RED FLAGS AND FRAUD PREVENTION ON RURAL BANKS

Abstract

This paper identifies the effectiveness of the red flags in detecting fraudulent financial statements, as well as preventive measures appropriate to implemented in Bank Perkreditan Rakyat (BPR). We use field survey convering the whole BPR in Province Bali, covering 60 indicators provided to 101 internal auditors from 86 BPR. The result shows that the highest dimensions within the Fraud Diamond are capability. Efforts to prevent the fraud would be the culture of honesty and high ethics, evaluating anti-fraud process and control, and developing an appropriate oversight process.