The red flags of fraudulent financial reporting among state government agencies in Malaysia / Nor ‘Asyiqin Abu … [et al.]

State government agency is one of the three tiers within the Malaysian government jurisdiction. As government agencies use public fund to function its daily operation, public are concerned with the fund governance within the entity. One of the monitoring mechanism to ensure public fund has been utilized diligently is by observing the audit report issued by the Auditor General Department. With the growing concern of the public to the fund management of these government agencies, this study aims to identify the types of audit report issued by the Auditor General Department (AGD). To achieve the objective of this study, a qualitative approach by content analysis over five-year data of 2013 to 2017 audit report certificates issued to the state government reported online through websites of the Auditor General Department (AGD) were scrutinized. The findings show that state government agencies in Melaka reported the highest case of Qualified Report with 23 incidences. The study also revealed that the highest cases reported revolves around asset valuation, manipulating liabilities and expenses followed by creating fictitious revenues. These reports spanning over five years may indicate the possibility of fraudulent financial statement elements or red flags to have existed within the public sector agencies. Such condition may tarnish the image of public government agencies, implicating poor financial governance within the organization.