Article Type: Research Paper

The Analysis of Fraud in Perspective of

Jurnal Akuntansi Terapan Indonesia
Fraud Pentagon Theory: An Empirical
Vol 06 No 02 Page 107-120 October
2023
Study in Indonesia
Heriyanni Mashitoh1, Eka Wirajuang Daurrohmah*2, Dedi
Iskandar Inan3, Antares Firman4

Affiliation: Abstract:
1,2,3Universitas Terbuka, Indonesia This study aims to delve into the primary causes of fraud, focusing on the fraud
4Universitas Papua, Indonesia pentagon theory that encompasses all types of fraud in both the public and private
sectors particularly in Indonesia. Using a qualitative phenomenological
*Correspondence: descriptive method, this study seeks to gain deep insights into individual subjective
ekawirajuang@ecampus.ut.ac.id experiences, especially from the perspective of forensic auditors. These auditors
are not only experts in investigating fraud but are also skilled in analyzing
This Article is Avalilable in: financial data, evaluating internal controls, and formulating recommendations
https://journal.umy.ac.id/index.php/
based on their investigations. This research employs a semi-structured interview
jati/article/view/18765
approach and involves 11 forensic auditors with CFE or CFrA certifications
DOI: from both AUI of BPK and the ACFE Indonesian chapter. Through this
https://doi.org/10.18196/jati.v6i2.1 analysis, the study offers a unique contribution to the literature by highlighting
8765 region-specific cultural and social dynamics, such as the profound reliance on
religious-based justifications or political affiliations, adding complexity to the
Citation: understanding of fraud in Indonesia.
Mashitoh, H., Daurrohmah, E., Inan,
D., & Firman, A. (2023). The Analysis Keywords: Fraud, The Causes of Fraud, Fraud Pentagon Theory.
of Fraud in Perspective of Fraud
Pentagon Theory: An Empirical Abstrak:
Study in Indonesia. Jati: Jurnal Penelitian ini bertujuan untuk menyelami penyebab utama penipuan,
Akuntansi Terapan Indonesia, 6(2),
dengan fokus pada teori pentagon penipuan yang mencakup semua jenis
107-120.
doi:https://doi.org/10.18196/jati.v6i
penipuan di sektor publik dan swasta khususnya di Indonesia.
2.18765 Menggunakan metode deskriptif fenomenologi kualitatif, penelitian ini
berupaya memperoleh wawasan mendalam tentang pengalaman
Article History subjektif individu, terutama dari perspektif auditor forensik. Auditor
Received: forensik ini bukan hanya ahli dalam menyelidiki fraud tetapi juga
13 June 2023 memiliki kemampuan dalam menganalisis data keuangan, mengevaluasi
Reviewed: kontrol internal, dan merumuskan rekomendasi berdasarkan hasil
26 July 2023 investigasi mereka. Penelitian ini menggunakan pendekatan wawancara
Revised: semi-struktur dan melibatkan 11 auditor forensik dengan sertifikasi CFE
21 August 2023 atau CFrA dari AUI BPK dan ACFE Indonesia chapter. Melalui hasil
Accepted:
analisis, penelitian ini memberikan kontribusi unik pada literatur
30 August 2023
dengan menyoroti dinamika budaya dan sosial khas daerah, seperti
Topic Article: ketergantungan yang mendalam pada justifikasi berbasis agama atau
Auditing afiliasi politik yang menambah kerumitan dalam pemahaman tentang
fraud di Indonesia.

Kata Kunci: Fraud, Penyebab Fraud, Teori Fraud Pentagon.

 Mashitoh, Daurrohmah, Inan, Firman
The Analysis of Fraud in Perspective of Fraud Pentagon Theory: An Empirical Study in Indonesia

INTRODUCTION
Fraud is one of the most serious problems and challenges today (Abdurrachman &
Suhartono, 2020). Fraud is a potential threat in the public and private sectors (Joseph et al.,
2020). The word fraud is used to accommodate the type of financial scandal and intentional
abuse with the main motive being to enrich themself (ACFE, 2021a). Fraud is a general term
and includes all various ways that human ingenuity creates to gain advantages over others,
whether financial or non-financial, by means of false representations (Khadra & Delen, 2020;
Maulidi & Ansell, 2020). ACFE classify fraud as 3 classifications: corruption, assets
misappropriation, and fraudulent statement. Each type has a subclass known as the fraud
tree (ACFE, 2021b).
Fraud is behavior that is detrimental to both business and stakeholders (Ozcelik,
2020). Frauds’ consequences are losses, directly or indirectly (Soehari et al., 2018). The impact
of losses is even more worrisome due to the Information and Communication Technology
(ICT) advancements facilitating more complex fraud, which is difficult to identify (Kemp et
al., 2020). On the other hand, ICT can also be used as a precautionary tool in preventing and
detecting fraud more easily (Donning et al., 2019).
The fraudster normally attempts to hide the fraud (AICPA, 2002; International
Standard on Auditing (UK) 240, 2021). Organizations cannot be healthy and competitive if it
cannot be detected. A good organisation should have a fraud prevention strategy and
effective risk management once a fraud attack occurs. Fraud detection enables decision-
makers to develop appropriate strategies to reduce the impact of fraud (Al-Shabi, 2019).
Organisations cannot prevent systematic fraud unless they implement strategies and
technologies that can automatically spotlight suspicious activity (Kristiyani & Hamidah, 2020).
Technology development today requires fraud prevention and detection to be carried out by
mixg technology and non-technology to balance the emergence of new ways to commit
fraud (Halbouni et al., 2016).
Fraud eradication consists of prevention, detection, and investigation. Fraud is
difficult to prove if there is no confession. The external audit is weak in fraud prevention
(Mouamer et al., 2020). Meanwhile, internal audit is principally aimed at designing,
implementing, and monitoring the internal control system so that it can be used more for
fraud prevention and detection compared to external audit (Umar et al., 2019) This is because
internal audit is a control mechanism within the organization, and the audit committee
carries out a supervisory role to ensure the effectiveness of the internal audit function
(Shamki & Alhajri, 2017). However, this fraud prevention and detection follow-up should be
delegated to a specialist for investigation (Taylor, 2011).
Fraud eradication in Indonesia has been carried out for a long time, such as the
establishment of the KPK, BPK audits, BPKP audits, inspectorate audits, etc. There are also
rules for preventing the prosecution of fraud (Elda, 2019; Pane, 2017). However, fraud cases
in Indonesia are still happening. In 2019, there were 239 fraud cases with a total loss of
873.430 IDR million with details of the cases, which can be seen in Table 1.

Table 1. The Percentages of Fraud Cases

Case Classification Percentage
Corruption 64%
Asset Misappropriation 28.9%
Fraudulent Statement 9.2%
Amount 100%
Source: (ACFE, 2022)

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Fraudster can be carried out internally and externally (Daurrohmah, 2018). Fraudsters
from internal are committed by employees, management, and owners (Omar et al., 2016).
Most fraudster are done by employees at 31.8%, but the highest loss from fraud came from
owner ranging from Rp 500 million to Rp 10 billion (ACFE, 2020). Meanwhile, external
fraudsters can be committed by vendors, customers, external auditors, and so on.
There are many causes about why someone is committed to fraud. Cressey (1953)
proposed the first theory about the causes of fraud, which states that opportunity, pressure,
and rationalization were the causes of fraud. It is called the fraud triangle theory. Then, Wolfe
& Hermanson (2004) developed the causes of fraud, called the fraud diamond theory. Marks
(2012) developed the fraud diamond theory to be the fraud pentagon theory.
An individual's ability to commit fraud is determined by the individual's knowledge,
experience, and honesty (Ozcelik, 2020). One of the characteristics of fraud is the intention
of the fraudster. Lack of understanding about fraudulent behaviour, low morality,
opportunities, lifestyle and pressure are some of them (Akomea-Frimpong et al., 2016;
Morales et al., 2014; Omar et al., 2016). Motivation also can be the cause of fraud (Free &
Murphy, 2015), but it is often influenced by situational and external variables (Maulidi &
Ansell, 2020). Rationalisation is still the most important factor that causes fraud (Cressey,
1953; Marks, 2012; Maulidi & Ansell, 2020; Utami et al., 2019; Wolfe & Hermanson, 2004).
It is necessary to know the causes of fraud to be able to combat all types of fraud.
Over the past few years, numerous studies in Indonesia have delved into the causes of fraud
using the fraud pentagon theory. Prominent among these are works by Farmashinta &
Yudowati (2019), Haqq & Budiwitjaksono (2020), Jaya & Poerwono (2019), Kurnia et al. (2020),
Situngkir & Triyanto (2020). As highlighted by the aforementioned research, a common thread
in these studies is a significant emphasis on financial reports, with a predilection for
quantitative methodologies. Specifically, between 2013 and 2018, research on financial
statement fraud across various sectors in Indonesia underscores the importance of the fraud
Pentagon as an instrumental tool in fraud detection. However, the impact of individual
variables within this pentagon can differ significantly based on the industry sector and the
timeframe under consideration. Notably, elements like 'financial stability' and 'change in
auditor' have manifested a noteworthy influence in certain settings, whereas others might
display inconsistency or lack relevance altogether.
Financial fraud has become a significant issue in various parts of the world, including
Indonesia. While many studies have focused on the fraud pentagon theory in the context of
financial statement fraud, research encompassing all types of fraud using this theory remains
scarce. Even though efforts to eradicate fraud are ongoing, the prevalence of fraud in
Indonesia is still alarming. Addressing this issue, researchers aim to delve into the primary
causes of fraud, focusing on the fraud pentagon theory that encompasses all types of fraud,
both in the public and private sectors. As an approach, the phenomenological qualitative
method in this research aims to achieve in-depth insights into individual subjective
experiences, particularly from the vantage point of forensic auditors. These auditors are
experts in investigating fraud and adept at analyzing financial data, evaluating internal
controls, and formulating recommendations based on their investigative outcomes. By
examining this unique perspective, the study seeks to enhance the understanding of the
underlying causes of fraud, hoping to devise effective strategies for its prevention in the
future.

RESEARCH METHOD
Adopting the qualitative approach described by Creswell & Poth (2017), this research
utilized the descriptive phenomenology method. While phenomenology focused on

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The Analysis of Fraud in Perspective of Fraud Pentagon Theory: An Empirical Study in Indonesia

capturing the intricate nuances of phenomena occurring within Indonesia, the descriptive
aspect emphasized the analysis of these findings. The principal subjects of this study were
forensic auditors who hold either a CFE or CFrA certification. Further refining the selection,
participants were chosen based on their experience in managing fraud cases, both within
investigatory and litigation realms. The reason for this specific selection was rooted in the
auditors' frontline experience, offering them a direct interaction and analysis of fraud
mechanisms and their subsequent implications. Data collection techniques in this study used
semi-structured interviews and surveys (Kuncoro, 2018).
The respondents of this research are forensic auditors who have CFE or CFrA
certification from either the Investigative Unit Auditors (AUI) of the Audit Board of the
Republic of Indonesia (BPK) and the Association of Certified Fraud Examiners (ACFE)
Indonesia chapter. Informants also have experience conducting forensic
audits/investigations in both the public and private sectors. The data were collected through
11 semi-structured interviews with different informants in each interview.

Table 2. Socio-demographic Characteristics of the Respondents

Name Gender Last Education Professional Certificate Number of Cases
Informant A Male Master’s Degree CFE > 10
Informant B Male Bachelor’s Degree CFrA 7 - 10
Informant C Male Bachelor’s Degree CFrA 7 – 10
Informant D Male Bachelor’s Degree CFrA 7 – 10
Informant E Female Master’s Degree CFrA > 10
Informant F Female Master’s Degree CFrA 4–6
Informant G Male Doctoral Degree CFE > 10
Informant H Male Master’s Degree CFE > 10
Informant I Male Master’s Degree CFE > 10
Informant J Male Professional CFE > 10
Education
Informant K Male Master’s Degree CFE > 10
Source: The Processed Primary Data (2021)

Before being analyzed, the data from the interviews were transcribed verbatim. The
data analysis process was divided into three stages, according to Miles et al. (2014): first, data
reduction was conducted by simplifying, abstracting, and grouping data to identify critical
information. Second, data presentation involved organizing the reduced data into a more
structured format such as tables or graphs. Lastly, interpretations and conclusions were
formulated based on the presented data, ensuring consistency, validity, and reliability of
findings. Each stage was crucial to gain a deep understanding of the data and derive relevant
insights from the interview results. In qualitative research, the primary data analysis is
conducted by researchers, and they often employ NVivo software as a tool to aid in this
process (Elo et al., 2014). NVivo amplifies the efficiency, depth, and rigor of the qualitative
analysis, facilitating researchers in deeply exploring their data, identifying patterns and
themes with enhanced effectiveness, and presenting their findings comprehensively and
visually captivatingly.

RESULT AND DISCUSSION

Marks (2012) mentioned that pressure, opportunity, competence, arrogance, and
rationalization are the causes of fraud.

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Pressure
Pressure is the condition that most trigger a crime, including fraud (ACFE, 2020).
Fraud occurred starting from the intention of the fraudster mentioned by informant H,

“The pressure is actually the intention. Even though there are opportunities for
example, even though I am a director at a state-owned enterprise (SOE), there are
actually many opportunities. Because we don't have any pressure, my intentions are not
to be malicious or, in other words, real integrity, strong integrity, didn't be tempted.”

Pressure can come from internal or external (Daurrohmah & Urumsah, 2021). Internal
pressure can be in the form of financial needs. The pressure of the need can usually lead to
fraud, as stated by informant J,

“If the motive is relatively the same, yes, usually it is financial (financial interest)
because there is a need.”

Needs can come from family needs, as mentioned by informant I,

“The family problem is meant if it's the pressure come from maybe his wife, the
demands on him, or his parents or parent in-laws ask him to give happiness in a material
form, that's a lot of pressure like that in Indonesia.”

It could also be due to financial issues such as debt, as mentioned by F informant,

“If you look at the motive, there is a debt factor pressure.”

External pressure can be in the form of pressure from the work environment and
social environment (Nawawi & Salin, 2018; Zuberi & Mzenzi, 2019). Leaders can be pressured
and lead to fraud. This was mentioned by the informant K,

“An employee like that is mostly pressured by his leader, so he does everything in his
power to manipulate to collect all kinds of funds.”

Business pressures and performance pressures are one of the drivers of fraud in
Indonesia, as stated by informant G,

“That's the most. This is it, yes, including business pressure or performance pressure,
right?”.

The pressure that comes from outside, apart from family, business demands,
performance demands, and leader, then social networks can also encourage fraud as
mentioned by informant H,

“Yes, from my experience, ladies and gentlemen, the next factor is that there are
actually 2 factors, the first is what kind of relationship is a social network. Social
networks, for example, can be regional, can be ethnic, yes, it can be anything. Oh he's in
the same area as me, Okay, appoint him as the director of SOEs, or he's from the same
area with me so I used to be an official in the government like that.”

Just like social networks, political connections and high political costs in Indonesia
can be a driving force for fraud, as stated by informants H and K:

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“…so, what we are most wary of is actually corruption in the strategic sector, ladies
and gentlemen, at the strategic level, the strategic level is the highest leadership of a
company or state-owned enterprise, which is influenced by elements that are outside
the organization, such as members of the DPR, political parties, and so on. It's so hard.”
(Informant H)

“Because he is a politician, as you know, he also has to have an unquote quote, maybe,
pressure to raise money for a deposit to his party or for his constituents. Indeed, our
political costs are very high, both my experience handling cases and stories from friends
or relatives who are politicians like that. Therefore, for the executive, the legislature
and even the judiciary, it all costs money.” (Informant K)

Based on the phenomena, pressure is a primary driver of fraud, both internally and
externally. According to various informants, internal pressure often stems from financial
needs such as debt or family demands. External pressure can come from the work
environment, leadership, performance demands, or social and political networks. In the
context of Indonesia, political connections and high political costs become significant factors
for fraud, especially at the leadership levels of companies or state-owned enterprises.
To prevent fraud, efforts are needed to alleviate these pressures based on their root
causes, such as internal pressure caused by needs that can be prevented by fulfilling those
needs. If the need was fulfilled but still committed fraud, that is called greed (Bologna, 1993).
External pressure caused by the work environment can be prevented by creating a good
work environment and managing conflict management in the work environment (Wicaksono
& Urumsah, 2016).

Opportunity
Opportunity is a condition that opens the way for people who commit fraud
(Rustiarini et al., 2019). Fraudsters in committing fraud must have the opportunity, as
explained by informant H,

“The fraudster must fulfil the elements of the Fraud Triangle, one of which is an
opportunity. The opportunity is because he has the authority.”

Fraud can occur when there is a gap, and even if there is no gap, the gap will be
created so that fraud can be carried out as stated by informant H,

“If someone really intends then have the authority, other opportunities can be made up
like that.”

A strong internal control system will make small opportunities for fraud (Adinda &
Ikhsan, 2015; Erbuga, 2020; Pristiyanti, 2012). Informant I also corroborated this with the
statement,

“Opportunity may be two natures, because his internal control system is weak or
because he created the opportunity.” Informant J added that there must be control,
“Yes. The thing called ‘control’, you have it too.”

There is also the experience of informant F related to technology, which aims to make
it easier, but because the control system is low, it actually encourages fraud,

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“There were some weaknesses in the system that might actually have been designed for
flexibility, right? But this can be used to make his name. Maybe you've heard of mask
credits.”

The opinion is the same as informant G's that knowing the weaknesses of the system
because they have been working in that place for a long time can be the cause of the fraud,
“When someone has worked for a long time, they already know their system
weaknesses and business processes, they can become vulnerabilities, yes, the
temptation that occurs for fraud is that they are invited to work together.”

Organizations usually already have rules that can prevent fraud, but sometimes some
rules can be made according to the stakeholders mentioned by informant D,

“if in certain companies there are already guidelines for the procurement of goods and
services. The only problem is that sometimes there are guidelines that do not fully refer
to higher regulations, in this case, those issued by the ministry. Therefore, because this
guideline for the procurement of goods and services is an area that can be regulated in
quotes by the officials or directors.”

Informant G also stated,

“In most incidents, the procedure is there, the mechanism is also there, but when there
is carelessness and negligence, there is an opportunity, fraud can occur.”

There are also cases where they were suddenly given the authority and then used the
opportunity to commit fraud, as stated by informant H,

“There is also 'aji mumpung.' As long as he has the opportunity, he will make the best
of it.”

Leaders who are out of control can be a driver of fraud (Pramudita, 2013; Zulkarnain,
2013). As mentioned by informant G,

“As a leader, one of them functions as a coach, the leader is not just collecting results.
Now, when the employee doesn't get it, then he despairs, it can become rationalism,
pressure too, and the opportunity is there, that's because he knows very well on the
field and he sees that his leader has lost control, so that's an opportunity for him.”
Leaders must continue to control the employee because over-trust can also
encourage fraud, as stated by informant I, “Actually he has no urgent financial need at
all, then he just Over-Trust maybe yes to his subordinates earlier.”

Opportunity, as evident from research findings, frequently serves as a gateway to

fraud. Strong internal controls substantially reduce the risk of fraud. However, intentional
gaps or system vulnerabilities can magnify the threat. The adaptability of technology, while
meant to simplify operations, can be manipulated if system flaws exist. Particularly, long-
standing employees, familiar with the system's intricacies, can discern and capitalize on these
vulnerabilities. Even when organizations implement anti-fraud measures, they might not
always be in sync with overarching regulations, creating a leeway for unethical actions. A
leader's inadequate oversight or over-reliance on their team can exacerbate the chances of
fraud.

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It's of paramount importance for organizations to robustly reinforce their internal

controls, spanning both tech-driven and traditional systems (Yan et al., 2020), and to
staunchly comply with all regulations and guidelines (Albrecht et al., 2019). By doing so,
opportunities for fraud can be significantly curtailed, ensuring a holistic protective
framework against fraudulent activities.

Competency
Competence is the ability to override internal control and develop strategies to hide
and control social situations for personal gain (Cushman, 2019). Fraud is usually carried out
by people who have the ability or competence. This was mentioned by informant J:

“Ya, with competence, yes. With competence, maybe the one who graduated from high
school is not a fraud, maybe just sorry for the thief. A thief is a thief, but not a Fraudster.
If a Fraudster is usually educated, right? Someone used to say he was a white-collar
criminal, right? That means it's not a blue-collar, it's not a blue-collar, it's a white-collar.”
(Informant J)

One form of ability is power. Fraudsters with a high level of loss are usually carried
out by people who have high authority and power, mentioned by informant G,

“Well, if the loss is big, it's just a high official, huh?” This was also corroborated by the
statement of informant A, “If I remember that it was the defendant who ended up
being the suspect and the convict, it's the end because the decision has been made, it's
the president director or the highest level of the organization in this case.”

Technological developments force businesses to digitalize, so the ability of

information technology can not only prevent fraud, but it can also be the cause of fraudsters
committing fraud, as mentioned by informant K,

“We can also use IT as well as possible to prevent fraud, but on the other hand for
fraudsters, this is a tool to commit fraud.” This proves that having IT skills is one of the
competencies to commit fraud (Macailao, 2020).

Competence is often associated with an individual's ability to commit fraud.

Competence includes overriding internal controls and developing strategies for personal
gain. Fraudsters typically have an educational background and are often termed "white-collar
criminals." Individuals with high authority positions tend to cause greater losses. In the digital
era, information technology skills are not only used for prevention but also by fraudsters as
a tool. While competence is crucial, integrity and honesty are also vital; even honest
individuals can be tempted to commit fraud if pressured by superiors.

Arrogance
Arrogance is an attitude of superiority or greed that believes that internal control
does not apply to him (Marks, 2012). An unequal lifestyle with income can encourage fraud
which is called greed. Greed, as mentioned several times by several informants, can be a
driving force for fraud, one of which is mentioned by informants I and J.

"People who are corrupt because they need it, their remuneration must be increased,
but if people with high remuneration are still corrupt, it means they are greedy."
(Informant I)

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“What I said earlier, even though what was obtained from the organization was
enough, it was enough, It could be sufficient, it was sufficient for the standard of living
of employees, but sometimes there are still things that are lacking, yes, Greedy or not,
his life is living beyond his means, so He life is above the existing standard.” (Informant
J)

Every way is sometimes done by fraudsters in order to have full control of a place so
that later they can commit fraud. This was explained by informant I:

“Like the case of MD, ma'am, that's why she doesn't want to be promoted, she doesn't
want to rotate, she doesn't want to take leave, so she maintains her position, she is very
dominant so that other people don't enter her domain. She's not even willing to get
promoted, but she's in full control there.” (Informant I)

Prestige arrogance can also encourage fraud, as stated by informant H,

“That's right, the arrogance of the prestige of the good name of the reputation, right?.”

Narcissistic people may be more likely to commit fraud due to their personality traits
and motivations (Vousinas, 2019). Narcissism is characterized by a grandiose sense of self-
importance, a lack of empathy for others, and a desire for admiration and attention. These
traits can lead narcissistic individuals to engage in unethical and fraudulent behaviors in order
to satisfy their desire for entitlement, dominance, and pride (Mohamed et al., 2021). Their
heightened sensitivity to criticism and failure amplifies their likelihood to commit fraud as a
means to maintain a perceived superior image and evade negative outcomes.
Arrogance, too, plays a pivotal role in fraudulent conduct. Extravagant lifestyles and
insatiable greed, even among high earners, have been pointed out as significant contributors
to such malpractices. The urge to uphold a certain prestige or reputation sometimes acts as
a catalyst for fraudulent activities. Some go to the extent of holding onto certain
organizational positions to ease their deceptive operations.
When narcissism and arrogance converge, these traits create a potent mix of
motivations pushing individuals towards deceitful actions. The consistent theme is the
pursuit of personal gain, dominance, and maintaining a facade, making such individuals highly
susceptible to unethical and fraudulent tendencies.

Rationalization
Rationalization occurs when a person has performed an action and then builds beliefs
and desires that will make him rational. Then, people often adjust their own beliefs and
desires to conform with those made up. Therefore, rationalization is not just justification for
the fraudster's actions, but it is the real reason behind the action (Rustiarini et al., 2019).
There are several rationalizations commonly used by fraudsters in cases in Indonesia.
Religious rationalization can be used to justify fraudulent acts by referring to the gifts as
'kerohiman' money, as stated by informant I,

“it's real there is a term that I heard real from him is this is ‘kerohiman’ money.”

Informant J also mentioned that he had the following experiences with religious
rationalization:

“Ya, that's rationalization, yes, like it's not haram, is it?.” (Informant J)

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In line with religious rationalization, giving is indeed widely used by fraudsters to

rationalize their actions. This was stated by informant J,

“Sometimes it's like, 'We have prepared this, sir. This is the marketing fee.' That's also
a rationalization: ' We have budgeted for the marketing fee, so it's okay, so it is legal.'

Informant J also stated that there was a rationalization of pressure from a leader, the
rationalization that the leader also committed fraud and feelings of injustice were carried out
by fraudsters as follows:

“I said that the pressure came from their leader, but their leader also did it. Others do
too, so I do, why not, yes, the others can be richer than me.” (Informant J)

Economics can be used to rationalize acts of fraud, and fraudsters feel entitled to get
it. As stated by informant K,

“Sometimes one of the officials even had a kind of double bookkeeping, so if he did a
mark-up, he collected the money, he would use it for investment, not for his family.
Investing to buy land, to make gas stations, he said, for investment, he said it was from
excess. His salaries are to be brought to his family, so he said that he did it for the
investment, right? he feels he has the right to get it.”

The rationalization by stating that there is a request from others, whether it is only
used as an excuse or indeed because there is pressure from others, is explained by informant
I in two statements:

“Bribery is a mode of corruption that is considered the highest based on Komisi

Pemberantasan Korupsi (KPK) records. As the briber, the businessmen, on average,
what I see are those who have internal interests because they want to win the tender,
for example, or they want to have a very good network. Even if in court, sometimes they
defend themselves with 'I was asked for money'." (Informant I)

“The leader doesn't always mean the bureaucrat. I said earlier that for political parties,
there are cases such as many individual ministers and also individual members of the
council they have to donate to their party if the congress was coming. That's a lot of it
the congress was coming. Party X is like that; several public officials have been affected
by corruption cases, and if they are asked, later they may also be sought in the media, 'I
have to donate so much, I was asked for money for party development, I was asked to
raise the party', yes, they said.” (Informant I)

Several perpetrators usually have more than one justification, and no one cannot be
sure which rationalization is the most salient (Shepherd & Button, 2018). Rationalization is a
process in which a person justifies their actions by creating beliefs and desires that align with
those actions. In Indonesia, many fraudsters use various reasons to rationalize their actions.
Some common rationalizations include referring to religion by considering the money from
fraud as a 'blessing', feeling that there is pressure from leaders or that their leaders also
commit similar actions, feeling an injustice, viewing their actions as legitimate in an economic
context, or reasoning that there is a request from others. In many cases, fraudsters may have
several reasons used concurrently to justify their actions. However, this rationalization
process plays a significant role in justifying fraudulent actions in Indonesia.

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 Mashitoh, Daurrohmah, Inan, Firman
The Analysis of Fraud in Perspective of Fraud Pentagon Theory: An Empirical Study in Indonesia

CONCLUSION
This study provides an in-depth perspective on the various causes of fraud in
Indonesia through the lens of the fraud pentagon theory, with pressure, opportunity,
competency, arrogance, and rationalization as the primary drivers. The depth of this analysis
is enhanced by leveraging the perspective of forensic auditors, offering a unique contribution
to the literature by highlighting the region-specific cultural and social dynamics, such as the
profound reliance on religious-based justifications or political affiliations, adding a layer of
complexity in understanding fraud within this context. However, as a qualitative research
focused on Indonesia, generalizing the findings to other contexts might be limited.
Although this research offers valuable insights, its limitations include the subjective
nature of the data and potential constraints on generalization. Nevertheless, suggestions like
strengthening internal controls, continuous ethics education, and the development of robust
whistleblower programs indicate the path toward fraud mitigation in Indonesia.
Understanding and addressing the factors contributing to fraud is vital for establishing a
safer and more ethical business environment.

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