Article Details
Vol. 6 No. 1 (2026): March
Determinants of Financial Reporting Quality Mediated in the Prevention of Fraudulent Financial Reporting and Firm Size as a Moderator
Abstract
Purpose: This study examines the effects of good corporate governance, internal audit function effectiveness, organizational culture, and information technology innovation on the quality of financial reporting, with the prevention of fraudulent financial reporting as a mediator. Additionally, it investigates the role of firm size as a moderating variable.
Research Methodology: A survey method was used to gather data from the finance director/general manager, audit committee, internal audit unit manager (SPI), and accounting manager/finance manager at a state-owned enterprise (BUMN). Data analysis was conducted using a Structural Equation Model (SEM) with a Partial Least Squares (PLS) approach.
Results: This study found that good corporate governance, internal audit effectiveness, organizational culture, and information technology innovation positively affect the prevention of fraudulent financial reporting. Good corporate governance, organizational culture, and IT innovation also improve financial reporting quality. However, internal audit effectiveness does not directly impact financial reporting quality. Firm size strengthens the positive relationship between governance mechanisms and financial reporting quality, both directly and through fraudulent financial reporting prevention.
Conclusions: This study concludes that good corporate governance, internal audit effectiveness, organizational culture, and IT innovation are critical for enhancing financial reporting quality and preventing fraud. Firm size moderates the relationship, thereby amplifying the impact of these factors.
Limitations: This study is limited to state-owned enterprises (BUMNs) and relies on self-reported data, which may introduce bias.
Contributions: This research contributes insights into improving financial reporting practices by highlighting the roles of governance and organizational factors.
Keywords
How to Cite
Download Citation
References
- ACFE. (2018). ACFE Report to the Nations: 2018 Global Fraud Study. Retrieved from https://www.acfe.com/fraud-resources/report-to-the-nations-archive
- ACFE. (2022). Occupational Fraud 2022: A Report to the Nations. Retrieved from https://www.acfe.com/report-to-the-nations/2022/
- Agustina, C. M., Manurung, A. H., & Manurung, A. (2023). Factors that affect bank risk in commercial banks that are publicly listed. Journal of Applied Finance & Banking, 13(3), 19-40. doi:https://doi.org/10.47260/jafb/1332
- Akhyaar, K., Purwantini, A. H., Afif, N., & Prasetya, W. A. (2022). The effect of financial reporting compliance, internal control system and whistleblowing system on fraud prevention in village fund management. KRISNA: Accounting Research Collection, 13(2), 202-217.
- Aninda, V., & Firmanto, Y. (2025). Analysis of the implementation of the whistleblowing system in improving good corporate governance in the association of state-owned banks (Himbara). International Journal of Research on Finance & Business, 7(1), 72-119. doi:https://doi.org/10.70575/ijrfb.v7i1.100
- Bachtiar, I. H. (2020). Determinants of village government fraud prevention efforts. University of East Indonesia: Journal of Islamic Economics. Management and Accounting, 5(2), 61-68. doi:https://doi.org/10.34202/imanensi.5.2.2020.61-68
- Bhandari, A., Mammadov, B., Thevenot, M., & Vakilzadeh, H. (2022). Corporate culture and financial reporting quality. Accounting Horizons, 36(1), 1-24. doi:https://doi.org/10.2308/HORIZONS-19-003
- Chairi, N., Indriani, M., & Darwanis, D. (2022). Competence, morality and whistleblowing system in fraud prevention: An empirical study on Indonesian government organizations. Journal of Accounting, Auditing & Information Research Media, 22(1), 119-142. doi:https://doi.org/10.25105/mraai.v22i1.12655
- Denziana, A. (2015). The influence of audit committee quality and internal auditor objectivity toward the prevention of fraudulent financial reporting (A Survey in BUMN of Indonesia). Paper presented at the 1st International Conference on Law, Business and Governance.
- Dinata, R. O., Irianto, G., & Mulawarman, A. D. (2018). Revealing cultural causes of fraud: an ethnographic study in public company. Jurnal Economia, 14(1), 66-88. doi:https://doi.org/10.21831/economia.v14i1.18453
- Hair, J., Hult, G. T. M., Ringle, C., Sarstedt, M., Danks, N., & Ray, S. (2021). Evaluation of Reflective Measurement Models (pp. 75-90).
- Hendarto, D. T. (2025). Governance analysis of PT Asuransi Jiwasraya from the perspective of good corporate governance and public trust in Indonesia. Journal of Economics and Business UBS, 14(3), 443-450. doi:https://doi.org/10.52644/joeb.v14i3.2675
- Huri, F. K., Mardi, M., & Fauzi, A. (2024). The Effect On Internal Control And Whistleblowing System On Fraud Prevention With Individual Morality As A Moderating Variable (Case Study of A Consumer Good Company). International Student Conference on Business Education Economics Accounting and Management (ISC-BEAM), 2(1), 2020-2031. doi:https://doi.org/10.21009/ISC-BEAM.012.138
- Mursal, M., Wibisono, C., Ngaliman, N., Dewi, N. P., & Basri, B. (2025). Public accountant performance: The mediation role of organizational commitment. Annals of Human Resource Management Research, 5(2), 51-66. doi:https://doi.org/10.35912/ahrmr.v5i2.2869
- Muslim, M. (2025). The failure of governance and internal controls in preventing fraud in the company. Advances in Managerial Auditing Research, 3(1), 15-29. doi:https://doi.org/10.60079/amar.v3i1.418
- Naldo, R. R., & Widuri, R. (2023). Fraudulent financial reporting and fraud hexagon: Evidence from infrastructure companies in ASEAN. Economic Affairs, 68(3), 1455-1468. doi:http://dx.doi.org/10.46852/0424-2513.3.2023.14
- Nawawi, A., & Salin, A. S. A. P. (2018). Internal control and employees’ occupational fraud on expenditure claims. Journal of Financial Crime, 25(3), 891-906. doi:https://doi.org/10.1108/JFC-07-2017-0067
- Novatiani, R. A., Afiah, N. N., & Sumantri, R. (2022). Risk management and other factors preventing fraudulent financial reporting by state-owned enterprises in Indonesia. Asian Economic and Financial Review, 12(8), 686.
- Nugroho, A. J. S., Marjukah, A., Setyawanti, D., Haris, A., Almasitoh, U. H., & Tasari, T. (2025). A model of student smoking cessation behavior based on pictorial health warnings as an intervening variable. Annals of Human Resource Management Research, 5(4), 1-14. doi:https://doi.org/10.35912/ahrmr.v5i4.3205
- Onesti, G., & Palumbo, R. (2023). Tone at the top for sustainable corporate governance to prevent fraud. Sustainability, 15(3), 2198. doi:https://doi.org/10.3390/su15032198
- Oyedotun, S. A., Oise, G. P., Akilo, B. E., Nwabuokei, O. C., Ejenarhome, P. O., Fole, M., & Onwuzo, C. J. (2025). The role of internal audit in fraud detection and prevention: A multi-contextual review and research agenda. Journal of Science Research and Reviews, 2(2), 76-85. doi:https://doi.org/10.70882/josrar.2025.v2i2.51
- Prayetno, S., & Reimond Hasangapan, M. (2025). Strategies to improve hospital implementation of management functions that influence service behavior. Annals of Human Resource Management Research, 5(1), 61-75. doi:https://doi.org/10.35912/ahrmr.v5i1.2790
- Rahayu, D., Rahmayati, A., & Narulitasari, D. (2022). Determinants of fraud prevention in village financial management. Paper presented at the Proceedings of the National Seminar on Accounting and Management (SENAMA).
- Saddiq, S. A., & Abu Bakar, A. S. (2019). Impact of economic and financial crimes on economic growth in emerging and developing countries: A systematic review. Journal of Financial Crime, 26(3), 910-920. doi:https://doi.org/10.1108/JFC-10-2018-0112
- Sánchez-Aguayo, M., Urquiza-Aguiar, L., & Estrada-Jiménez, J. (2021). Fraud detection using the fraud triangle theory and data mining techniques: A literature review. Computers, 10(10), 121. doi:https://www.mdpi.com/2073-431X/10/10/121#
- Siagian, A. O. (2020). Contribution of inventory accounting systems in improving inventory internal control. Journal of Social Science, 1(2), 1-6. doi:https://doi.org/10.46799/jss.v1i2.12
- Sinaga, J., Manurung, A. H., Machdar, N. M., & FoEh, J. E. H. J. (2023). Internal and external determinants of risk based capital. Journal of Applied Finance & Banking, 13(2), 65-75. doi:https://doi.org/10.47260/jafb/1325
- Soepriyanto, G., Meiryani, Ikhsan, R. B., & Rickven, L. (2022). Analysis of countercyclical policy factors in the era of the COVID-19 pandemic in financial statement fraud detection of banking companies in Indonesia. Sustainability, 14(16), 10340. doi:https://doi.org/10.3390/su141610340
- Wijaya, R. M. S. A. A. (2023). Trends analysis of CPI in Indonesia, BPK findings IC weaknesses, and disobedience with laws. Journal of Economics, Business, and Government Challenges, 6(02), 50-58. doi:https://doi.org/10.33005/ebgc.v6i2.306
- Zulkiffly, N. A., Nazr, S. N. F. S. M., & Zolkaflil, S. (2025). The Quantitative Approach of Corporate Ethical Culture in Reducing Corporate Fraud. International Journal of Research and Scientific Innovation, 12(9), 2636-2653.
License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.