Abstract:
According to CNBC, in recent years several Indonesian insurance companies have
faced problems due to their failure to pay claims due to financial distress and
significant increase of financial reporting fraud cases that occurred that led to a
loss of public trust. Understanding a company's financial condition is very
important for customers and investors before buying a policy and shares of the
company. Therefore, it can be a reference before placing their money in a
company to be able to know how much risk they might suffer in the future.
Insurance companies are businesses that are vulnerable to bankruptcy because the
nature of the business is influenced by public trust. This research aims to
determine if the companies are experiencing financial distress and indicated to
commit financial reporting fraud as a result of pressure or encouragement to
manipulate the financial reporting and hide the truth about company performance.
The sample used in this research was financial reporting of 18 public insurance
companies registered on IDX from 2020-2023. Altman Z-Score is used to predict
financial distress and Beneish M-Score is used to detect financial report fraud.
The result of the research calculations is that by the period 2020-2023 there were
2 companies that were predicted to be experiencing financial distress and 5
companies in the grey zone. Moreover, there were 4 companies that are predicted
to be experiencing financial distress and detected to commit financial reporting
fraud. The result of this research might be helpful for customers and investors in
making decisions.
