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Nowadays, one of the biggest problems that being face by the financial institution is fraudulent in the business transaction. It is one of the serious problems that causes many companies loses of hundred billion of dollar. It is considered as white-collar crimes as it involve many key players of the financial industry and from the company itself. The most common fraudulent is the financial statement fraud (FSF). It is an attempt to deceive the financial player regarding the actual status of the company. It’s the consequences of the ethical behaviour from financial information provider in preparing their financial statement. So, in this article will define the meaning of the financial statement fraud, presenting the biggest cases that have happened in the past years, how the company ‘cooking the books’ and it consequences, and suggest how to prevent the financial fraud in the future. To prevent the financial fraud, the government participation is essential as the government have the power to authorize the regulation regarding prevention of financial fraud. One of the regulations that is famous in preventing financial fraud is using Sarbanes-Oxley Act of 2002, which is used to revamp the standard of financial report, corporate governance and cogency of auditor. The variable for this article is the deterring financial fraud and the understanding the element which lead to financial statement fraud. Introduction Basically, the definition of financial fraud can be classified as a fraudulent act of financial transaction with a view to personal gain. Fraud is one of the crimes, which is against civil law. Most of the cases of fraud contain financial transactions that are difficult to identify with their offenses committed by 'white collar villains' such as professionals who have high knowledge and have criminal intentions. There are 3 factors for why financial fraud, which is stress, rationalization and opportunity, (Rashid, Asfthanorhan, et al., 2018). Stress is existing because of other people. For instant, pressure from family members, a spouse or his friend can lead a person on the path of fraud. Pressure can also force International Journal of Academic Research in Business and Social Sciences Vol. 8 , No. 12, Dec, 2018, E-ISSN: 22 22 -6990 © 2018 HRMARS 1631 various human behaviours that sometimes cause fraud such as recognise revenue in the wrong period of time, (Alfadhli, Rashid, & Yaakub, 2018). Second, rationalization is the logical thinking of the manager where to prove and defence the reputation of the financial condition of the company. Sometimes it's just justified. For example, the worker did not get promotion, salary or even 10-year remuneration may say the company owes it to him, so the person makes a scam for money that he thinks it's been too late. Fraud is not necessarily in large amount. Fraud in small amounts is also a crime. Employees have always assumed that thefts in small amounts do not cause the company to suffer huge losses, (Jamal, Daud, Zainol, Rashid, & Afthanorhan, 2018). Chance, this is the strongest factor in the fraud triangle. if somebody is under pressure to break fraud or have rationalized the idea so there is no benefit, this is impossible to make fraud without any opportunity to do so. The biggest case for financial fraud is the 'Enron Scandal'. Enron was created for Kenneth Lay after successfully combining the two largest energy companies in Texas, Houstan Natural Gas and Internorth in 1985. In 1992, the company became the largest provider of natural gas and also has various pipelines and power plants at state level as well as the world. The principle behind this scandal, Jeffrey Skilling, CEO of Enron, with other officers made various accounting methods and loopholes to hide billions of dollars in debt from stakeholders and board of directors, (Rashid, Daud, et al., 2018). After the company was bankrupt, its shareholders lost about $ 74 billion together with retirement and employment funds. Enron's case also raises new questions about ethics of corporate watchdogs like Arthur Anderson, Enron's auditor. Financial Statement Fraud According to (Musibau et al., 2018), there is five interactive factors which is called end-cooks, recipe, incentive, monitoring and end result, which given in the short word called CRIME (Ali, Abdullah, & Rashid, 2018). These factors are providing a huge contribution to the financial fraud, these factors emphasize more the understanding of causes and effective of financial statement fraud. This is because many organization businesses they are trying to hide the real document that show the agreement with suppliers that will provide information about the organization transaction, but sometime fraud may be caused by the CEO of the company or group of the auditors, (Masud, Daud, Zainol, Rashid, & Asyraf, 2018). But it is not only that, a financial fraud may be happen with different situation may be by known or unknown. There is so many reasons and causes that lead to financial fraud and not only that five interactive factors which know in short as CRIME, sometime financial fraud may occur in recognition of revenue in the wrong accounting period, or sometime withholding money with suppliers and also manipulating over the business cost, (Hamid et al., 2018). Those situations may cause fraud to the business financial reporting, so the organization should be aware with any situation that may cause a fraud to the financial statement because now day people are seeking for the information in every corner of the world to know what is going on to the wold of business, (Yazid, Yuhafidz, et al., 2018). Strategy of Detection and Prevention of Fraud Risk Controlling and preventing the fraud is not easy as we think, it requires to have higher knowledge, therefore, a company or organizations should develop fraud detection and prevention program. First they have to establish the fraud policy; where the organization may meet its expectation, of risk in International Journal of Academic Research in Business and Social Sciences Vol. 8 , No. 12, Dec, 2018, E-ISSN: 22 22 -6990 © 2018 HRMARS 1632 the policy approach was been established, also they have to asses where the organization has fraud exposure, (Hashim, Hamid, & Rashid, 2018). Second, they have to establish fraud risk assessment and fraud prevention control; the organization they have to develop a new system of controlling activities to manage the risk, to be wide control, example fraud awareness training and ethic policy to be in specific to a different part of risk like quick regression of the duty of the transaction, (Dakhlallh et al., 2018). Third they have to establish fraud detection control, by communicating, monitoring and reporting the fraud statement that could be ongoing and continuing, also in other hand internal company audit should attempt on the role to observe the fraud risk either the fraud control is operating effectively and efficiency. Also, organization should develop a new software system that will manage to conduct the information precisely obtained by company and also to the top manager committees as evidence of fraud arise regarding of materiality. Corporate Governance Financial fraud can be defined as intentional deception in organization about their financial reports for the purpose of illicit reasons and personal gains. It has occur in many countries and companies all across the world. It is safe to say that most of the company, to say the least, must have involve in financial fraud. The reason of not been caught is obviously because it still not being exposed or they handle it very discreetly that in some cases, they might have slip through the hand of law enforcer unnoticed. One example of financial fraud that always occurred is cooking the book. Cooking the book means management intentionally manipulate financial reports. Top executives who involve in cooking the book can be say they will barred by Securities and Exchange Commission (SEC), force to early retirement, being burden by fines and losing the value of their stock-based compensation (Rashid, Wan, Shaari, & Afthanorhan, 2018). They should aware of these consequences and avoid of doing any unethical things, whether can gain benefits out of it or not. Corporate governance is important in business organization. It plays its vital role in managing company to strive for a good profit and sustain for a long-term. But, if it falls into wrong hand, it might put the company into risks. As many cases that happened for the last year, corporate governance was always become the factor to financial fraudulent. Most of the cases tell that corporate governance is always lack in responsible (Ghazali, Mamat, Mohamed, Muhamad, & Rashid, 2018). Corporate governance was supposedly eliminating any elements of fraud in their organization. So, corporate governance should consist of vigilant board of directors and audit committee (Rashid, Ghaffar, Mokhtar, Yazid, & Afthanorhan, 2018). By having this kind of corporate governance, it can create an environment that demand high-quality financial report only, which should be truth and fairness. Because, financial statement users are all expecting a clean report that reflect the condition of the company. Otherwise, the company might lose their potential investor and creditor. Sarbanes Oxley Act 2002 (SOX) was enacted because of financial fraud case that happened years ago that caught world attention. Sarbanes Oxley Act 2002 (SOX) also exist to improve corporate governance, quality of financial report and credibility of audit functions. This act can supervise responsibility in the area of corporate governance, financial reporting, internal control structure and audit functions (Yazid, Hassan, et al., 2018). It banned the company give loan to executives and job protection to whistle-blower. International Journal of Academic Research in Business and Social Sciences Vol. 8 , No. 12, Dec, 2018, E-ISSN: 22 22 -6990 ©

The Causation of the Financial Statement Manipulation Activities