Company Characteristics and the Tendency of Fraudulent Financial Reporting

Company will always try to satisfy the expectation of their shareholders, even if the business conditions are not favorable. This will influence the company decisions, and one of them is decision about financial reports. Financial reports are important because it’s one of the tools that investor use to measure the company they invest. There are several legal ways to made up the report such as accounting method selection, and tax avoidance accounting. In the other hand, there are also some illegal ways, such as fraud, and manipulation. This research is aimed to find the relation between certain company characteristics towards the tendency of fraudulent financial reporting. Data for this research are taken from Indonesian Stock Exchange and Compustat, and analized using logistic regression model. The result of this research are company size, age, and maagement integrity has a significant negative relation towards the tendency of fraudulent financial reporting. Contrary to the common mindset, this research found that audit quality has a significant positive relation towards the tendency of fraudulent financial reporting