Fraudulent financial reporting is an intentional misstatement of the financial statements, which is the incorrect representation intentionally used to manipulate the decision of stakeholders by ensuring that they make their decision based on incorrect information. This study examines factors affecting the likelihood of financial statement fraud occurrences and differences between fraudulent and non-fraudulent companies listed in Indonesia Stock Exchange with respect to the company’s profitability over the period 2010 to 2018. Empirical results indicate that the ratio of current assets to total assets, long-term debt to total equity, total sales to total equity, and the cost of goods sold to sales have significant impact on affecting the likelihood of financial statement fraud. Based on the propensity score matching using cross-sectional data, the study finds that profitability has no significant difference between fraudulent and non-fraudulent companies.

Table of Contents
Acknowledgement i
Abstract ii
CHAPTER 1 INTRODUCTION 1
1.1 Status Quo of Financial Statement Fraud in Southeast Asia 2
1.2 Research Problem 5
1.3 Research Objectives and Questions 6
1.4 Research Framework 6
CHAPTER 2 LITERATURE REVIEW 8
2.1 Agency Theory 8
2.2 Fraud Definition 9
2.3 Fraud Triangle Theory 10
2.4 Determinants of Financial Statement Fraud 11
2.5 Prior Studies Overview 12
2.6 Hypothesis Development 16
CHAPTER 3 DATA AND METHODOLOGY 21
3.1 Data 21
3.2 Methodology 22
CHAPTER 4 EMPIRICAL FINDINGS AND DISCUSSIONS 25
4.1 Descriptive Statistical Analysis 25
4.2 Factors Model Affecting Financial Statement Fraud 25
4.3 Propensity Score Matching Analysis 27
CHAPTER 5 CONCLUSION 34
References 36
Appendix A: Research Variables and Sources of Variables 40

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