| Summary: | This study aims to analyse the effect of financial pressure (financial stability, personal financial need and financial targets) and related party transactions (RPTs) on financial statement fraud. Respondents of the study are manufacturing companies listed on the Indonesia Stock Exchange for the years 2011 to 2015. By using fixed effect panel regressions, the survey results show that financial stability as measured by sales divided by total asset and RPTs negatively affect financial statement fraud. In addition, financial targets have a significant positive effect on financial statement fraud. However, this study shows that personal financial need does not affect the financial statement fraud. This study provides several important conclusions. First, companies are in a stable financial condition, enabling them to reduce their financial report fraud. Second, the findings suggest the possibility of a negative impact on the quality of financial statements due to the use of financial performance targets such as ROA. Third, the result of the study which states that RPTs negatively affect fraudulent financial statements implies that in Indonesia with reference to manufacturing companies, RPTs do not reflect negative behaviour or even vice versa. © 2022 Inderscience Enterprises Ltd.
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