Moderation of Corporate Governance in Financial Statement Fraud Investigation with the Sccore Model
Authors: Arum Enggar Diah Puspa , Wijaya Rico , Wahyudi Ilham 
Published: May 2024

Objective: The purpose of this study was to determine the effect of stimulus, capability, collusion, opportunity, rationalization, and ego on financial statement fraud moderated by the effectiveness of the board of commissioners which essential of corporate governance structure. This study also seeks to develop recommendations based on the analysis of financial statement fraud detection and empirically demonstrate the effectiveness of appropriate supervision in preventing financial statement fraud.

Theoretical Framework: Management fraud in the context of the misstatement of financial information that can harm other parties for the sake of certain personal or group interests is referred to as a financial statement fraud. In recent years, the theory of financial statement fraud has developed, starting with the fraud triangle, fraud diamond, fraud pentagon, and fraud hexagon. The fraud hexagon theory expanded the previous theory by including the components of stimulus, capability, collusion, opportunity, rationalization, and ego. Furthermore, the model derived from the hexagon theory is known as the SCCORE model.

Method: Quantitative research was developed to test the hypothesis in this study. The data observed is secondary data derived from the annual reports of publicly listed companies in the non-financial sector industry on the Indonesia Stock Exchange, which is the target population of the study. The sample was determined using the total sampling technique, and based on this, the observed data amounted to 529. The data were analyzed using multiple linear regression methods and moderated regression analysis methods processed with the SPSS program.

Results and Discussion: The findings suggested that corporate governance could moderate the relationship among the SCCORE model and financial statement fraud. Additionally, according to the research findings, stimulus, collusion, opportunity, and ego affect financial statement fraud, even though capability and rationalization accomplish not.

Research Implications: The theoretical implication of this research is to provide additional empirical evidence of fraud theory development into hexagon fraud, whereby collusion, which is proposed as an addition to the pentagon fraud theory, is proven to have an effect on financial statement fraud. The other theoretical implication is to empirically verify the relevance of agency theory to the oversight mitigation of the corporate governance structure. The practical implication of this research is to broaden the insights of practitioners in the accounting and finance fields in order to detect the likelihood of financial statement fraud based on historical financial data, which ultimately can assist in the financial decision-making process.

Originality/Value: This study advanced to the state of knowledge on financial statement fraud through an inquiry into the interaction between the fraud hexagon theory's elements and corporate governance moderation, particularly the effectiveness of its oversight. The effectiveness of corporate governance in preventing financial statement fraud through appropriate oversight illustrates the study's relevance and value.