The Effect of the Fraud Pentagon in Detecting Fraudulent Financial Reporting
Abstract
This study aims to examine the factors of fraudulent financial reporting in the banking sector for the 2015-2020 period. Several factors include external pressure, financial targets, change of directors, and frequent number of CEO's picture. Currently, many studies in the field of fraudulent financial reporting have been carried out in the manufacturing industry sector as well as in the mining sector, while the current focus of research is in the banking sector, which has significant differences in characteristics in aspects of leverage, return on assets, and CEO arrogance in financial institutions. This study uses a quantitative approach of to panel data regression using Stata software which connects twelve banks listed on the Indonesian stock exchange with a period of six years from 2015 to 2020. The result of this study indicate that external pressure has a negative effect on fraudulent financial reporting. In addition, financial targets and changes in directors have a positive effect on fraudulent financial reporting. While other result shows that the frequent number of CEO's picture has no effect on fraudulent financial reporting in the banking sector. The limitation of this study is that it has a small sample of banks with a relatively short period of observation time, thus so that the range of observational data is still limited and unable to be generalized to larger companies. In addition, this study uses a quantitative approach, and further studies are expected to extend the cross-sectional and corporate culture wisdom to increase the determination of banking fraudulent financial reporting.
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