Fraud Risk Assessment in Indonesian Manufacturing Financial Statements

Abstract

This research aims to explore the risk of fraud in the financial statements of Indonesian manufacturing companies by applying a library research approach. Through the use of financial ratio analysis, the study seeks to uncover anomalies and discrepancies in company reports that may signal potential fraudulent practices. The research literature from related fields such as management, which provides valuable insights into the motivations, opportunities, and rationalizations that may encourage fraudulent behavior. The results indicate that organizations with inadequate internal control systems, insufficient levels of independent oversight, and corporate cultures that prioritize immediate performance goals over ethical responsibility tend to be more exposed to the risk of fraud. To reduce such vulnerabilities, firms must strengthen internal controls, cultivate a strong ethical culture, and ensure the availability of effective and transparent reporting mechanisms. Moreover, regulatory authorities and professional bodies have a critical role in increasing awareness of fraud risks and enforcing compliance with both accounting standards and ethical principles within the industry.