manusia yang
menjelaskan lebih lanjut mengenai
teori keagenan yaitu pada umumnya
manusia mementingkan dirinya sendiri
(self interest), memiliki daya pikiran
yang terbatas mengenai persepsi masa
mendatang (bounded rationality), dan
selalu menghindari risiko (risk averse).
Untuk melihat keterkaitan antara teori
keagenan dengan elemen-elemen
dalam fraud model secara singkat akan
dijabarkan di bawahini: (1) Arogansi :
merupakan sikap sombong atau
angkuh seseorang yang menganggap
bahwa dirinya mampu melakukan
kecurangan. Sifat ini muncul
dikarenakan adanya sifat
mementingkan diri sendiri (self
interest yang besar) di dalam diri
manajemen yang membuat
arogansinya semakin besar, sifat ini
akan menjadi pemicu timbulnya
keyakinan bahwa dirinya tidak akan
diketahui apabila kecurangan telah
terjadi dan sanksi yang ada tidak dapat
menimpadirinya; (2) Kompetensi :
merupakan kemampuan yang dimiliki
seseorang untuk melakukan
kecurangan. Keterkaitannya dengan
teori keagenan adalah kemampuan
yang dimiliki oleh manajemen
perusahaan ditimbulkan karena adanya
kepentingan dari diri manajemen untuk
mendapatkan banyak keuntungan bagi
diri sendiri, sehingga manajemen tidak
APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

bertindak untuk kepentingan dalam hukuman (adanya unsur risk

prinsipallagi; (3) Peluang : terciptanya
suatu kesempatan untuk melakukan
kecurangan. Dalam hal ini, keadaan ini
akan digunakan oleh manajemen
perusahaan untuk melakukan
kecurangan secara diam-diam agar
tidak diketahui oleh orang banyak (risk
averse). Kecurangan tidak akan
tercipta apabila hanya ada peluang
tanpa diikuti oleh lemahnya
pengendalian diri manajemen; (4)
Tekanan : suatu keadaan yang
membuat pelaku melakukan
kecurangan. Adanya motivasi dalam
diri manajemen untuk melakukan
kecurangan, misalnya kurangnya
penghasilan yang diperoleh, kebutuhan
hidup yang cukup besar, hal tersebut
menjadi pemicu bagi manajemen
untuk bertindak atas kepentingan
dirisendiri; (5) Rasionalisasi : dan fraud pentagon adalah dalam
merupakan pembenaran yang muncul
di dalam pikiran pelaku ketika
kecurangan telah terjadi. Pemikiran ini
akan muncul karena pelaku
kecurangan tidak ingin perbuatannya
diketahui sehingga pelaku
membenarkan manipulasi yang telah
dilakukan. Pembenaran ini muncul
karena adanya keinginan dalam diri
pelaku untuk tetap aman dan terbebas
averse untuk terbebas dari risiko
jeratan hukuman).
Fraud Model
Fraud Model sudah berkembang
dengan pesat dalam beberapa tahun
terakhir ini, pertama kali fraud model
ditemukan oleh Donald R.Cressey
(1953) yang kemudian dikenal sebagai
fraud triangle. Fraud triangle
menggambarkan faktor-faktor yang
menyebabkan terjadinya kecurangan.
Fraud triangle kemudian berkembang
menjadi fraud diamond yang
ditemukan oleh Wolfe dan Hermanson
(2004). Perkembangan model fraud
terbaru ditemukan oleh Jonathan
Marks (2012) yang disebut sebagai
The Crowe’s Fraud Pentagon.
Perbedaan nyata antara fraud triangle
fraud triangle berfokus pada
kecurangan yang dilakukan pada
tingkat manajemen tingkat menengah
sedangkan fraud pentagon mempunyai
skema kecurangan yang lebih luas dan
menyangkut manipulasi yang
dilakukan oleh CEO atau CFO. Di
bawah ini adalah gambar dari fraud
pentagon:

Gambar 1.1
Sumber: The Crowe’s Fraud Pentagon, Marks (2012)

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132
Di bawah ini akan dijelaskan
mengenai unsur-unsur yang
terkandung dalam fraud pentagon: (1)
Arogansi (arrogance): merupakan
sifat kurangnya hati nurani yang
merupakan sikap superioritas atau
adanya sifat congkak pada seseorang
yang percaya bahwa pengendalian
internal tidak dapat diberlakukan
secara pribadi. Menurut Achsin dan
Cahyaningtyas (2015), kesombongan
ini muncul dari keyakinan bahwa
dirinya mampu melakukan
kecurangan dan kontrol yang ada tidak
dapat menimpa dirinya sehingga
pelaku kecurangan biasanya berpikir
bebas untuk melakukan kecurangan
tanpa takut adanya sanksi yang akan
menjeratnya; (2) Kompetensi
(competence/capability): yang
dimaksud dengan kompetensi disini
adalah dalam hal seseorang untuk
melakukan fraud. Dengan demikian
dapat disimpulkan bahwa kompetensi
merupakan kemampuan karyawan
untuk menembus pengendalian
internal yang ada di perusahaannya,
mengembangkan strategi penggelapan
yang canggih, dan mampu
mengendalikan situasi sosial yang
mampu mendatangkan keuntungan
baginya dengan cara mempengaruhi
orang lain agar bekerja sama
dengannya (Marks,2014); (3) Peluang
(opportunity): kontrol yang lemah
memberikan kesempatan bagi
seseorang untuk melakukan penipuan.
Dalam Sukirman dan Sari (2013)
menjelaskan terbukanya kesempatan
dikarenakan si pelaku percaya bahwa
aktivitas mereka tidak akan terdeteksi.
Andaikan tindakan tersebut diketahui,
maka tidak akan ada tindakan serius
untuk menanggapi hal tersebut.
Peluang biasanya terkait dengan
lingkungan dimana perbuatan itu akan
terjadinya, hal ini disebabkan karena
pengendalian internal yang lemah,
105 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017
pengawasan manajemen yang kurang
memadai, dan prosedur yang
dijalankan tidakjelas; (4) Tekanan
(pressure): adanya motivasi untuk
melakukan dan menyembunyikan
penipuan yang dilakukan. Tuanakotta
(2012) menjelaskan bahwa seseorang
melakukan penggelapan uang
perusahaan karena adanya tekanan
yang menghimpitnya, tekanan itu
dapat berupa adanya kebutuhan
mendesak yang harus segera
diselesaikan (tekanan keuangan) dan
hal ini tidak dapat dibagikan kepada
orang lain. Masalah tersebut akan
ditutup rapat-rapat oleh orang
bersangkutan dan menjadi
permasalahan yang non-
shareablebaginya; (5) Rasionalisasi
(rationalization): adanya pemikiran
untuk membenarkan kecurangan yang
sudahterjadi.DalamSukirmandanSari(
2013),rasionalisasimerupakanpemben
aranterhadap tindakan yang akan
dilakukan. Para pelaku kecurangan
biasanya akan mencari berbagai alasan
yang rasional untuk mengidentifikasi
tindakan mereka. Dalam Tuanakotta
(2012), rasionalisasi diperlukan untuk
mencerna perilakunya yang melawan
hukum untuk tetap mempertahankan
jati dirinya sebagai orang
yangdipercaya.
Kecurangan (Fraud)
Kecurangan (Fraud) merupakan
perbuatan yang disengaja dengan
maksud menipu dan mengambil
keuntungan dari pihak lain. Secara
harafiah, IIA (2009) dalam Modul
Audit Forensik Universitas Trisakti
(2015) mendefinisikan kecurangan
(fraud) sebagai:“Setiap tindakan ilegal
yang ditandai dengan adanya tipu
daya, penyembunyian, atau
pelanggaran kepercayaan. Tindakan ini
tidak tergantung pada ancaman
kekerasan atau ancaman fisik.
APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard
Penipuan dilakukan oleh pihak dan
organisasi lain yang terlibat untuk
memperoleh uang, properti, atau jasa;
untuk menghindari pembayaran atau
kerugian atas jasa; atau untuk
mengamankan keuntungan pribadi
atau bisnis”
Menurut Mary-Jo Kranacher et
al. (2011) dalam Haryono Umar
(2016: 83), terdapat tiga unsur dalam
kecurangan, yaitu: (1) Conversion :
yang berarti menipu, merekayasa,
membohongi, dan lainnya. Dalam hal
ini, kecurangan dimulai dengan adanya
niat jahat untuk melakukan manipulasi
dan rekayasa atas suatu kondisi demi
kepentingan pribadi dan kelompok
yang dapat merugikan pihak lain; (2)
Concealment : yang berarti
menyembunyikan atau terjadinya
pembelokan. Karena kecurangan
merupakan salah satu bentuk kejahatan
maka tentunya para pelaku tidak ingin
diketahui oleh pihak lainnya. Para
pelaku melakukan nepotisme dan
berkolusi untuk menyembunyikan
kejahatannya agar perbuatan tersebut
tidak dketahui oleh pihak luar. Karena
apabila perbuatan tersebut sampai
diketahui pihak luar maka akan
menimbulkan sanksi yang berat
bagimereka; (3) Theft : yang berarti
mengambil kekayaan secara tidak sah.
Manipulasi, penipuan dan rekayasa
yang telah dilakukan secara sembunyi-
sembunyi tentunya dilakukan dengan
tujuan agar mendapatkan keuntungan
finansial secara tidaksah.
Dalam Tuanakotta (2012), ACFE
(Association of Certified Fraud
Examiners) menggambarkan cabang-
cabang dari fraud beserta rantingnya
dalam bentuk sebuah pohon yang
dikenal dengan sebutan fraud tree.
Secara garis besar, pohon kecurangan
dapat dijelaskan secara singkat di
bawah ini: (1) Korupsi (Corruption) :
dalam Tuanakotta (2012), istilah
106 | JURNAL ASET (AKUNTANSI RISET) Vol.9 | No.1 | 2017
“corruption” di dalam fraud tree ini
serupa tetapi tidak sama dengan istilah
korupsi di dalam perundang-undangan
kita. Korupsi dalam pohon kecurangan
dibagi ke dalam empat bagian yaitu:
benturan kepentingan (conflicts of
interest), penyuapan (bribery),
gratifikasi secara ilegal (illegal
gratuities), dan pemerasan ekonomi
(economicextortion); (2)
Penyalahgunaan aktiva (Asset
Misappropriation) : adalah
“pengambilan” aktiva secara ilegal
(tidak sah atau melawan hukum) yang
dilakukan oleh seseorang yang diberi
wewenang untuk mengelola atau
mengawasi aktiva tersebut
(Tuanakotta, 2012). Dalam fraud tree,
penyalahgunaan aktiva dibagi menjadi
dua bagian, yakni: kas (cash) dan
persedian dan semua aktiva lainnya
(inventory and all
otherassets);Kecurangan laporan
keuangan (financial statement fraud) :
diartikan sebagai kecurangan yang
dilakukan oleh manajemen perusahaan
berupa salah saji yang material dalam
laporan keuangan yang disajikan oleh
manajemen dan hal ini merugikan
investor dan pihak berkepentingan
lainnya. Dalam fraud tree, kecurangan
laporan keuangan dibagi kedalam dua
bagian, yaitu: kelebihan saji aktiva
atau pendapatan (asset/revenue
overstatements) dan kekurangan saji
aktiva atau pendapatan (asset/revenue
understatements).
Kecurangan laporan keuangan
atau biasa disebut sebagai financial
statement fraud (fraudulent financial
reporting). Menurut Arens et al. (2008:
12) kecurangan laporan keuangan
adalah salah saji atau pengabaian
jumlah atau pengungkapan yang
disengaja dengan maksud menipu para
pemakai laporan keuangan. Banyak
kasus mengenai fraud pada laporan
keuangan diantaranya mengenai lebih
 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

saji pada pengakuan aktiva, pendapatan dalam laporan tahunan perusahaan

atau pengabaian kewajiban. dinilai CEO tersebut memiliki
keinginan untuk dikenal oleh
masyarakat luas. Hal ini dinilai sebagai
METODOLOGI PENELITIAN
adanya sifat sombong atau arogan
Pengembangan Hipotesis dalam diri CEO tersebut. Sifat arogan
Pengaruh politisi CEO terhadap merupakan salah satu elemen yang
kecurangan laporan keuangan terkandung dalam fraud pentagon.
Simon et al. (2015) melakukan Masih sangat jarang penelitian di
penelitian untuk mengukur arogansi Indonesia yang meneliti tentang hal
dengan menilai adanya CEO di suatu tersebut. Penelitian ini melanjutkan
perusahaan yang juga merupakan hubungan frekuensi kemunculan
seorang politisi. Pengukuran politisi gambar CEO terhadap kecurangan
CEO masih sangat jarang dilakukan di laporan keuangan yang sebelumnya
Indonesia. Secara umum, seorang CEO dilakukan oleh Simon et al.
yang juga seorang politisi akan Berdasarkan uraian di atas, maka
memiliki banyak koneksi dan hal ini hipotesis dapat dirumuskan sebagai
dapat membantu kelancaran bisnis berikut:
perusahaan. Dengan koneksi yang H2 : Frekuensi kemunculan gambar
dimilikinya, tentunya hal ini akan CEO berpengaruh signifikan
menumbuhkan sifat angkuh atau terhadapkecuranganlaporan keuangan.
sombong dalam diri CEO tersebut. Sifat
angkuh tersebut akan membuat CEO Pengaruh kebijakan hutang-piutang
menghalalkan segala macam cara untuk meragukan yang tidak diumumkan
menutupi kecurangan yang terhadap kecurangan laporan
dilakukannya dan memanfaatkan keuangan
koneksinya yang luas. Dalam hal Perusahaan perlu untuk
berbuat curang, CEO akan berpikir mengumumkan semua kebijakan yang
bahwa ia merupakan salah satu orang digunakan oleh perusahaan dalam
penting yang menunjang kelancaran catatan laporan keuangannya, sehingga
bisnis Perusahaan. Oleh karena itu, sifat investor memperoleh informasi yang
arogan merupakan faktor utama transparan dan relevan mengenai
terjadinya kecurangan. Berdasarkan kebijakan dan kinerja perusahaan
uraian di atas, maka hipotesis dapat tersebut. Apabila ada perusahaan yang
dirumuskan sebagaiberikut: tidak mengumumkan kebijakan yang
H1 : Politisi CEO berpengaruh digunakan, menunjukkan besarnya
signifikan terhadap kecurangan dalam kemungkinan ada hal yang
laporan keuangan. disembunyikan oleh pihak manajemen
perusahaan. Kebijakan terkait hutang-
Pengaruh frekuensi kemunculan piutang meragukan yang tidak
gambar CEO terhadap kecurangan diumumkan menunjukkan tidak adanya
laporan keuangan transparansi. Seringkali hutang- piutang
Simon et al. (2015) meneliti dipertanyakan oleh investor untuk
bahwa salah satu pengukuran arogansi melihat kinerja perusahaan dalam
bisa dilihat dari frekuensi kemunculan melunasi kewajibannya. Terkait hal
gambar CEO di dalam laporan tahunan tersebut, manajemen perlu
perusahaan, apabila seorang CEO menampilkan informasi secara
memiliki gambar yang cukup banyak transparan.Pengukuran ini ditemukan

107 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017

APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard
oleh Simon et al. (2015) melalui
wawancara dan pengamatan terhadap
perusahaan yang terdaftar di Bursa
Malaysia. Penelitian ini melanjutkan
penelitian yang dilakukan oleh Simon et
al. (2015). Variabel ini digunakan untuk
mengukur kompetensi yang terdapat
dalam elemen fraud pentagon.
Berdasarkan rincian di atas, hipotesis
dapat dirumuskan sebagaiberikut:
H3 : Kebijakan hutang-piutang
meragukan yang tidak diumumkan
berpengaruh signifikan terhadap
kecurangan laporankeuangan.
Pengaruh terbatasnya akses
informasi entitas bertujuan khusus
terhadap kecurangan laporan
keuangan
Entitas bertujuan khusus
biasanya dibentuk dengan tujuan khusus
yaitu untuk menutupi kebutuhan
operasional perusahaan induk. Ada atau
tidaknya entitas bertujuan khusus
biasanya diungkapkan dalam catatan
laporan keuangan dan dari sanalah
pihak luar (pemangku kepentingan)
mendapatkan informasi yang akuntabel
mengenai kegiatan perusahaannya.
Terbatasnya akses informasi dari pihak
luar terhadap entitas bertujuan khusus
dinilai tidak adanya transparansi. Hal
ini memungkinkan adanya informasi
yang ditutupi oleh manajemen
perusahaan dan mengindikasikan
adanya kecurangan. Simon et al. (2015)
belum melakukan penelitian lebih lanjut
mengenai pengaruh terbatasnya akses
informasi entitas bertujuan khusus
terhadap kecurangan laporan keuangan
(variabel ini digunakan untuk mengukur
kompetensi yang terdapat dalam
elemen fraud pentagon). Penelitian ini
ingin melanjutkan penelitian Simon et
al. (2015). Berdasarkan uraian di atas,
hipotesis dapat dirumuskan
sebagaiberikut:
108 | JURNAL ASET (AKUNTANSI RISET) Vol.9 | No.1 | 2017
H4 : Terbatasnya akses informasi
entitas bertujuan khusus
berpengaruhsignifikanterhadap
kecurangan laporankeuangan.
Pengaruh efektifitas pengawasan
terhadap kecurangan laporan
keuangan
Pengawasan yang independen
biasanya dilakukan dengan
menempatkan sejumlah dewan
komisaris independen di dalam
perusahaan. Dewan komisaris
independen merupakan komisaris yang
berasal dari luar perusahaan atau tidak
berafiliasi dengan pihak pemegang
saham perusahaan. Semakin banyak
dewan komisaris di dalam suatu
perusahaan maka pengawasannya akan
semakin efektif. Penelitian Rahardjo
dan Sihombing (2014) menunjukkan
bahwa efektifitas pengawasan tidak
berpengaruh signifikan terhadap
kecurangan laporan keuangan, hal ini
didukung pula oleh Martantya dan
Daljono (2013). Dan di beberapa
penelitian lainnya, hasilnya masih
tidak memiliki pengaruh signifikan.
Dan penelitian ini ingin meneliti lebih
lanjut mengenai pengaruh efektifitas
pengawasan terhadap kecurangan
laporan keuangan (variabel ini
digunakan untuk mengukur peluang
yang terdapat dalam elemen fraud
pentagon). Berdasarkan uraian di atas,
maka hipotesis dapat dirumuskan
sebagaiberikut:
H5 : Efektifitas pengawasan
berpengaruh signifikan terhadap
kecurangan laporan keuangan.
Pengaruh pergantian ketua auditor
internal terhadap kecurangan
laporan keuangan
Pergantian ketua auditor internal
seharusnya mengikuti peraturan yang
berlaku di perusahaan tersebut.
Apabila pergantian ketua auditor
 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

internal tidak mengikuti peraturan yag oleh penelitian Sukirman dan Sari
ada, maka perusahaan tersebut dinilai (2013) serta Henny dan Nugraha
tidak efektif. Terlalu sering (2015) yang menunjukkan bahwa
bergantinya ketua internal auditor akan stabilitas keuangan tidak berpengaruh
mempengaruhi audit internal yang signifikan terhadap kecurangan
akan dilakukan oleh Sistem laporan keuangan. Stabilitas keuangan
Pengendalian Intern (SPI). Sejauh ini digunakan untuk mengukur tekanan
penelitian yang dilakukan masih belum yang terdapat dalam elemen fraud
meneliti mengenai pengaruh pentagon. Berdasarkan uraian di atas,
pergantian internal auditor terhadap hipotesis dapat dirumuskan
manipulasi laporan keuangan. sebagaiberikut:
Penelitian yang dilakukan Simon et al. H7: Stabilitas keuangan
(2015)menghasilkanpengukuranbaruun berpengaruh signifikan terhadap
tukmengukurpeluangyangterdapatdala kecurangan laporankeuangan.
melemen fraud pentagon. Penelitian
ini merupakan kelanjutan penelitian Pengaruh tekanan pihak eksternal
yang dilakukan oleh Simon terhadap kecurangan laporan
etal.Berdasarkan uraian di atas, keuangan
hipotesis dapat dirumuskan sebagai Adanya tekanan pihak eksternal
berikut: akan menyebabkan manajemen akan
mencari pinjaman dari pihak lain agar
H6 : Pergantian ketua auditor internal
perusahaannya dapat bersaing dengan
berpengaruh signifikan terhadap
kompetitif. Tekanan tersebut akan
kecurangan laporan keuangan.
menjadi pemicu bagi pihak manajemen
untuk melakukan manipulasi laporan
Pengaruh stabilitas keuangan keuangan. Manajemen akan lebih
terhadap kecurangan laporan menghalalkan segala macam cara untuk
keuangan mendapatkan pinjaman dan akan
Stabilitas keuangan merupakan berusaha untuk menampilkan laporan
kondisi stabil keuangan dalam suatu keuangan yang sempurna agar dinilai
perusahaan. Stabilitas keuangan kinerjanya baik. Penelitian yang
dipengaruhi oleh keadaan ekonomi dilakukan oleh Henny dan Nugraha
suatu negara. Apabila kondisi ekonomi (2015) serta Rahardjo dan Sihombing
tidak stabil, maka akan mempengaruhi (2014) menunjukkan adanya pengaruh
stabilitas keuangan perusahaan signifikan antara tekanan pihak
tersebut. Tentunya hal seperti ini akan eksternal dan kecurangan laporan
memberikan tekanan terhadap pihak keuangan. Namun hasil penelitian
manajemen perusahaan. Dan mereka bertolak belakang dengan
manajemen akan menghalalkan segala penelitian Sukirman dan Sari (2013)
macam cara untuk menampilkan dan Martantya dan Daljono (2013) yang
laporan keuangan yang terkesan baik. menunjukkan bahwa tekanan pihak
Penelitian Martantya dan Daljono eksternal tidak berpengaruh signifikan
(2013) menjelaskan bahwa stabilitas terhadap kecurangan laporan keuangan.
keuangan berpengaruh signifikan Tekanan pihak eksternal digunakan
terhadap kecurangan laporan untuk mengukur tekanan yang terdapat
keuangan, hal serupa didukung oleh dalam elemen fraud pentagon.
penelitian Rahardjo dan Sihombing Berdasarkan uraian di atas, hipotesis
(2014). Hal tersebut tidak didukung dapat dirumuskan sebagaiberikut:

109 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017

APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard
H8 : Tekanan eksternal berpengaruh
signifikan terhadap kecurangan laporan
keuangan.
Pengaruh kepemilikan manajerial
terhadap kecurangan laporan
keuangan
Sejumlah kepemilikan saham
yang dimiliki oleh orang dalam
mampu meningkatkan kontrol di
dalam perusahaan. Menurut Henny
dan Nugraha (2015), kepemilikan
saham oleh orang dalam ini dianggap
mampu mengatasi permasalahan
agensi yang sering terjadi di dalam
perusahaan. Sebab dengan adanya
kepemilikan saham orang dalam
tersebut mampu menyejajarkan
kepentingan manajemen dengan
kepentingan pemegang saham (Henny
dan Nugraha, 2015). Yang dimaksud
di dalam hal ini adalah adanya
kepemilikan sahan dari pihak pemilik
perusahaan yang ingin turut campur
dalam pengambilan keputusan
operasional perusahaan dianggap
sebagai penghubung antara prinsipal
dan agen. Sehingga akan tercipta
kontrol yang lebih kuat. Semakin kecil
kepemilikan manajerial di suatu
perusahaan, maka
kontrolmanajemendidalamperusahaana
kansemakinkecildanhaliniakanmenyeb
abkanterjadinya kecurangan semakin
tinggi. Berdasarkan penelitian yang
dilakukan oleh Ratmono dan Diany
(2014) serta penelitian Henny dan
Nugraha (2015) menunjukkan bahwa
kepemilikan manajerial tidak
berpengaruh signifikan terhadap
kecurangan laporan keuangan.
Kepemilikan manajerial digunakan
untuk mengukur tekanan yang terdapat
dalam elemen fraud pentagon. .
Berdasarkan uraian di atas, hipotesis
dapat dirumuskan sebagai berikut:
110 | JURNAL ASET (AKUNTANSI RISET) Vol.9 | No.1 | 2017
H9 : Kepemilikan manajerial
berpengaruh signifikan terhadap
kecurangan laporan keuangan.
Pengaruh pergantian kebijakan
akuntansi perusahaan terhadap
kecurangan laporan keuangan
Adanya pergantian kebijakan
akuntansi di dalam suatu perusahaan
akan memunculkan pembenaran bagi
manajemen untuk melakukan
kecurangan laporan keuangan.
Tindakan yang mungkin sebenarnya
ilegal akan sengaja di-legalkan oleh
manajemen dengan alasan adanya
pergantian kebijakan perusahaan untuk
menampilkan laporan keuangan yang
baik. Sampai sejauh ini masih belum
ada penelitian mengenai pengaruh
pergantian kebijakan akuntansi
perusahaan terhadap kecenderungan
manipulasi laporan keuangan di
Indonesia. Penelitian Simon et al.
(2015) menghasilkan pengukuran baru
untuk mendeteksi laporan keuangan
dengan melihat adanya kecenderungan
pergantian kebijakan akuntansi
perusahaan. Variabel ini digunakan
untuk mengukur rasionalisasi yang
terdapat dalam elemen fraud pentagon.
Penelitian ini ingin melanjutkan
penelitian Simon et al. Berdasarkan
uraian di atas, hipotesis dapat
dirumuskan sebagaiberikut:
H10 : Pergantian kebijakan akuntansi
perusahaan berpengaruh signifikan
terhadap kecurangan laporan
keuangan.
Pengaruh opini auditor terhadap
kecurangan laporan keuangan
Opini audit seringkali digunakan
untuk menilai efektifitas kinerja suatu
perusahaan dan untuk menilai apakah
laporan keuangan yang telah disajikan
oleh manajemen telah akuntabel dan
transparan. Dan opini auditor dapat
dijadikan sebagai tolak ukur dari
 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132
adanya indikasi kecurangan yang
mungkin terjadi. Penelitian yang
dilakukan oleh Ratmono dan Diany
(2014) menunjukkan bahwa opini
auditor tidak berpengaruh signifikan
terhadap kecurangan laporan keuangan
dan variabel ini tidak dapat digunakan
dalam penelitian beliau saat diuji
dengan Uji Mann-Whitney. Variabel
ini digunakan untuk mengukur
rasionalisasi yang terdapat dalam
elemen fraud pentagon. Berdasarkan
uraian di atas, hipotesis dapat
dirumuskan sebagai berikut: H11 :
Opini auditor berpengaruh signifikan
terhadap kecurangan laporankeuangan.
Definisi Operasional Variabel
Variabel Dependen
Variabel Dependen (Y) dalam
penelitian ini adalah kecurangan
laporan keuangan (fraudulent financial
reporting). Kecurangan laporan
keuangan dihitung menggunakan
Model Beneish yang diadopsi pada
tahun 1999 yang terdapat dalam jurnal
Mahama (2015). Adapun rumusnya
sebagai berikut:
M-Score = -4.84 + 0.920DSRI +
0.528GMI + 0.404
AQI + 0.892 SGI +
0.11 DEPI -
0.172SGAI +
4.679TATA -
0.327LEVI
Dengan rincian dari masing-masing
rasio sebagai berikut: (1) Days’ Sales
in Receivable Index(DSRI)Rasio ini
digunakan untuk mengukur rasio hari
penjualan dalam bentuk piutang dalam
satu tahun berjalan dibandingkan
dengan tahun sebelumnya (Mahama,
2015). Apabila skor indeks DSRI lebih
tinggi dari 1.0 di tahun bersangkutan
dapat ditafsirkan bahwa persentase
piutang penjualan pada tahun tersebut
lebih tinggi dibandingkan tahun
111 | JURNAL ASET (AKUNTANSI RISET)Vol.9 | No.1 | 2017
sebelumnya. Terjadinya peningkatan
jumlah hari penjualan dalam piutang
dapat diartikan sebagai hasil dari
perubahan kebijakan kredit yang ada
untuk memacu penjualan guna
menghadapi persaingan yang
meningkat. Peningkatan piutang
dengan cara yang tidak tepat dapat
menurunkan penghasilan. Efitasari
(2013) menyatakan peningkatan DSRI
berkaitan dengan tingginya penghasilan
karena terjadi overstated. Semakin
tinggi DSRI, maka semakin besar
terjadinya kemungkinan terjadinya
manipulasi laporan keuangan. Rumus
dari DSRI adalah sebagai berikut:
(Account Receivables t / Sales t )
(Account Receivables t-1 / Sales t-1 )
(2) Gross Margin Index(GMI)
Rasio ini digunakan untuk mengukur
rasio laba kotor tahun sebelumnya
dibandingkan dengan tahun berjalan
(Mahama, 2015). Apabila skor indeks
GMI lebih tinggi dari 1.0 menandakan
bahwa laba kotor perusahaan memburuk
pada periode berjalan dengan
konsekuensi perusahaan melakukan
manipulasi laba. Menurut Warshavsky
(2012) menunjukkan bahwa kualitas
laba dapat menjadi aspek penting dalam
mengevaluasi kesehatan perusahaan,
sehingga godaan untuk melakukan
manipulasi akan lebih tinggi. Rumus
GMI adalah sebagaiberikut:
(Sales t-1 – COGS t-1) / Sales t-1
(Sales t – COGS t) / Sales t
(3) Asset Quality Index(AQI)
Rasio ini merefleksikan perubahan
risiko realisasi aktiva dengan
membandingkan aktiva lancar,
bangunan, tanah dan perlengkapan
dengan total aktiva (Mahama, 2015).
Warshavsky (2012) menyatakan jika
skor indeks AQI lebih tinggi dari 1.0
mengindikasikan bahwa perusahaan
berpotensi untuk meningkatkan biaya
APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard
pertangguhan atas aktiva tak berwujud,
hal ini dapat menciptakan terjadinya
manipulasi laba. Rumus AQI sebagai
berikut:
(1-((Current Asset t + PPE t)/Total
Asset t))
(1-((Current Asset t-1 +PPE t-1)/Total
Asset t-1))
(4) Sales Growth Index(SGI)
Rasio ini digunakan untuk mengukur
pertumbuhan pendapatan pada tahun
berjalan dibandingkan dengan tahun
sebelumnya (Mahama, 2015). Bila skor
SGI lebih tinggi dari 1.0 menunjukkan
adanya pertumbuhan yang positif,
pertumbuhan dalam pendapatan dapat
mengindikasikan adanya manipulasi
laba. Rumus SGI adalah sebagai
berikut:
SGI = Sales t
Sales t-1
(5) Depreciation Index(DEPI)
Rasio ini digunakan untuk mengukur
biaya depresiasi dan nilai bruto
bangunan, tanah dan perlengkapan
pada tahun berjalan dengan tahun
sebelumnya (Mahama, 2015). Apabila
skor DEPI di atas 1.0 maka
menunjukkan adanya penyesuaian ke
atas dari umur ekonomis bangunan,
tanah serta perlengkapan dan hal ini
menandakan adanya indikasi terjadinya
manipulasi earning selama tahun
tersebut. Rumus DEPI sebagaiberikut:
(Depreciation t-1/(Depreciation t-1 +
PPE t-1))
(Depreciation t/(Depreciation t + PPE
t))
(6) Sales, General and Administrative
Expenses Index(SGAI)
Rasio ini digunakan untuk mengukur
beban penjualan dan adminstratif
terhadap penjualan pada tahun
112 | JURNAL ASET (AKUNTANSI RISET) Vol.9 | No.1 | 2017
berjalan dibandingkan dengan tahun
sebelumnya (Mahama,
2015).Warshavsky (2012) menjelaskan
apabila ada kenaikan yang tidak
proporsional pada penjualan yang
dibandingkan dengan beban umum dan
administratif, maka terdapat indikasi
negatif mengenai prospek perusahaan di
masa yang akan datang. Rumus SGAI
adalah sebagai berikut:
SGAI = (SGA expenses t/Sales t)
(SGA expenses t-1/Sales t-1)
(7) Total Accruals to Total Assets
Index(TATA)
Rasio ini digunakan untuk mengukur
penjualan tunai yang terjadi di sebuah
perusahaan (Mahama, 2015). Beneish
(1999) menjelaskan apabila total akrual
lebih tinggi daripada kas maka
mengindikasikan adanya kemungkinan
manipulasi pendapatan yang tinggi.
Rumus TATA adalah sebagai berikut:
(Change in Working Capital t- Change
in Cash t –Change in Tax Payable t -
Depr & Amor Exp t)
Total Assets t
(8) Leverage Index(LEVI)
LEVI digunakan untuk mengukur
struktur keuangan perusahaan dan
mengukur risiko jangka panjang pada
perusahaan tersebut (Mahama, 2015).
Jika skor LEVI lebih tinggi dari1.0
maka terjadi peningkatan leverage
dalam perusahaan dan hal ini dapat
mengakibatkan adanya manipulasi.
Efitasari (2013) menjelaskan bahwa
indeks ini dapat menangkap adanya
insentif dalam debt covenant untuk
memanipulasi pendapatan. Rumus
LEVI adalah sebagai berikut:
((LTD t + Current Liabilites t)/Total
Assets t)
((LTD t-1 + Current Liabilites t-
 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

1)/Total Assets t-1) dependen (Y) dan variabel ini biasanya

mempunyai pengaruh secara positif atau
negatif. Adapun variabel independen
Variabel Independen
yang terdapat dalam penelitian ini
Variabel independen (X) adalah
adalah sebagai berikut:
variabel yang mempengaruhi variabel

Tabel 1.
Pengukuran Variabel

Variabel Penelitian Pengukuran Skala

1. POLCEO (X1) Variabel dummy Nominal

Berdasarkan penelitian Yang 1 = perusahaan yang menerapkan
dilakukan oleh Simon et al. ASEAN CG Scorecard mempunyai CEO
(2015) yang juga seorang politisi
0 = sebaliknya
2. CEOPIC (X2) CEOPIC = Nominal
Berdasarkan penelitian Yang frekuensi kemunculan gambar CEO di
dilakukan oleh Simon et al. laporan tahunan perusahaan yang
(2015) menerapkan ASEAN CG Scorecard
selama tahun penelitian
3. UNDPOL (X3) Variabel dummy Nominal
Berdasarkan penelitian Yang 1 = perusahaan yang menerapkan
dilakukan oleh Simon ASEAN CG Scorecard tidak
et al. mengumumkan kebijakan akuntansi
(2015) mengenai hutang-piutang meragukan
(dilihat di catatan laporan keuangan).
0 = sebaliknya.
4. SPVACC (X4) Variabel dummy Nominal
Berdasarkan penelitian yang 1 = perusahaan yang menerapkan
dilakukan oleh Simon et al. ASEAN CG Scorecard memiliki entitas
(2015) bertujuan khusus dan iinformasinya
dibatasi.
0 = sebaliknya.
5. COMIC (X5) COMIC = Rasio
Berdasarkan penelitian yang (Jumlah dewan komisaris
dilakukan Henny dan Nugraha independen/Jumlah dewan komisaris
(2015), Rahardjo dan Sihombing keseluruhan) x100%
(2014), Sukirman dan Sari
(2013), beserta Martantya dan
Daljono (2013).
6. CHIA (X6) Variabel dummy Nominal
Berdasarkan penelitian yang 1 = adanya pergantian ketua auditor
dilakukan oleh Simon et al. internal selama tiga tahun pengamatan
(2015) pada perusahaan yang menerapkan
ASEAN CG Scorecard.
0 = sebaliknya.

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 APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

7. AGROW (X7) AGROW = Rasio

Berdasarkan penelitian yang
dilakukan oleh Simon et al. Total Asset t – Total Asset t-
(2015), Henny dan Nugraha 1 Total Assett
(2015), Rahardjo dan Sihombing
(2014), beserta Martantya dan
Daljono (2013).
8. LEV (X8) LEV = Rasio
Berdasarkan penelitian yang
dilakukan oleh Simon et al. Total Debt t
(2015), Henny dan Nugraha Total Equity t
(2015), Rahardjo dan Sihombing
(2014), Utaminingsih dan
Ardiyani (2014), beserta
Martantya dan Daljono (2013).
9. OSHIP (X9) OSHIP = Rasio
Berdasarkan penelitian yang (Jumlah saham manajerial
dilakukan oleh Henny dan t/Jumlah saham keseluruhan t)
Nugraha (2015), Ratmono dan x100%
Diany (2014), Martantya dan
Daljono (2013), beserta
Sukirman dan Sari(2013).
10. ACCPOL (X10) Variabel dummy Nominal
Berdasarkan penelitian yang 1 = perusahaan yang menerapkan
dilakukan Simon et al.(2015). ASEAN CG Scorecard seringkali
berganti-ganti kebijakan akuntansi
selama tiga tahun pengamatan.
0 = sebaliknya.

11. OPNADT (X11) Variabel dummy Nominal

Berdasarkan penelitian yang 1 = perusahaan yang menerapkan
dilakukan oleh Sukirman dan ASEAN CG Scorecard mendapatkan
Sari (2013) opini yang cenderung berubah-ubah
selama tiga tahun pengamatan.
0 = sebaliknya.
12. SIZE (X12) (variabel kontrol) SIZE = Ln (total asset) Rasio
Berdasarkan penelitian yang
dilakukan oleh Henny dan
Nugraha (2015) beserta
Martantya dan Daljono(2013)

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Penentuan Sampel SPVACC = Terbatasnya akses

Penelitian ini menggunakan informasi entitasbertujuankhusus
sampel perusahaan yang menerapkan COMIC = Proporsional jumlah
ASEAN CG Scorecard di tahun 2014 dewan komisarisindependen
dikarenakan untuk 50 perusahaan yang CHIA = Pergantian
menerapkan ASEAN CG Scorecard di ketuaauditorinternal
tahun 2015 belum dikeluarkan oleh AGROW = Tingkatpertumbuhan
IICD (Indonesian Institute for aktiva
Corporate Directorship), dan belum LEV = Leverageratio
dipublikasikan di website resmi IICD. OSHIP = Proporsional saham
Pengambilan sampel menggunakan yang dimilikidewandireksi
metode purposive sampling, sebagai ACCPOL = Pergantian kebijakan
berikut:(a)Perusahaan yang menerapkan akuntansiperusahaan
ASEAN CG Scorecard tahun 2014 dan OPNADT = Opini auditor
diteliti selama tahun 2011-2015;(b) SIZE = Ukuran perusahaan
Menerbitkan laporan keuangan dan dengan skala total aktiva yangdimiliki.
laporan tahunan secara lengkap selama Ε =Error
tahun 2011- 2015;(c)Perusahaan
tersebut terdaftar di Bursa Efek
HASIL DAN PEMBAHASAN
Indonesia selama periodepenelitian;(d)
Perusahaan tersebut menggunakan mata Statistik deskriptif
uang rupiah di dalam Di bawah ini akan disajikan tabel
laporankeuangannya;(e) Memiliki data analisa 14tatistic deskriptif yang
yang lengkap terkait dengan variabel- memberikan gambaran suatu data yang
variabel yang digunakan dalam dilihat dari nilai minimum, maksimum,
penelitian. rata-rata, dan standar deviasi dari nilai
variabel yang diuji sebagai berikut:
Persamaan Regresi
Di bawah ini merupakan persamaan
regresi berganda yang digunakan dalam
penelitian ini:
FFR = α + β1.POLCEO + β2.CEOPIC
+ β3.UNDPOL + β4.SPVACC
+ β5.COMIC + β6.CHIA +
β7.AGROW + β8.LEV +
β9.OSHIP + β10.ACCPOL +
β11.OPNADT + β12.SIZE + ε
Keterangan:
FFR = Fraudulent
FinancialReporting
POLCEO = Politisi CEO
CEOPIC = Frekuensi kemunculan
gambarCEO
UNDPOL = Kebijakan hutang-
piutang meragukan yangtidak
diumumkan

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APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

Tabel 2.
Descriptive Statistics

Std.
N Minimum Maximum Mean Deviation
POLCEO 190 0 1 .03 .160
CEOPIC 190 2 24 8.40 5.226
UNDPOL 190 0 1 .43 .496
SPVACC 190 0 1 .45 .499
COMIC 190 .2000 .8000 .445958 .1192025
CHIA 190 0 1 .48 .501
AGROW 190 -.0900 .5900 .134842 .0922025
LEV 190 -4.7600 26.0500 3.394158 3.8972436
OSHIP 190 .2050 1.0000 .684316 .1580744
ACCPOL 190 0 1 .84 .370
OPNADT 190 0 1 .62 .486
SIZE 190 28.5160 34.4450 31.366816 1.4063603
FFR 190 -4.0000 1.2400 -2.264526 .7067045
Valid N
190
(listwise)
Sumber: Pengolahan data SPSS 21

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132
Berdasarkan tabel diatas, berikut
penjabaran penjelasannya:(1) Variabel
politisi CEO dengan jumlah data
sebesar 190 memiliki nilai terendah
sebesar 0 dan nilai tertingginya sebesar
1 (menggunakan variabel dummy), dan
memperoleh nilai rata-rata sebesar 0.03
yang artinya hanya sebesar 3% saja
CEO dari data perusahaan yang
terkumpul yang merupakan politisi dan
nilai standar deviasinya
(penyimpangan) yang cukup besar
yaitu 0.160 (standar deviasi >mean);
(2) Variabel frekuensi kemunculan
gambar CEO dengan jumlah data
sebesar 190 memiliki nilai terendah
sebesar 2 di beberapa perusahaan yakni
PT Astra Agro lestari Tbk, PT Bumi
Serpong Damai Tbk, PT Indocement
Tunggal Prakasa Tbk, dan PT Smart
Tbk dan nilai tertingginya sebesar 24 di
PT Astra International Tbk, dengan
nilai rata-rata sebesar 8.40 yang artinya
frekuensi kemunculan gambar CEO
tidak terlalu banyak dalam laporan
tahunan dari data perusahaan yang
terkumpul dan nilai standar deviasinya
(penyimpangan) yang cukup kecil
sebesar 5.226 (standar deviasi <mean);
(3) Variabel kebijakan hutang-piutang
meragukan yang tidak diumumkan
dengan jumlah data sebesar 190
memiliki nilai terendah sebesar 0 dan
nilai tertingginya sebesar 1 >mean); (7) Variabel stabilitas
(menggunakan variabel dummy),
dengan nilai rata-rata sebesar 0.43
yang artinya sebesar43% dari data
perusahaan yang terkumpul tidak
mengumumkan kebijakan hutang-
piutang meragukan dan nilai standar
deviasinya (penyimpangan) yang
cukup besar yaitu 0.496 (standar
deviasi >mean); (4) Variabel
terbatasnya akses informasi entitas
bertujuan khusus dengan jumlah data
sebesar 190 memiliki nilai terendah
sebesar 0 dan nilai tertingginya sebesar
1 (menggunakan variabel dummy),
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dengan nilai rata-rata sebesar 0.45 yang
berarti sebesar 45% dari data
perusahaan yang terkumpul memiliki
informasi yang terbatas terkait EBK
dan standar deviasinya (penyimpangan)
yang cukup besar yaitu 0.499 (standar
deviasi >mean); (5) Variabel efektifitas
pengawasan yang diproksikan
menggunakan persentase jumlah dewan
komisaris independen dengan jumlah
data sebesar 190 memiliki nilai
terendah 0.20 di PT Waskita Karya
Tbk dan nilai tertingginya sebesar 0.80
di PT BPD Jawa Barat dan Banten Tbk
dan PT Unilever Indonesia Tbk,
dengan nilai rata-rata sebesar 0.4459
yang artinya efektifitas pengawasan
dari data perusahaan yang terkumpul
sudah cukup tinggi sebesar 44.59% dan
standar deviasinya (penyimpangan)
yang cukup kecil sebesar 0.1192
(standar deviasi <mean); (6) Variabel
pergantian ketua auditor internal
dengan jumlah data sebesar 190
memiliki nilai terendah 0 dan nilai
tertingginya sebesar 1 (menggunakan
variabel dummy), dengan nilai rata-rata
sebesar 0.48 yang artinya turnover
ketua auditor internal dari data
perusahaan yang terkumpul cukup
tinggi sebesar 48% dan standar
deviasinya (penyimpangan) yang
cukup besar yaitu 0.501(standar deviasi
keuangan yang diproksikan
menggunakan tingkat pertumbuhan
aktiva dengan jumlah data sebesar 190
memiliki nilai terendah -0.090 di PT
Bukit Asam (persero) Tbk dan nilai
tertingginya sebesar 0.590 di PT
Waskita Karya Tbk, dengan nilai rata-
rata sebesar 0.1348 yang artinya tingkat
pertumbuhan aktiva perusahaan sebesar
13.48% cukup tinggi dan standar
deviasinya (standar penyimpangan)
yang cukup kecil sebesar 0.0922
(standar deviasi <mean); (8) Variabel
tekanan pihak eksternal yang
APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

diproksikan menggunakan leverage total asset dengan jumlah data sebesar

ratio dengan jumlah data sebesar 190 190 memiliki nilai terendah 28.5160 di
memiliki nilai terendah -4.760 di PT PT Matahari Department Store Tbk dan
Matahari Department Store Tbk dan nilai tertingginya sebesar 34.445 di PT
nilai tertingginya sebesar 26.050 di PT Bank Mandiri (persero) Tbk, dengan
Wijaya Karya (persero) Tbk, dengan nilai rata-rata sebesar 31.3668 berarti
nilai rata-rata sebesar 3.3941 dan ukuran perusahaan dari data yang
standar deviasinya (penyimpangan) terkumpul cukup besar dan standar
yang cukup besar sebesar 3.8972 deviasinya (penyimpangan) yang
(standar deviasi >mean); (9) Variabel cukup kecil sebesar 1.40636 (standar
kepemilikan manajerial yang deviasi< mean); (13) Variabel
diproksikan menggunakan persentase kecurangan laporan keuangan yang
kepemilikan saham manajemen dengan diproksikan menggunakan M-Score
jumlah data sebesar 190 memiliki nilai dengan jumlah data sebesar 190
terendah 0.2050 di PT Matahari memiliki nilai terendah -4.00 di PT
Department Store Tbkdan nilai Indosat Tbk dan nilai tertingginya
tertingginya sebesar 1.00 di PT sebesar 1.24 di PT BPD Jawa Barat dan
Waskita Karya Tbk, dengan nilai rata- Banten Tbk, dengan nilai rata-rata skor
rata sebesar 0.6843 memiliki arti beneish pada data perusahaan yang
kepemilikan saham manajerial dari data terkumpul sebesar -2.2645 dan standar
perusahaan yang terkumpul sebesar deviasinya (penyimpangan) yang
68.43% dan standar deviasinya cukup kecil sebesar 0.70670 (standar
(penyimpangan) yang cukup kecil deviasi <mean).
sebesar 0.1580 (standar deviasi Uji Normalitas
<mean); (10) Variabel pergantian Uji normalitas dilakukan untuk melihat
kebijakan akuntansi perusahaan dengan residual dalam model penelitian telah
jumlah data sebesar 190 memiliki nilai terdistribusi dengan normal. Hasil uji
terendah 0 dan nilai tertingginya normalitas dapat dilihat pada tabel di
sebesar 1 (menggunakan variabel bawah ini:
dummy), dengan nilai rata-rata sebesar
0.84 berarti pergantian kebijakan
akuntansi dari data perusahaan yang
terkumpul sebesar 84% dan standar
deviasinya (penyimpangan) yang
cukup kecil sebesar 0.370 (standar
deviasi <mean); (11) Variabel opini
audit dengan jumlah data sebesar 190
memiliki nilai terendah 0 dan nilai
tertingginya sebesar 1 (menggunakan
variabel dummy), dengan nilai rata-rata
sebesar 0.62 berarti perubahan opini
audit yang diperoleh dari data
perusahaan yang terkumpul
sebesar62% dan standar deviasinya
(penyimpangan) yang cukup kecil
sebesar 0.486 (standar deviasi <mean);
(12) Variabel ukuran perusahaan yang
diproksikan menggunakan logaritma

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Tabel 3.
One-Sample Kolmogorov-Smirnov Test

Unstandardized
Residual
N 190
NormalParametersa,b Mean .0000000
Std. Deviation .65895473
MostExtreme Absolute .087
Differences Positive .087
Negative -.063
Kolmogorov-Smirnov Z 1.206
Asymp. Sig. (2-tailed) .109
a. Test distribution isNormal.
b. Calculated fromdata.
Sumber: Pengolahan data SPSS 2i
Dari tabel di atas, dapat disimpulkan merupakan persyaratan statistik yang
bahwa residual dalam model regresi perlu dipenuhi untuk model regresi
penelitian ini terdistribusi dengan berganda. Uji asumsi klasik terdiri dari
normal, hal ini dapat dilihat dari nilai tiga langkah sebagai berikut:
Asymp. Sig. (2-tailed) yang lebih besar (1) UjiMultikolonieritasHasil
dari 0.05, yaitu sebesar 0.109. pengujian multikolonieritas dapat
Uji Asumsi Klasik dilihat pada tabel di bawah ini
Langkah berikutnya adalah melakukan
uji asumsi klasik. Uji asumsi klasik
Tabel 4.
Coefficientsa
Collinearity Statistics
Model
Tolerance VIF
1 (Constant)
POLCEO .882 1.133
CEOPIC .779 1.284
UNDPOL .684 1.463
SPVACC .793 1.261
COMIC .575 1.739
CHIA .880 1.137
AGROW .900 1.111
LEV .625 1.600
OSHIP .734 1.363
ACCPOL .899 1.113
OPNADT .898 1.113
SIZE .538 1.858

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APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

a. Dependent Variable:FFR
Sumber: Pengolahan data SPSS 21

Berdasarkan tabel diatas, dapat satu dan yang lain, hal ini dapat
disimpulkan bahwa semua variabel dibuktikan dari perolehan nilai
independen yang diuji di dalam Tolerance masing-masing variabel >
penelitian ini yang terdiri dari politisi 0.10 dan nilai VIF masing- masing
CEO, frekuensi kemunculan gambar variabel <10.
CEO, kebijakan hutang-piutang (2) UjiHeteroskedastisitas
meragukan yang tidak diumumkan, Uji Heteroskedastisitas dalam
terbatasnya akses informasi entitas
penelitian ini menggunakan uji
bertujuan khusus, efektifitas Glejser. Uji Glejser dapat dilihat dari
pengawasan, pergantian ketua auditor nilai signifikansi masing-masing
internal, stabilitas keuangan, tekanan variabel independen yang diuji dengan
pihak eksternal, kepemilikan nilai absolut residual variabel
manajerial, pergantian kebijakan dependen. Hasil pengujian Glejser
akuntansi perusahaan, opini audit tidak dapat dilihat pada tabel di bawah ini:
memiliki korelasi antara variabel yang

Tabel 5.
Coefficientsa
Unstandardized Standardi
Coefficients zed t Sig.
Std. Coefficie
Model B nts Be
Error
1 (Constant) 1.956 .976 ta 2.003 .047

POLCEO .064 .220 .023 .292 .770

CEOPIC .000 .007 -.001 -.018 .986
UNDPOL .100 .081 .108 1.232 .220
SPVACC .012 .075 .013 .157 .875
COMIC
.591 .367 .154 1.611 .109

CHIA .019 .071 .021 .268 .789

AGROW .383 .379 .077 1.010 .314
LEV .015 .011 .125 1.361 .175
OSHIP -.265 .245 -.092 -1.082 .281
ACCPOL .109 .094 .088 1.153 .251
OPNADT .107 .072 .114 1.484 .140
SIZE -.060 .032 -.185 -1.867 .064
a. Dependent Variable:ABR_RES
Sumber: Pengolahan data SPSS 21

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Berdasarkan tabel di atas, dapat ditarik kepemilikan manajerial, pergantian

kesimpulan bahwa nilai signifikansi kebijakan akuntansi perusahaan, opini
variabel independen yang terdiri dari audit memiliki nilai signifikansi > 0.05
politisi CEO, frekuensi kemunculan yang artinya tidak terdapat
gambar CEO, kebijakan hutang- heteroskedastisitas dalam model
piutang meragukan yang tidak regresi penelitian dan model penelitian
diumumkan, terbatasnya akses ini memenuhi persyaratan.
informasi entitas bertujuan khusus, (2) Uji Autokorelasi
efektifitas pengawasan, pergantian Hasil uji autokorelasi dapat dilihat pada
ketua auditor internal, stabilitas tabel di bawah ini:
keuangan, tekanan pihak eksternal,

Tabel 6.
Model Summaryb
Adjusted
R R Std. Error Durbin
Model R Squar Square of the -
1 e.131 .072 Estimate
.6809259 Watso
.361a 1.765
n
b. Predictors: (Constant), SIZE, CHIA, UNDPOL, ACCPOL,
OPNADT, AGROW, SPVACC, POLCEO, OSHIP,
CEOPIC,LEV, COMIC
c. Dependent Variable:FFR
Sumber: Pengolahan data SPSS 21

Hasil uji autokorelasi dapat dilihat dari D-W di antara - 2 sampai +2, berarti
nilai Durbin-Watson (D-W), dilihat dari tidak adaautokorelasi.
tabel di atas bahwa nilai D-W yang
didapat sebesar 1.765 yang artinya Uji Kelayakan Model
bahwa tidak terdapat autokorelasi pada 1. UjiF
model regresi penelitian ini. Hal ini Hasil dari uji F dapat dilihat pada tabel
sudah sesuai persyaratan apabila angka di bawah ini:
Tabel 7.
ANOVAa
Sum of Mean
Model Square df Squar F Sig.
1 Regression s 12.325 e 1.027
12 2.215 .013b
Residual 82.068 177 .464
Total 94.393 189
a. Dependent Variable:FFR
b. Predictors: (Constant), SIZE, CHIA, UNDPOL, ACCPOL, OPNADT,
AGROW, SPVACC, POLCEO, OSHIP, CEOPIC,LEV, COMIC
Sumber: Pengolahan data SPSS 21

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APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

Dari tabel di atas dapat disimpulkan kebijakan akuntansi perusahaan, opini

bahwa variabel independen yang
terdiri dari politisi CEO, frekuensi
kemunculan gambar CEO, kebijakan
hutang-piutang meragukan yang tidak
diumumkan, terbatasnya akses
informasi entitas bertujuan khusus,
efektifitas pengawasan, pergantian
ketua auditor internal, stabilitas
keuangan, tekanan pihak eksternal,
kepemilikan manajerial, pergantian
audit memiliki pengaruh secara
simultan dan signifikan terhadap
kecurangan laporan keuangan. Hal ini
dapat dibuktikan dari nilai signifikansi
dari tabel 4.7 sebesar 0.013 ( < 0.05).
(2) Uji R & R-Square
(KoefisienDeterminasi)
Hasil uji R & R-Square dapat dilihat
dari tabel di bawah ini:

Tabel 8.
Model Summary
R Adjusted R Std. Error of the
Model R Square Square Estimate
1
.361a .131 .072 .6809259
a. Predictors: (Constant), SIZE, CHIA, UNDPOL,
ACCPOL, OPNADT, AGROW, SPVACC,
POLCEO, OSHIP,CEOPIC, LEV,COMIC
Sumber: Pengolahan data SPSS 21

Berdasarkan tabel di atas, menunjukkan stabilitas keuangan, tekanan pihak

nilai r sebesar 0.361 yang memiliki arti
hubungan antara variabel independen
politisi ceo, frekuensi kemunculan
gambar ceo, kebijakan hutang- piutang
meragukan yang tidak diumumkan,
terbatasnya akses informasi entitas
bertujuan khusus, efektifitas
pengawasan, pergantian ketua auditor
internal, stabilitas keuangan, tekanan
pihak eksternal, kepemilikan
manajerial, pergantian kebijakan
akuntansi perusahaan, opini audit
terhadap variabel dependen kecurangan
laporan keuangan lemah (dapat dilihat
dari nilai r < 0.5). Tabel di atas juga
menunjukkan nilai adjusted r-square
sebesar 0.072 yang berarti variabel
independen politisi ceo, frekuensi
kemunculan gambar ceo, kebijakan
hutang-piutang meragukan yang tidak
diumumkan, terbatasnya akses
informasi entitas bertujuan
khusus,efektifitas pengawasan,
pergantian ketua auditor internal,
eksternal, kepemilikan manajerial,
pergantian kebijakan akuntansi
perusahaan, opini audit mampu
menjelaskan variabel dependen
kecurangan laporan keuangan yaitu
sebesar 7.2%, sedangkan sisanya 92.8%
dijelaskan oleh faktor-faktor lainnya
yang tidak terdapat dalam model
penelitian. Besarnya 7.2% dikarenakan
hanya stabilitas keuangan saja yang
mempengaruhi kecurangan laporan
keuangan, sedangkan variabel sisanya
tidak mempengaruhi kecurangan
laporan keuangan.
Uji Hipotesis (Uji T)
Hasil uji hipotesis (uji t) dapat dilihat
dari tabel di bawah ini:

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Tabel 9.
Coefficientsa
Stand
ar
Predic Unstandardized dized
t Sig.
tion Coefficients Coeff
Std. ici
Model B Error ents
Beta
1 (Constant) -3.065 1.459 -2.100 .037
POLCEO + .469 .329 .106 1.427 .155
CEOPIC + .002 .011 .018 .227 .820
UNDPOL + .106 .121 .075 .881 .380
SPVACC + -.092 .112 -.065 -.827 .409
COMIC - -.250 .548 -.042 -.456 .649
CHIA + .062 .105 .044 .585 .559
AGROW - 2.225 .566 .290 3.930 .000
LEV + .014 .016 .077 .868 .386
OSHIP - -.403 .366 -.090 -1.102 .272
ACCPOL + -.042 .141 -.022 -.296 .768
OPNADT - -.021 .107 -.015 -.199 .842
SIZE .026 .048 .052 .546 .586
a. Dependent Variable: FFR
Sumber: Pengolahan data SPSS 21
Dilihat dari tabel di atas, didapatkan tidakberpengaruh signifikan terhadap
hasil sebagai berikut: (1) Variabel terhadap kecurangan laporankeuangan;
politisi CEO tidak berpengaruh (6) Variabel pergantian ketua auditor
signifikan terhadap terhadap internal tidak berpengaruh signifikan
kecurangan laporan keuangan; (2) terhadap terhadap kecurangan
Variabel frekuensi kemunculan gambar laporankeuangan; (7) Variabel
CEO tidak berpengaruh signifikan stabilitas keuangan berpengaruh
terhadap terhadap kecurangan signifikan terhadap kecurangan
laporankeuangan; (3) Variabel laporan keuangan; (8) Variabel
kebijakan hutang-piutang meragukan tekanan pihak eksternal tidak
yang tidak diumumkan tidak berpengaruh signifikan terhadap
berpengaruh signifikan terhadap terhadap kecurangan laporankeuangan;
terhadap kecurangan laporankeuangan; (9) Variabel kepemilikan manajerial
(4) Variabel terbatasnya akses tidak berpengaruh signifikan terhadap
informasi entitas bertujuan khusus terhadap kecurangan laporankeuangan;
tidak berpengaruh signifikan terhadap (10) Variabel pergantian kebijakan
terhadap kecurangan akuntansi perusahaan tidak
laporankeuangan;(5) Variabel berpengaruh signifikan terhadap
efektifitas pengawasan terhadap kecurangan laporankeuangan;

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APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

(11) Variabel opini audit tidak hipotesa antara sampel sebanyak 190
berpengaruh signifikan terhadap perusahaan dan sampel baru sebanyak
terhadap kecurangan laporan 34 perusahaan yang terindikasi
keuangan. melakukan kecurangan laporan
keuangan. Hasil uji sensitivitas dengan
Uji Sensitivitas menggunakan sampel yang baru dapat
Uji sensitivitas ini dilakukan untuk dilihat di bawah ini:
melihat seberapa besar pengaruh uji

Tabel 10.
Coefficientsa

Stand
ar
Predi Unstandardi dized
t Sig.
ction zed Coeff
Coefficient
Std. ic
Model B s Error ients
Beta
1 (Constant) - 2.644 -.651 .522
POLCEO + 1.7
.65 .379 .327 1.734 .098
227
CEOPIC + - .014 -.020 -.087 .932
UNDPOL + .00
.33 .182 .491 1.847 .079
16
SPVACC + - .150 -.141 -.647 .525
COMIC - .09 - 1.292 -.162 -.447 .659
.57-7
CHIA + .141 -.181 -.872 .393
.12 8
AGROW - .74 .636 .222 1.170 .255
3
5
LEV + - .038 -.238 -.713 .484
OSHIP - .02- .554 -.496 -2.260 .035
1.2 7
ACCPOL + .14 .174 .173 .833 .414
525
OPNADT - .05 .149 .077 .377 .710
SIZE .036 .095 .169 .400 .693
a.Dependent Variable: FFR 8
Sumber: Pengolahan data SPSS 21

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 JURNAL ASET (AKUNTANSI RISET), 9 (1), 2017, 101-132

Dilihat dari tabel di atas, didapatkan hasil ini masih signifikan dengan uji
hasil sebagai berikut: (1) variabel hipotesa dengan sampel sebanyak
politisi ceo tidak berpengaruh signifikan 190perusahaan; (9) variabel
terhadap terhadap kecurangan laporan kepemilikan manajerial berpengaruh
keuangan. hasil ini masih signifikan signifikan terhadap terhadap
dengan uji hipotesa dengan sampel kecurangan laporan keuangan. hasil ini
sebanyak 190 perusahaan; (2) variabel bertentangan dengan hasil uji hipotesa
frekuensi kemunculan gambar ceo tidak sebelumnya yang menunjukkan bahwa
berpengaruh signifikan terhadap kepemilikan manajerial tidak
terhadap kecurangan laporan keuangan. berpengaruh signifikan terhadap
hasil ini masih signifikan dengan uji kecurangan laporankeuangan; (10)
hipotesa dengan sampel sebanyak variabel pergantian kebijakan akuntansi
190perusahaan; (3) variabel kebijakan perusahaan tidak berpengaruh
hutang-piutang meragukan yang tidak signifikan terhadap terhadap
diumumkan tidak berpengaruh kecurangan laporan keuangan. hasil ini
signifikan terhadap terhadap masih signifikan dengan uji hipotesa
kecurangan laporan keuangan. hasil ini dengan sampel sebanyak
masih signifikan dengan uji hipotesa 190perusahaan; (11) variabel opini audit
dengan sampel sebanyak tidak berpengaruh signifikan terhadap
190perusahaan; (4) variabel terbatasnya terhadap kecurangan laporan keuangan.
akses informasi entitas bertujuan khusus hasil ini masih signifikan dengan uji
tidak berpengaruh signifikan terhadap hipotesa dengan sampel sebanyak 190
terhadap kecurangan laporan keuangan. perusahaan.
hasil ini masih signifikan dengan uji Dapat disimpulkan bahwa: (1)
hipotesa dengan sampel sebanyak Dengan menggunakan sampel
190perusahaan; (5) variabel efektifitas perusahaan sebanyak 34 perusahaan
pengawasan tidak berpengaruh yang terindikasi melakukan kecurangan
signifikan terhadap terhadap laporan keuangan membuktikan bahwa
kecurangan laporan keuangan. hasil ini kepemilikan manajerial berpengaruh
masih signifikan dengan uji hipotesa signifikan terhadap kecurangan laporan
dengan sampel sebanyak keuangan. Hasil yang diperoleh
190perusahaan; (6) variabel pergantian berbeda dengan uji hipotesa dengan
ketua auditor internal tidak berpengaruh sampel 190 perusahaan (stabilitas
signifikan terhadap terhadap keuangan yang berpengaruh signifikan
kecurangan laporan keuangan. hasil ini terhadap kecurangan
masih signifikan dengan uji hipotesa laporankeuangan); (2) Semakin sedikit
dengan sampel sebanyak sampel penelitian maka semakin
190perusahaan; (7) variabel stabilitas sensitif model regresi yang dihasilkan,
keuangan tidak berpengaruh signifikan dan tingkat signifikansi per variabel
terhadap kecurangan laporan keuangan. independen juga mengalami perubahan
hasil ini bertentangan dengan hasil uji yang cukup signifikan.
hipotesa sebelumnya yang
menunjukkan bahwa stabilitas keuangan SIMPULAN
berpengaruh signifikan terhadap
kecurangan laporankeuangan; (8) Hasil penelitian menunjukkan
variabel tekanan pihak eksternal tidak bahwa hanya stabilitas keuangan yang
berpengaruh signifikan terhadap diproksikan dengan rasio perubahan
terhadap kecurangan laporan keuangan. total aset saja yang berpengaruh
signifikan terhadap kecurangan

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APRILIA/ Analisis Pengaruh Fraud Pentagon Terhadap Kecurangan Laporan Keuangan Menggunakan
Beneish Model Pada Perusahaan Yang Menerapkan Asean Corporate Governance Scorecard

laporan keuangan. Sedangkan untuk terhadap kecurangan laporan keuangan

variabel lainnya yaitu politisi CEO, juga menggunakan penyebaran
frekuensi kemunculan gambar CEO, kuesioner untuk lebih meyakinkan
kebijakan hutang-piutang meragukan pengukuran variabel independennya
yang tidak diumumkan, terbatasnya (mixed method); kedua agar penelitian
akses informasi entitas bertujuan selanjutnya dapat memilih sampel
khusus, efektifitas pengawasan, penelitian perusahaan yang memiliki
pergantian ketua auditor internal, net loss (mengalami kerugian
tekanan pihak eksternal, kepemilikan finansial) sehingga akan
manajerial, pergantian kebijakan mempengaruhi hasil penelitian
akuntansi perusahaan, opini audit tidak yangdihasilkan.
berpengaruh signifikan terhadap Dapat ditarik kesimpulan bahwa
kecurangan laporan keuangan. fraud pentagon yang diproksikan
Penelitian ini memiliki dengan beberapa variabel independen
keterbatasan antara lain: pertama yang diteliti kurang cocok untuk
sampel penelitian ini merupakan digunakan untuk menilai kecurangan
perusahaan yang sudah memperoleh laporan keuangan. Hal ini disebabkan
sertifikat ASEAN CG Scorecard, variabel-variabel independen yang
dimana perusahaan tersebut sudah digunakan sebagai proksi masing-
terbukti menjalankan GCG dengan masing elemen fraud pentagon lebih
baik. Oleh karena itu, hasil penelitian terfokus kepada perilaku manusia
yang diperoleh sebagian besar variabel sehingga tidak secara langsung
independennya tidak berpengaruh berkaitan dengan data
terhadap kecurangan laporan laporankeuangan.
keuangan; kedua model Beneish cocok
digunakan untuk perusahaan DAFTAR PUSTAKA
manufaktur (Beneish et al., 2012) dan ACFE, 2014. Report To The Nation On
dalam penelitian ini perusahaan yang Occupational Fraud And
dijadikan sampel merupakan Abuse 2014 Global Fraud
perusahaan campuran Study. Association Of Certified
(banking/keuangan, manufaktur, dan Fraud Examiners, p. 1-80.
lainnya); ketiga diperlukan variabel
pengukuran lainnya untuk fraud Achmad, Tarmizi dan Viva Yustitia
pentagon, dikarenakan variabel yang Rini, 2012. Analisis Prediksi
dipakai dalam penelitian ini kurang Potensi Risiko Fraudulent
cocok untuk digunakan di Indonesia; Financial Statement Melalui
keempat kurangnya referensi jurnal Fraud Score Model.
nasional dan internasional untuk Diponegoro Journal Of
pengukuran fraud pentagon yang Accounting, Vol. 1, No. 1: 1-
digunakan dalam penelitianini. 15.
Oleh karena itu diharapkan pada
penelitian selanjutnya dapat Achsin, M. dan Ruri Ihsania
melakukan beberapa hal, yakni: Cahyaningtyas, 2015. Studi
pertama diharapkan menggunakan Fenomenologi Kecurangan
proksi variabel dependen yang Mahasiswa Dalam Pelaporan
menggunakan pengukuran rasio Pertanggungjawaban Dana
keuangan dan akan lebih baik apabila Kegiatan Mahasiswa: Sebuah
analisa pengaruh fraud pentagon Realita Dan Pengakuan. Jurnal

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 Jurnal Akuntansi dan Auditing Indonesia 23(1) Juni 2019

Jurnal Akuntansi dan Auditing Indonesia

www.journal.uii.ac.id/index.php/jaai

The analysis of the factor that causes fraudulent

financial reporting with fraud diamond
Ni Komang Astri Yulistyawati*, I Made Sadha Suardikha, I Putu Sudana
Faculty of Economics and Business, Udayana University, Bali, Indonesia
*Corresponding Author e-mail: komang.bali13@yahoo.co.id

ARTICLE INFO ABSTRACT

Article history: The purpose of this study is to obtain empirical evidence of the influence of the elements of fraud
Available online diamond namely: pressure, opportunity, rationalization, and capability on fraudulent financial
reporting. The samples in the study were selected by usifigureng a non-probability sampling
technique with a purposive sampling method with a total number of samples that met the sample
Keywords:
fraudulent financial reporting, selection criteria of 76 samples, namely 19 manufacturing companies during the four years of the
fraud diamond, manufacturing 2011–2014 observation period. The collected data were analyzed by multiple linear regression
companies analysis. Fraudulent financial reporting was measured using Dechow et al's F-Score (2007) which
can be included as a first-pass test in evaluating the possibility of manipulation. This research
DOI: showed that opportunity and rationalization are proven to be fraud diamond elements that most
https://doi.org/10.20885/jaai.vol23. influence the occurrence of fraudulent financial reporting in the companies. While pressure and
iss1.art1 capability have no effect on fraudulent financial reporting. The implication of this study is that
the ratio of total inventory as a proxy for opportunity measurement and the ratio of total accrual
to total assets as a proxy for measurement of rationalization has a significant effect on fraudulent
financial reporting, meaning that these ratios can be used by management to detect fraudulent
financial reporting practices in manufacturing companies.

Introduction
Based on SAS No. 99 (AICPA, 2002) misstatements arising from fraudulent financial reporting are misstatements
or intentional omissions of amounts or disclosures in financial statements to deceive users of financial statements.
In the present, there have been many cases and practices related to fraud, not least in the process of preparing
financial statements. Although accounting and financial reports are increasingly comprehensive and complex
processes, there are still many gaps for certain parties to commit fraudulent financial statements. Healy and Wahlen
(1999) revealed that in running a company, managers can use their knowledge of business and the opportunities
they have to choose the method of reporting, estimation, and disclosure that is in accordance with the company's
business economy, which has the potential to increase accounting value as a form of communication. However,
the use of management ratings also creates opportunities for earnings management.
Many capital market players recognize the potential dangers in business, which are caused by fraudulent
financial reporting. One of the fraudulent financial reporting cases that have occurred in the United States (US)
involving a company's senior executives is a fraud case of HRC (HealthSouth Corp.) of USD 1.4 billion (Brooks &
Dunn, 2015). Thus, it is important for management to understand the impacts that can be generated from fraudulent
financial reporting practices within the company so that early detection and prevention efforts can be made.
The researcher who first had the idea of a fraud triangle to investigate the cause of fraud was Cressey in
his 1953 study entitled Other People's Money: A Study in the Social Psychology of Embezzlement (Cressey, 2953).
The Fraud triangle has long been a useful tool for Certified Public Accountants in an effort to understand fraud
risk. The Fraud triangle explains three factors that are present in each fraud situation, namely: 1) Pressure, which is
the presence of incentives/ pressure/ need to commit fraud, 2) Opportunity, which is a situation that opens
opportunities to enable fraud, and 3) Rationalization, which becomes an important element in the occurrence of
fraud, where the perpetrator seeks justification for his actions.
According to Wolfe and Hermanson (2004), the nature and personal abilities of a person play a large role
in allowing fraud to occur even though three fraud factors (pressure, opportunity and rationalization) support. Wolfe
and Hermanson (2004) state that the possibility of fraud can be realized if the CEO of the company has technical
skills to understand and utilize the weaknesses of existing internal controls. Thus, the ability of the CEO is a major
factor in determining whether the weaknesses of internal control will ultimately lead to fraud. Wolfe and

P ISSN 1410-2420 | E ISSN 2528-6528

Copyright @ 2019 Authors. This is an open-access article distributed under the terms of the Creative Commons Attribution License
(http://creativecommons.org/licences/by-sa/4.0/)
2 Jurnal Akuntansi dan Auditing Indonesia, Vol. 23 No. 1, Juni 2019

Hermanson (2004) believe that triangle fraud can be increased by considering the capability element to improve,
prevent and detect fraud. These four elements are called fraud diamond.
Pardosi (2015) examined fraud diamond in detecting fraudulent financial statements. His research
succeeded in proving that the nature of industry variable which is proxied by the ratio of total inventory and
capability that is proxied by the change of directors of the company which has a positive and significant influence
on the risk of fraudulent financial statements. Amaliah et al. (2015) conducted research on the perspective of fraud
diamond theory in explaining non-GAAP (non-Generally Accepted Accounting Principles) earnings management.
Her research found out that the capabilities proxied by changes in directors affect non-GAAP earnings management.
Based on the research background, the formulation of the problem in this study is whether the elements
of fraud diamond (pressure, opportunity, rationalization, and capability) affect the fraudulent financial reporting.
Therefore, the purpose of this study is to test the effectiveness of fraud diamond as an analytical tool in detecting
and preventing fraudulent financial reporting. So that fraud diamond analysis can be useful to help find the causes
of fraudulent behavior and provide solutions and efforts to eliminate these causes.
The results of this study can provide several benefits. First, this study can provide empirical evidence of
the benefits of fraud diamond as an analytical tool in detecting and preventing fraudulent financial reporting.
Second, this research can help prospective investors in the analysis of the company's financial statements to
determine the performance of management who will manage their investment funds and avoid investing in
companies indicated to commit fraudulent financial reporting to avoid investment losses. Third, this research can
be an important consideration for companies in making and developing policies to improve internal control and
supervision as an effort to prevent and detect fraudulent financial reporting.

Literature Review
Agency Theory
Agency relations are defined as one or more people (principals) involved by other people (agents) to do some
services on their behalf which involves delegating some authority for decision making to the agent. The foundation
of agency theory is assuming that the interests of principals and agents are different (Jensen & Meckling, 1976).
According to Ujiyantho and Pramuka (2007) in a company, managers act as agents who are morally responsible
for optimizing the profits of the owners (principals), but on the other hand managers also have an interest in
maximizing their welfare. Problems can occur when executives or managers in making decisions prioritize their
personal benefits (Rationalization). Conflict of interest between agents and principals result in managers as agents
facing various pressures from principals to find ways to increase company performance.
The main concern of agency theory as proposed by Jensen and Meckling (1976) is how to compile the
best contract between the agent and principal in measuring the performance of the agent with regard to receiving
incentives so that the agent acts in the interest of the principal. The gateway to fraud will be more open if
management has broad authority (Capability) as well as opportunities and chances to increase profits (Opportunity).
The solution to one of the agent's problems is to ensure that executives or managers act in the best interests of the
owner by increasing the amount and quality of information available to principals and making senior executives
become owners of parts of the company through their compensation packages.

Fraud
According to Singleton et al. (2006), fraud has many definitions, fraud is a generic term, and includes all the various
ways that humans can use with their ingenuity, which is forced by one individual, to gain more benefits from other
individuals. Fraud, which includes fraud, cunning, and unfair ways in which other individuals are cheated.
SAS No. 99 defines Fraud as a deliberate action that results in material misstatement in the financial
statements that are the subject of an audit (AICPA, 2002). Three conditions are generally present when fraud occurs.
First, management or other employees have incentives or are under pressure, which provides a reason for fraud.
Second, the situation exists — for example, the absence of control, ineffective control, or management's ability to
override controls that provide opportunities for fraud to be committed. And third, those involved can rationalize
the motive for committing fraud. The greater the incentive or pressure, the more likely an individual will be to
rationalize acceptability in committing fraud.
ACFE (2012) divides fraud in 3 (three) types or typologies based on the actions committed, that are:
1) Asset misappropriation, including abuse/ theft of assets or belongings of the company or other parties. This is
a form of fraud that is most easily detected because it is tangible or measurable (defined value).
2) Fraudulent statements, covering actions carried out by company executives or government agencies to cover up actual
financial conditions by conducting financial manipulation in the presentation of their financial statements for profit.
The analysis of the factor … 3

3) Corruption, this type of fraud often cannot be detected because the parties working together enjoy shared
benefits. These include abuse of authority/ conflict of interest, bribery, illegal acceptance, and economic
extortion.

Fraud Diamond
There are various forms of fraud in accounting. In general, fraud will always occur, if there are no detection and
prevention efforts. There are several efforts and perspectives in reviewing and detecting fraud, one of which is the
perspective of fraud diamond which was first coined by Wolfe and Hermanson (2004). The elements of fraud
diamond theory include:
1) Pressure, namely the existence of incentives / pressure / need to commit fraud.
2) Opportunity, which is a situation that opens opportunities to enable fraud.
3) Rationalization, which is an attitude or character that causes individuals to rationally commit fraud that enables
them to consciously and intentionally commit dishonest actions.
4) Capability, is the ability of individuals who play a major role regarding whether fraud can actually occur. One
must have the ability to see the gap to commit fraud as an opportunity and to take advantage continuously.

Fraudulent Financial Reporting

Based on SAS No. 99 (AICPA, 2002), there are two types of relevant misstatements for the auditor's judgment in
assessing frauds that arise from fraudulent financial reporting and misstatements arising from asset
misappropriation. Misstatements arising from fraudulent financial reporting are intentional misstatements or
omissions on amounts or disclosures in financial statements designed to deceive users of financial statements whose
effects cause financial statements, in all material matters, not to be presented in accordance with applicable
accounting principles general (GAAP). Types of fraudulent financial reporting include: 1) Manipulation, forgery, or
changes to accounting records or supporting documents relating to the financial statements prepared. 2) Intentional
misrepresentations or omissions concerning events, transactions, or other important information in the financial
statements. 3) Deliberately misusing accounting principles related to the amount, classification, method of
presentation, or disclosure in financial statements.
Misstatements arising from asset misappropriation (asset misuse) involve the theft of assets belonging to
an entity where the effect of theft causes the financial statements, in all cases which are in all material respects, not
to be presented in accordance with generally accepted accounting principles. Abuse of assets can be done in various
ways, including embezzlement, asset theft, or intentionally causing the entity to pay for goods or services that have
not been received.

The Effect of Pressure on Fraudulent Financial Reporting

Based on SAS No. 99 (AICPA, 2002), one of the conditions that causes fraud in financial statements is pressure.
Pressure can occur when management is in need of money to meet personal needs such as pressure for medical
expenses, pressure from the family that demands economic success, and a luxurious lifestyle (Rustendi, 2009).
Management pressure to meet his personal financial needs can be a trigger for fraud by increasing company profits.
Based on the agency theory proposed by Jensen and Meckling (1976), principals and agents have different
objectives. Principal wants a high return on his investment, while the agent wants to get great compensation for
his work. These differences lead to agency conflicts, namely conflicts of interest between managers and
shareholders. Based on the description, the hypothesis proposed is as follows:
H1: Pressure has a positive effect on fraudulent financial reporting

The Effect of Opportunity on Fraudulent Financial Reporting

One of the causes of fraudulent financial reporting is due to factor opportunities. According to Gagola (2011),
opportunity will arise because of a weak internal control system. Companies with weak internal controls will have
many gaps that make it an opportunity for management to manipulate financial transactions. Summers and
Sweeney (1998) argue that accounts receivable and inventory require a subjective assessment in estimating
uncollectible accounts and obsolete inventory. Summers and Sweeney (1998) state that because of the subjective
judgment in determining the value of the account, management can use the account as a tool for financial report
manipulation. Based on the description, the hypothesis proposed is as follows:
H2: Opportunity has a positive effect on fraudulent financial reporting
4 Jurnal Akuntansi dan Auditing Indonesia, Vol. 23 No. 1, Juni 2019

The Effect of Rationalization on Fraudulent Financial Reporting

Rationalization is an action taken by perpetrators of fraud to seek justification for his actions. Rationalization is a
reason (personal or because there are other factors) that can justify an act even if it is actually wrong. Attitudes or
characters that cause one or more individuals to rationally commit fraud that allows them to consciously and
intentionally commit dishonest actions. Rationalization is full of subjective judgments chosen by company
management. According to Skousen et al. (2009), assessment and management decision making related to the use
of accrual principles will be reflected in the value of corporate accruals. Beneish (1999) estimates higher positive
accruals (less cash) associated with the possibility of higher income manipulation. Based on the description, the
hypothesis proposed is as follows:
H3: Rationalization has a positive effect on fraudulent financial reporting

The Effect of Capability on Fraudulent Financial Reporting

In fraud diamond theory owned by Wolfe and Hermanson (2004), capability is how much power and capacity of a
person to commit fraud in the company environment. According to Wolfe and Hermanson (2004), several major
cases related to fraud will not occur without a person with the capability to do so in a position or position that
allows him to commit fraud within the company. Wolfe and Hermanson (2004) state that fraud perpetrators are
people who are smart enough and understand the weaknesses of the company's internal control, and that the person
uses the position, function, or authority they have to make a profit. Wolfe and Hermanson (2004) concluded that
changes in directors could indicate fraud. According to (Wolfe & Hermanson, 2004), the change of directors can
be an attempt by the company to improve the performance of previous directors by making changes to the
composition of the board of directors or the recruitment of new directors who are considered more competent than
the previous directors. Based on the description, the hypothesis proposed is as follows:
H4: Capability has a positive effect on fraudulent financial reporting

Research Method
The research was conducted at PT. Indonesia Stock Exchange (IDX). The data in this study was obtained by
accessing the official website of the Indonesia Stock Exchange, www.idx.co.id. The object of this study is non-
financial companies engaged in the manufacturing sector which are listed on the Indonesia Stock Exchange during
2011– 2014.
The type of data used in this study is quantitative data in the form of company financial statements that
have been published on the official website of the Indonesia Stock Exchange. While the data source is secondary
data, namely the Annual Financial Report of manufacturing companies listed on the Indonesia Stock Exchange
obtained from the Indonesia Stock Exchange (IDX) through direct search of the Indonesia Stock Exchange's official
website, www.idx.co.id, from accounting journals published, and from previous researches.

Fraudulent Financial Reporting (Y)

The dependent variable in this study is fraudulent financial reporting which is proxied by the F-Score as determined
by Dechow et al. (2011). F-Score is used to measure fraudulent financial reporting seen from accrual quality (accrual
quality) and financial performance (financial performance). Accrual quality is calculated by RSST accruals, namely
accrual calculations belonging to Richardson et al. (2006), while financial performance is measured based on
measurements belonging to Skousen et al. (2009). Measurements used in calculating financial performance are
change in receivable, change in inventory, change in cash sales, and change in earnings.
Accrual calculations belonging to Richardson et al. (2006), defines all non-cash and non-equity changes in
a company's balance sheet as accruals and distinguishes the characteristics of reliability working capital accruals,
non-current operating accruals, and financing accruals and components of assets and liabilities on accrual types.
This classification is considered good for explaining both the short-term (in the coming year) and long-term effects
of future earnings accruals, given that there are various and long-term impacts ranging from company operations,
investment and funding to future performance.
Whereas in measuring financial performance, Dechow et al. (2011) suggested that the manipulations made
with changes in receivable accounts could have an impact on increasing sales growth. Manipulation carried out
with changes to inventory accounts can have an impact on increasing gross margins. Measurement of changes in
cash sales is used to evaluate whether sales that are not subject to accrual management are declining. Changes in
earnings were also analyzed because managers seemed to prefer to show positive earnings growth. During the
period of manipulation, managers tend to use accruals to show a positive increase in profits.
The analysis of the factor … 5

Pressure (X1)
Pressure (pressure) is a condition because there is an incentive / pressure / need for managers or employees to
commit fraud. According to Sulityani (2010), managers are expected to increase the value of the company through
increasing the prosperity of the owners or shareholders. However, managers often have other goals that are contrary
to the main objective, which is usually used for self-interest. Pressure in this study is proxied by the percentage of
share ownership in companies owned by insiders, namely by calculating shares held by management divided by
outstanding common shares.

Opportunity (X2)
Opportunity is a situation that opens opportunities to allow for fraud. Summers and Sweeney (1998) examined
accounts receivable and inventory. Summers and Sweeney (1998) argue that accounts receivable and inventory
require subjective valuation in estimating uncollectible accounts and obsolete inventories. Therefore, management
can use these accounts as a tool for financial report manipulation. Opportunity in this study is proxied by the ratio
of total inventories, namely by dividing inventories this year with sales this year minus the division of inventories
with sales in the previous year.

Rationalization (X3)
Rationalization is an attitude or character that causes one or more individuals to rationally commit fraud that enables
them to consciously and intentionally commit dishonest acts. Rationalization is full of subjective judgments of the
company. In this study, rationalization is proxied by Beneish (1999) Total Accrual to Total Asset ratio. Beneish
(1999) uses the Total Accrual to Total Asset ratio to estimate the extent to which cash underlies reported income.
According to Beneish (1999) total accruals will affect the fraudulent financial reporting. This opinion is supported
by Skousen et al. (2009) which states that total accrual ratios can be used to describe rationalization related to the
use of accrual principles by management.

Capability (X4)
According to Wolfe and Hermanson (2004), capability is how much power and capacity of a person to commit
fraud in a company environment. Capability or individual abilities play a major role in whether fraud can actually
occur. Capability in this study is proxied by the change of company directors. Wolfe and Hermanson (2004), state
that changes in directors can be a company effort to improve the performance of previous directors by making
changes to the composition of the board of directors or the recruitment of new directors who are considered more
competent than the previous directors. Capability is measured using a dummy variable, that is, companies that
make board changes during the 2011-2014 period will be given a value of 1, whereas if there is no change in the
company's directors during the 2011–2014 period, it will be given a value of 0.

Population and Samples

The population in this study were non-financial companies engaged in the manufacturing sector listed on the
Indonesia Stock Exchange (IDX) for the period 2011-2014. While the samples in the study were selected using non-
probability sampling techniques with purposive sampling method, with the following criteria:
1) Manufacturing companies listed on the Indonesia Stock Exchange during the period 2011-2014 respectively.
2) Manufacturing companies that publish annual financial reports on the company's website or IDX website
during the period 2011-2014 which are expressed in rupiahs (Rp.).
3) Annual financial reports that have data relating to research variables (overall data available in publications
during the 2011–2014 period).
4) Manufacturing companies that are not delisted from the IDX during the observation period (2011-2014).
5) Manufacturing companies that have insider ownership during the 2011-2014 period.

Based on data obtained from the official website of the Indonesia Stock Exchange, www.idx.co.id, there
are 106 manufacturing companies registered in succession during the 2011-2014 observation period. However,
from the total sample there were only 19 manufacturing companies that met all the criteria for determining the
research sample. The study period was four years of observation (2011-2014) so that the total sample used in this
study amounted to 76 samples.
The data analysis technique used to test the hypothesis in this study is multiple linear regression analysis
using the regression equation as follows:
6 Jurnal Akuntansi dan Auditing Indonesia, Vol. 23 No. 1, Juni 2019

Y = α + β X + β X + β X + β X + e ................................................................................................. (1)

Note:
Y = F-Score
α = Constant
β1, β2, β3, β4 = Regression coefficient
X1 = Pressure
X2 = Opportunity
X3 = Rationalization
X4 = Capability
e = error

Results and Discussion

Description of Research Samples
Table 1 shows the descriptive statistical analysis that gives a description or description of the characteristics of the
research variables seen from the minimum, maximum, average (mean), and standard deviation values. The table
contains descriptive statistics of the dependent variable namely fraudulent financial reporting and independent
variables, namely pressure, opportunity, rationalization, and capability used in this study.

Table 1. Descriptive Statistics

Variable N Minimum Maximum Mean Std.
Deviation
Pressure (X1) 76 0.00 0.7719 0.1257 0.2265
Opportunity (X2) 76 -0.2675 0.4076 0.0034 0.0785
Rationalization (X3) 76 -0.4941 0.5389 -0.0446 0.1479
Capability (X4) 76 0.00 1.00 0.3289 0.4729
Fraudulent Financial Reporting (Y) 76 -1.4949 1.7289 0.0058 0.4395
Valid N Listwise 76
Source: SPSS analysis result, 2016

The results of the descriptive statistical analysis of the Pressure variable, which is proxied by the cumulative
percentage of share ownership by insiders, show that the average level of share ownership by insiders in the sample
companies is 12.57% with ownership ranges from 0% to 77.19%.
The results of the descriptive statistical analysis of the Opportunity variable which is proxied by the total
inventory ratio show that the sample companies have an average total inventory ratio of 0.034%. The minimum
value of the total inventory ratio shows a negative value which indicates that there is a sample company that
manages its inventory less optimally. Summers and Sweeney (1998) argue that accounts receivable and inventory
require a subjective valuation in estimating uncollectible accounts and obsolete inventories so that less optimal
inventory management can open opportunities for actors to carry out assets misappropriation.
The results of the descriptive statistical analysis of the Rationalization variable which is proxied by the
Total Accrual to Total Asset ratio indicate that the sample company has an average Total Accrual to Total Asset
ratio of -4.46% which indicates the small amount of cash underlying the company's reported income. Beneish
(1999) estimates higher positive accruals (less cash) associated with the possibility of higher income manipulation.
The results of the descriptive statistical analysis of the Capability variable, which is proxied by the change
in the board of directors of the company, show that the sample companies that made the change of board of
directors were 32.89% of the total samples studied.
Based on the results of SPSS output, the determination coefficient value of this study is indicated by the
value of R Square of 0.121 which means that 12.1% of pressure, opportunity, rationalization and capability can
influence fraudulent financial reporting indications in the company while 87.9% are influenced by other variables
which was not used in this study. ANOVA test or F Test shows F value of 2,437 with a significance level of 0.05.
This means that simultaneously the independent variables in this study, namely pressure, opportunity,
rationalization, and capability have a significant influence on the dependent variable, namely fraudulent financial
reporting.
The analysis of the factor … 7

While testing of the hypotheses carried out in this study is to do the t test. Testing is done using a significant
level of 0.05. If the independent variable has a level of significant 5 0.05 then H0 is rejected. But if the independent
variable has a significant level > 0.05 then H0 is accepted. The hypothesis test results are shown in Table 2.

Table 2. Hypothesis Test Results

Variable t Sig.
Pressure (X1) 0.259 0.79
Opportunity (X2) 1.980 0.05*
Rationalization (X3) 2.159 0.03*
Capability (X4) -0.160 0.87
Note: *) Significant
Source: SPSS analysis result, 2016

Based on the results of testing the first hypothesis (H1) it can be concluded that the pressure proxied by
the percentage of share ownership by insiders does not have a positive effect on fraudulent financial reporting. This
means that the first hypothesis is rejected. The results of this study are in line with the results of research conducted
by Norbarani (2012) which shows that the pressure proxied by the ratio of share ownership by insiders does not
significantly influence fraudulent financial reporting. However, this study is not in line with the research belonging
to the study of Skousen et al. (2009) which states that share ownership by the board of commissioners and board
of directors affects fraudulent financial reporting. The results of this study can be explained by the agency theory
approach. Pressure arises because of the desire of company executives to get large compensation for their work.
Based on agency theory, making senior executives become owners of parts of the company through compensation
packages is one way to bridge the conflict between the agent and the principal. By making senior executives
become owners of parts of the company, they will work to improve the financial performance of the entity. So,
when the company has good financial performance, it will also benefit senior executives because the financial
condition of the entity will also affect their financial condition as the owner of a part of the company.
Based on the results of testing the second hypothesis (H2) it can be concluded that the opportunity proxied
by the ratio of total inventory has a positive effect on fraudulent financial reporting. This means that the second
hypothesis is accepted. The findings of this study support the theory of fraud used in this study as proposed by
ACFE (2012) that asset misappropriation is one of the fraud typologies. If the amount of inventory stored is too
much, then this will reduce solvency because the funds used to increase inventory should be able to divert its use
for expansion or for company operations, can increase storage costs, warehouse rental costs, and insurance costs.
Risk of loss due to price reduction or because damage to goods will also increase. The results of this study are in
line with the results of research obtained by Pardosi (2015) which states that the opportunity proxied by the ratio
of total inventory has a significant effect on the fraudulent financial reporting. So that it can be concluded that
opportunity is the main variable that drives the occurrence of fraudulent financial reporting.
Based on the results of testing the third hypothesis (H3) it can be concluded that the rationalization
represented by the ratio of total accrual to total assets has a positive effect on fraudulent financial reporting. This
means that the third hypothesis is accepted. The findings of this research support the diamond fraud theory used in
this study which states that rationalization as one element of diamond fraud is an important element in the
occurrence of fraud. According to Beneish (1999), total accruals will affect fraudulent financial reporting because
accruals are strongly influenced by management decisions in rationalizing financial statements. The argument is
also supported by Marinakis (2011) who argues that earnings management through accruals is a process in which
a manager can increase or decrease the accrual level of accounting (such as accounts receivable, inventory, debt,
deferred income, accrued liabilities, and prepaid expenses) to achieve the desired level of profit. The results of this
study are consistent with the results of studies obtained by Vermeer (2003) and Sihombing and Rahardjo (2014)
which state that the rationalization proxied by the ratio of total accrual to total assets has a significant effect on
fraudulent financial reporting. But the results of this study conflict with proprietary research Skousen et al. (2009)
which states that total accrual ratios do not significantly influence financial statement fraud.
Based on the results of testing the fourth hypothesis (H4) it can be concluded that the capability
represented by the change of company directors has no positive effect on fraudulent financial reporting. This means
that the fourth hypothesis is rejected. The findings in this study cannot prove that capability is the cause of
fraudulent financial reporting. This is most likely due to the change of the board of directors in the manufacturing
company as the research sample is the replacement of the routine board of directors where the new board members
come from the internal company. After the change of the board of directors, some members of the old board of
directors get new positions in the company as members of the board of commissioners. According to Wells (2002)
the reason for routine changes in the board of directors is suspected because the principle wants a refresher on the
8 Jurnal Akuntansi dan Auditing Indonesia, Vol. 23 No. 1, Juni 2019

structure of the board of directors. The findings of this study do not support the diamond fraud theory used in this
study. According to Wolfe and Hermanson (2004) the nature and personal abilities of a person who plays a large
role to enable fraud can occur, capability is needed to find out how much power and capacity a person has
committed fraud in the company environment. The results of this study are consistent with the research conducted
by Sihombing and Rahardjo (2014) which states that capability proxied by changes in the board of directors does
not affect the fraudulent financial reporting. But the results of this study contradict the research of Skousen et al.
(2009) who succeeded in proving that the change of directors has a positive effect on fraudulent financial
statements and Pardosi (2015)which states that changes in the board of directors have a significant influence on
fraudulent financial reporting.

Conclusion
Based on the results of data analysis and discussion, it can be concluded as follows: First, pressure does not affect
the fraudulent financial reporting. This indicates that share ownership by insiders does not necessarily trigger
management or senior executives to commit fraudulent financial reporting. Second, opportunity influences the
fraudulent financial reporting. This finding indicates that the greater the opportunity for management to commit
fraud, the greater the risk of fraudulent financial reporting in the company. In this study, the opportunities created
by the weak control of inventory management are the main causes for perpetrators to commit fraudulent financial
reporting. Third, rationalization has an effect on the fraudulent financial reporting. This finding indicates that
management rationalization is an important element in the occurrence of fraudulent financial reporting in
companies. Rationalization of management in the subjective assessment and decision making of companies related
to the use of accrual principles is proven to increase management risk in conducting fraudulent financial reporting.
Fourth, capability does not affect the fraudulent financial reporting. This indicates that the replacement of the
company's board of directors is not the main indication that fraudulent financial reporting has occurred in the
company. This can be caused by the change of the board of directors in the sample company is a routine change,
in which the new board members come from the internal company. So the reason for the change of the board of
directors is not because the old board of directors had a poor performance, but because of the role of position
within the structure of the board of directors.

Implications of Research Findings

Based on the findings obtained in this study, the implication of this finding is pressure proxied by the ratio of share
ownership by insiders is proven to have no significant effect on fraudulent financial reporting, so investors and
prospective investors should not need to be afraid of the existence of insider ownership in manufacturing companies
where investors invest their capital. Making a senior executive as the owner of a company part through a
compensation package can bridge the conflict between the agent and the principal. When a company has good
financial performance, it will also benefit senior executives because the financial condition of the entity will affect
their financial condition as the owner of a part of the company.
Opportunity proxied by the ratio of total inventory proved to have a significant effect on fraudulent
financial reporting, so it can be concluded that opportunity is the main trigger for increasing fraudulent financial
reporting in manufacturing companies. The results of this study indicate that opportunity is created due to weak
control of inventory management, so that it can open fraudulent financial reporting opportunities that can occur in
manufacturing companies.
Rationalization proxied by the ratio of total accrual to total assets proved to have a significant effect on
fraudulent financial reporting, so it can be concluded that rationalization is the main trigger for the increase in
fraudulent financial reporting in manufacturing companies. Management rationalization related to accrual policies
chosen by management will be reflected in the value of corporate accruals. The results of this study indicate the
amount of cash underlying income reported in manufacturing companies is relatively small. Beneish (1999)
estimates higher positive accruals (less cash) associated with the possibility of higher income manipulation.
Capability proxied by changes in the board of directors does not affect fraudulent financial reporting, so
that the change of the board of directors occurs regularly not because the old board of directors has a poor
performance, but as an effort to refresh the board structure.

Research Limitations and Suggestions

This study has several limitations, namely First, researchers only use non-financial companies engaged in the
manufacturing sector listed on the Indonesia Stock Exchange for the 2011-2014 period as research samples, so that
the results of the study cannot be generalized to other sector companies. Second, researchers use the board of
The analysis of the factor … 9

directors as a proxy for capability measurement in this study. After the data analysis test process is carried out, the
change in the board of directors that occurs in the sample company is only a change in the board of directors that
occurs routinely.
Based on these limitations, the advice that can be given to the next researcher is, First, researchers can
then consider using non-routine board of directors as a proxy for measuring capability. Second, for future
researchers who are interested in conducting similar research or who want to develop this research, they can
consider different data analysis techniques and measurement proxies, such as using logistic regression analysis,
using Jones's modified model as a proxy for fraudulent financial reporting, and other measurement proxies which
can be used in further research.

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