Fraudulent Financial Reporting with Fraud PentagonPerspective: The Role of Corporate Governance as Moderator

ABSTRACT:The purpose of thisstudyis to investigate the impact of fraudpentagontheory(pressure,opportunity, rationalization, capability, and arrogance) with the importance of corporategovernance on thedetection of fraudulentfinancialreporting in the Indonesiaproperty and real estatesectorfrom 2019-2021. Thestatistical technique used in thisresearchis panel data with multiple regressionanalysismethodswith PLS (PartialLeast Square) Smart PLS 3 software. Purposive sampling became the sampling technique used in the researchand obtained 132 sample data units. The findings in thisstudy show financialstability and effective monitoringhave a significanteffect in detecting an indication of fraudulentfinancialreporting. Meanwhile, financialtarget,external pressure, total accruals, change in director, and CEO duality do not affect the detection indication offraudulentfinancialreporting. However, corporategovernanceconsisting of audit committee andinstitutionalownershipdid not moderate the effect of fraudpentagonelements on indication offraudulentfinancialreporting. This studyconcludesthat pressure factor can trigger companies to carry outfraudulentfinancialreporting. Furthermore, effective monitoring can beused by business entities toreduceopportunities in accordance to minimize the occurrence of fraudulentfinancialreporting practices in asustainable business climatewithin the company.

KEYWORDS :Fraudulent Financial Reporting, Fraud Pentagon Theory, Corporate Governance, AuditCommittee, Institutional Ownership