Fraudulent financial reporting in ministerial and governmental institutions in Indonesia : an analysis using hexagon theory

This study examined fraudulent financial reporting in the ministerial and governmental institutions in Indonesia. It adopted the hexagon theory that identified six elements (pressure, opportunity, rationalisation, capability, arrogance, and collusion) in determining whether these elements influence fraudulent financial reporting in the institutions. Content analysis was used on the financial statements of thirty-two ministerial and governmental institutions over three years from 2018 to 2020. This study shows that three out of the six elements, namely opportunity, arrogance, and collusion, significantly affect fraudulent financial reporting. The effects are positive, confirming the proposition of the hexagon theory. On the other hand, this study could not provide evidence on the effect of pressure, rationalisation, and capability on fraudulent financial reporting in the ministerial and governmental institutions. The findings in this study suggest the importance of a holistic application of the whistle-blowing and e-procurement systems in all governmental elements to deliver a transparent, accountable organisational performance for the stakeholders, especially society.