Fraudulent Financial Reporting and the Fraud Pentagon: Corporate Governance as a Moderator in the Financial Sector

Irfan Zamzam; Vivi Ivanka; Rizki Wahyu Utami Ohorella; Zainuddin Zainuddin

doi:10.63922/ijebir.v4i03.1704

Irfan Zamzam Universitas Khairun
Vivi Ivanka Universitas Khairun
Rizki Wahyu Utami Ohorella Universitas Khairun
Zainuddin Zainuddin Universitas Khairun

DOI: https://doi.org/10.63922/ijebir.v4i03.1704

Keywords: Fraud pentagon theory, Fraudulent financial statement, Good corporate governance

Abstract

This study examines the influence of the fraud pentagon dimensions (Pressure, Opportunity, Rationalization, Competence, Arrogance) on fraudulent financial statement within the financial industry, with good corporate governance (GCG) as a moderating variable. Data were collected from the annual financial reports of financial sector companies listed on Indonesia Stock Exchange (IDX) for the period 2019-2023 and analyzed using Moderated Regression Analysis (MRA) with Eviews, The findings reveal that Pressure and Rationalization affect fraudulent financial statements, while Opportunity, Competence, and Arrogance do not have significant impacts. Furthermore, GCG fails to moderate the relationship between the fraud pentagon dimensions and fraudulent financial statements. This study extends the fraud pentagon theory and offers practical insight for companies to enchance internal controls and for regulators to develop more effective policies for preventing fraudulent financial statement in the financial indutry.

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