CORPORATE GOVERNANCE AND FINANCIAL STATEMENT FRAUDS: EVIDENCE FROM INDONESIA

This study aims to investigate the the effect of corporate governance on financial statement frauds. The variables of the corporate governance consisted of independent Board of Commisioners (IND), managerial ownership (OSHIP), audit committee meeting (MEET) and quality of external auditor (AUD). Agency theory was employed to explain how such variables may influence financial statement frauds.. Population of this study was companies listed in the Indonesia Stock Exchanges (IDX) which were suspected for being involved in financial statement frauds from 2008 to 2013. Total sample were 38 companies, consisting of 19 companies which were penalised by the IDX regulator because of their potential fraudulent financial statement, and 19 companies that are not financial statements fraudsters from the same industry (sectors). Data were then analised using logistic regression method. The findings of this study indicated that audit committee meeting (MEET) significantly influenced financial statement frauds. Meanwhile, independent Board of Commisioners (IND), managerial ownership (OSHIP) and interaction of quality of external auditor (AUD) and audit committee meeting (MEET) have no significant impact on financial statement fraud