Testing of Fraud Detection Model on Indonesia Companies

• In Event: Forensic and Investigative Accounting

Abstract

The purpose of this study is to examine whether the fraud detection model, Beneish model (1999) can be used to detect fraud at companies in Indonesia. This study uses firm fraud data for the period of 1999-2012. The fraudulent firms matched with non fraudulent firms based on firm size, time period, and industry. By using a sample of 153 years of fraud firms and non-fraud firms, this study found that Beneish model (1999 ) have sufficient accuracy in detecting fraud companies in Indonesia. However, the application of this model using data in Indonesia required special caution because of the possibility of type 2 error (predict that a bank non fraud, but actually they are fraud) classified 27 firm as non fraud firms, while 26 other misclassified as fraud firm in this model in Indonesia context is quite high. The results of this study provide empirical evidence concerning the application of the fraud detection model in the context of developing countries such as Indonesia.

Authors

• Fitriany Abdul Mutholib, University Indonesia

• Dwi Martani, Universitas Indonesia

• Kurina I. Rais, University of Indonesia

• Emil Bachtiar, University of Indonesia