The Influence of Fraud Heptagon, Audit Report Lag, and Whistleblowing System on Financial Statement Fraud with Good Corporate Governance as a Moderating Variable: Evidence from Indonesian Manufacturing Companies

Vol 8 No 11 (2025): Volume 08 Issue 11 November 2025

Article Date Published : 24 November 2025 | Page No.: 5693-5708 | Google Scholar | Crossref doi for this article

Abstract :

This study examines how the Fraud Heptagon, Audit Report Lag, and Whistleblowing System influence the incidence of financial statement fraud in Indonesian manufacturing firms, with Good Corporate Governance (GCG) tested as a moderating factor. Using panel data from 100 companies listed on the Indonesian Stock Exchange between 2015 and 2024, the analysis applies Partial Least Squares–Structural Equation Modeling (PLS-SEM) to evaluate both direct and interaction effects. The Fraud Heptagon—comprising pressure, opportunity, rationalization, capability, arrogance, collusion, and greed—demonstrates a significant positive association with fraudulent financial reporting, indicating its relevance as a multidimensional predictor of unethical behavior. Audit Report Lag shows a positive but insignificant relationship with fraud, suggesting that reporting delays alone do not reliably indicate manipulation. Conversely, an effective Whistleblowing System significantly reduces the likelihood of misstatements. The moderating analysis reveals that GCG strengthens the effects of the Fraud Heptagon and the Whistleblowing System but does not alter the influence of Audit Report Lag. These findings highlight the importance of behavioral, procedural, and governance mechanisms in fraud prevention. The study contributes theoretical validation of the Fraud Heptagon in an emerging-market context and provides practical guidance for improving oversight, transparency, and ethical accountability in corporate reporting.

Keywords :

Audit report lag, Effective corporate governance, Fraud Heptagon, Fraudulent Financial Statement, Whistleblowing System

References :

  1. Abed, S., Bataineh, H., & Suwaidan, M. (2020). Does impementing corporate governance and ownership structure have any impact on audit report lag and management report lag in Jordan. International Journal of Innovation Creativity and Change, 13(10), 702–717.
  2. Achmad, T., Ghozali, I., & Pamungkas, I. D. (2022). Hexagon Fraud: Detection of Fraudulent Financial Reporting in State-Owned Enterprises Indonesian context. Economies, 10(1), 1–16. https://doi.org/10.3390/economies10010013
  3. Adi, A. N., Baridwan, Z., & Mardiati, E. (2018). Profitability, Liquidity, Leverage and Corporate Governance Impact on Financial Statement Fraud and Financial Distress as Intervening Variable. Bulletin of Taras Shevchenko National University of Kyiv Economics, 200, 66–74. https://doi.org/10.17721/1728-2667.2018/200-5/9
  4. Akbar, T. (2017). The Determination of Fraudulent Financial Reporting Causes By Using Pentagon Theory on Manufacturing Companies in Indonesian context. International Journal of Business, Economics and Law, 14(5), 106–133.
  5. Al Daoud, K. A., Ku Ismail, K. N. I., & Lode, N. A. (2015). The impact of internal corporate governance on the timeliness of financial reports of jordanian firms: Evidence using audit and management report lags. Mediterranean Journal of Social Sciences, 6(1), 430–442. https://doi.org/10.5901/mjss.2015.v6n1p430
  6. Andriani, K. F., Budiartha, K., Sari, M. M. R., & Widanaputra, A. A. G. P. (2022). Fraud Pentagon Elements in Detecting Fraudulent Financial Statement. Linguistics and Culture Review, 6(S1), 686–710.
  7. Apriliana, S., & Agustina, L. (2017). The Analysis of Fraudulent Financial Reporting Determinant through Fraud Pentagon Approach. Jurnal Dinamika Akuntansi, 9(2), 154–165. https://doi.org/10.15294/jda.v7i1.4036
  8. Astuti, S., Marita, M., & Heriningsih, S. (2019). Analysis Factor Triggers Fraud And Corporate Governance On Indications of Fraudulent Financial Reporting Using the Pentagon Fraud Theory Approach. Eksis: Jurnal Riset Ekonomi Dan Bisnis, 14(1), 47–54. https://doi.org/10.26533/eksis.v14i1.448
  9. Beneish, M. D. (1999). The Detection of Earnings Manipulation. Financial Analysts Journal, 55(5), 24–36. https://doi.org/10.2469/faj.v55.n5.2296
  10. Christian, N., Basri, Y. Z., & Arafah, W. (2019). Analysis of Fraud Triangle, Fraud Diamond, and Fraud Pentagon Theory to Detecting Corporate Fraud in Indonesian context. The International Journal of Business Management and Technology, 3(4), ISSN 2581-3889.
  11. Cresey, D. R. (1953). Other People’s Money: A Study in the Social Psychology of Embezzlement: Vol. (Issue). Free Press.
  12. Creswell, J. W., & Creswell, D. J. (2018). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches (Fifth Edit). SAGE, Publication, Inc.
  13. Dewi, K., & Anisykurlillah, I. (2021). Analysis of the Effect of Fraud Pentagon Factors on Fraudulent Financial Statement with Audit Committee as Moderating Variable. Accounting Analysis Journal, 10(1), 39–46. https://doi.org/10.15294/aaj.v10i1.44520
  14. Djami, R. A., & Murtanto, M. (2024). Factors That Influence Fraud Heptagon Theory On Financial Statements Fraud (Empirical Study on the Mining Sector Listed on the Indonesian context Stock Exchange for the Period 2018-2022). Journal Research of Social Science, Economics, and Management, 4(1), 85–103. https://doi.org/10.59141/jrssem.v4i1.701
  15. Evana, E., Metalia, M., Mirfazli, E., Georgieva, D. V., & Sastrodiharjo, I. (2019). Business Ethics in Providing Financial Statements: The Testing of Fraud Pentagon Theory on the Manufacturing Sector in Indonesian context. Business Ethics and Leadership, 3(3), 68–77. https://doi.org/10.21272/bel.3(3).68-77.2019
  16. Fakhfakh, I., & Jarboui, A. (2022). Earnings management and audit report lag: The role of audit risk-Tunisian evidence. Journal of Accounting and Management Information Systems, 21(1), 113–135. https://doi.org/10.24818/jamis.2022.01006
  17. Fathmaningrum, E. S., & Anggarani, G. (2021). Fraud Pentagon and Fraudulent Financial Reporting: Evidence from Manufacturing Companies in Indonesian context and Malaysia. Journal of Accounting and Investment, 22(3), 625–646. https://doi.org/10.18196/jai.v22i3.12538
  18. Fitriyah, R., & Novita, S. (2021). Fraud Pentagon Theory for Detecting Financial Statement Fraudulent. Jurnal Riset Akuntansi Kontemporer, 13(1), 20–25. https://doi.org/10.23969/jrak.v13i1.3533
  19. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman
  20. Fuad, K., Lestari, A. B., & T, H. R. (2020). Fraud Pentagon as a Measurement Tool for Detecting Financial Statements Fraud. Advances in Economics, Business and Management Research, 115(Insyma), 85–88.
  21. Ginting, C. U., & Hidayat, W. (2019). The effect of a fraudulent financial statement, firm size, profitability, and audit firm size on audit delay. International Journal of Innovation, Creativity and Change, 9(7), 323–341.
  22. Hair Jr, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2021). A primer on partial least squares structural equation modeling (PLS-SEM)-Third Edition.
  23. Handayani, S., Bambang, B., & Waskito, I. (2021). The Moderating Effect of Audit Committee on the Prevention of Financial Statement Fraud with Pentagon Fraud Analysis. Kasta: Jurnal Ilmu Sosial, Agama, Budaya, Dan Terapan, 1(1), 14–28.
  24. Handoko, B. L. (2021). Fraud Hexagon dalam Mendeteksi Financial Statement Fraud Perusahaan Perbankan di Indonesian context. Jurnal Kajian Akuntansi, 5(2), 176. https://doi.org/10.33603/jka.v5i2.5101
  25. Handoko, B. L., Angelyca, A., & Nicholas, A. (2023). Examining the Psychological Aspect: Fraudulent Financial Reporting in Property and Real Estate Companies Listed on the Indonesian context Stock Exchange During the Covid-19 Pandemic using the Fraud Heptagon Approach. Journal for Re Attach Therapy and Developmental Diversities, 6(10–2), 650–661.
  26. Haqq, A. P. N. A., & Budiwitjaksono, G. S. (2020). Fraud Pentagon for Detecting Financial Statement Fraud. Journal of Economics, Business, and Accountancy Ventura Vol., 22(3), 319–332. https://doi.org/10.14414/jebav.v22i3.1788.
  27. Hartadi, B. (2022). Pengaruh Fraud Hexagon Terhadap Fraudulent Financial Statements pada Perusahaan Badan Usaha Milik Negara Indonesian context yang Terdaftar di Bei pada Tahun 2018-2021. Jurnal Pendidikan Tambusai, 6(2), 14883–14896.
  28. Hasnan, S., Abdul Rahman, R., & Mahenthiran, S. (2013). Management motive, weak governance, earnings management, and fraudulent financial reporting: Malaysian evidence. Journal of International Accounting Research, 12(1), 1–27. https://doi.org/10.2308/jiar-50353
  29. Hasnan, S., Mohd Razali, M. H., & Mohamed Hussain, A. R. (2021). The effect of corporate governance and firm-specific characteristics on the incidence of financial restatement. Journal of Financial Crime, 28(1), 244–267. https://doi.org/10.1108/JFC-06-2020-0103
  30. Jensen, M., & Meckling, W. (2012). Theory of the firm: Managerial behavior, agency costs, and ownership structure. The Economic Nature of the Firm: A Reader, Third Edition, 283–303. https://doi.org/10.1017/CBO9780511817410.023
  31. Kaptein, M. (2011). From Inaction to External Whistleblowing: The Influence of the Ethical Culture of Organizations on Employee Responses to Observed Wrongdoing. Journal of Business Ethics, 98(3), 513–530. https://doi.org/10.1007/s10551-010-0591-1
  32. Khamainy, A. H., Ali, M., & Setiawan, M. A. (2022). Detecting fi nancial statement fraud through new fraud diamond model : the case of Indonesian context. Journal of Financial Crime, 29(3), 925–941. https://doi.org/10.1108/JFC-06-2021-0118
  33. Lastanti, H. S. (2020). Role of Audit Committee in the Fraud Pentagon and Financial Statement Fraud. International Journal of Contemporary Accounting, 2(1), 85–102.
  34. Mahdi, S. A. R., Djaelani, Y., Suwito, & Buamonabot, I. (2021). Determinants of fraud prevention with spiritual intelligence as moderator. Estudios de Economia Aplicada, 39(12). https://doi.org/10.25115/eea.v39i12.6004
  35. Mohamed, N., Zakaria, N. B., Nazip, N. S. B. M., & Muhammad, N. F. (2021). The Influencing Factors of Employee Fraud in Malaysia Financial Institution: The Application of the Fraud Pentagon Theory. Academy of Strategic Management Journal, 20(6), 1–13.
  36. Nasir, N. A. B. M., Ali, M. J., & Ahmed, K. (2019). Corporate governance, board ethnicity and financial statement fraud: evidence from Malaysia. Accounting Research Journal, 32(3), 514–531. https://doi.org/10.1108/ARJ-02-2018-0024
  37. Nirmala, P., Devi, C., Agung, A., Putu, G., Ayu, I. G., Budiasih, N., & Rasmini, N. K. (2021). The Effect of Fraud Pentagon Theory on Financial Statements : Empirical Evidence from Indonesian context. Journal of Asian Finance, Economics and Business Vol, 8(3), 1163–1169. https://doi.org/10.13106/jafeb.2021.vol8.no3.1163
  38. Nurardi, D. S., & Wijayanti, R. (2021). Determinan Financial Statement Fraud dengan Analisis Fraud Hexagon Model (Studi Empiris pada Perusahaan Sektor LQ 45 yang Terdaftar di Bursa Efek Indonesian context Periode II Agustus-Januari 2016-2019). The 13th University Research Colloqium 2021, 2019(3), 430–441.
  39. Nuristya, E. R., & Ratmono, D. (2022). The Role of Audit Report Lag in Mediating the Effect of Auditor Switching and Financial Distress on Financial Statement Fraud. Sriwijaya International Journal of Dynamic Economics and Business, 6(June), 165–184. https://doi.org/10.29259/sijdeb.v6i2.165-184
  40. Ogunmodede, E. O., Aggreh, M., & … (2023). Moderating effect of abnormal audit fees on the relationship between audit delay and the quality of financial reporting: A study of listed industrial goods firms in Nigeria. Journal of Global …, 9(4), 328–350. https://journals.unizik.edu.ng/joga/article/view/2916
  41. Pamungkas, I. D., Ghozali, I., Achmad, T., Khaddafi, M., & Hidayah, R. (2018a). Corporate Governance Mechanism in Preventing Accounting Fraud: A Study of Fraud Pentagon Model. Journal of Applied Economic Sciences, XIII(2 (56)), 549–560.
  42. Pamungkas, I. D., Ghozali, I., Achmad, T., Khaddafi, M., & Hidayah, R. (2018b). Corporate Governance Mechanism in Preventing Accounting Fraud: A Study of Fraud Pentagon Model. Journal of Applied Economic Sciences, XIII(56), 549–560.
  43. Puspitha, M. Y., & Yasa, G. W. (2018a). Fraud Pentagon Analysis In Detecting Fraudulent Financial Reporting. International Journal of Sciences: Basic and Applied Research, 42(5), 93–109. http://gssrr.org/index.php?journal=JournalOfBasicAndApplied
  44. Puspitha, M. Y., & Yasa, G. W. (2018b). Fraud Pentagon Analysis in Detecting Fraudulent Financial Reporting (Study on Indonesian contextn Capital Market). International Journal of Sciences: Basic and Applied Research (IJSBAR), 42(5), 93–109.
  45. Putra, N. N. A. N., & Suprasto, H. B. (2022). Penggunaan Fraud Pentagon dalam Mendeteksi Kecurangan Laporan Keuangan Perusahaan Perbankan di Indonesian context. E-Jurnal Akuntansi, 32(1), 3481. https://doi.org/10.24843/eja.2022.v32.i01.p12
  46. Putri, U. R., & Handayani, D. (2024). Analisis Pengaruh Rapat Komite Audit , Audit Internal , dan Whistleblowing System Terhadap Potensi Fraudulent Financial Reporting. Jurnal Ilmiah Ekonomi Manajemen Bisnis Dan Akuntansi, 1(4), 29–41.
  47. Rachman, M. N., Suhendro, S., & Azhar, R. (2023). Analysis of factors affecting fraudulent financial reporting in fraud pentagon perspective. Asian Journal of Economics and Business Management, 2(1), 342–352. https://doi.org/10.53402/ajebm.v2i1.262
  48. Ramadhan, D. (2020). Root Cause Analysis Using Fraud Pentagon Theory Approach (a Conceptual Framework). Asia Pacific Fraud Journal, 5(1), 118. https://doi.org/10.21532/apfjournal.v5i1.142
  49. Reskino, R., & Bilkis, M. S. (2022). Apakah Effective corporate governance Memoderasi Hubungan Kecenderungan Kecurangan Manajemen terhadap Fraudulent Financial Statement? Jurnal Kajian Akuntansi, 6(2), 2579–9975. http://jurnal.ugj.ac.id/index.php/jka
  50. Rezaee, Z. (2005). Causes, consequences, and deterence of financial statement fraud. Critical Perspectives on Accounting, 16(3), 277–298. https://doi.org/10.1016/S1045-2354(03)00072-8
  51. Rostami, V., & Rezaei, L. (2022). Corporate governance and fraudulent financial reporting. Journal of Financial Crime, 29(3), 1009–1026. https://doi.org/10.1108/JFC-07-2021-0160
  52. Rusmin, R., & Evans, J. (2017). Audit quality and audit report lag: Case of Indonesian contextn listed companies. Asian Review of Accounting, 25(2), 191–210. https://doi.org/10.1108/ARA-06-2015-0062
  53. Sangkala, M., & Safitri, N. (2022). Pentagon Fraud Analysis in Detecting Fraudulent Financial Statements in Pharmaceutical Companies Listed on the Indonesian context Stock Exchange (IDX). Proceedings of the International Conference on Social, Economics, Business, and Education (ICSEBE 2021), 205(Icsebe 2021), 210–216. https://doi.org/10.2991/aebmr.k.220107.040
  54. Sari, M. P., Mahardika, E., Suryandari, D., & Raharja, S. (2022). The audit committee as moderating the effect of hexagon’s fraud on fraudulent financial statements in mining companies listed on the Indonesian context stock exchange. Cogent Business and Management, 9(1). https://doi.org/10.1080/23311975.2022.2150118
  55. Saunders, M., Lewis, P., & Thornhill, A. (2018). Research Methods for Business Students (Eigth). Pearson Education.
  56. Sekaran, U., & Bougie, R. (2016). Research Methods for Business: A Skill-Building Approach (Seventh). John Wiley & Sons.
  57. Situngkir, N. C., & Triyanto, D. N. (2020). Detecting Fraudulent Financial Reporting Using Fraud Score Model and Fraud Pentagon Theory: Empirical Study of Companies Listed in the L . Q . 45 Index. The Indonesian contextn Journal of Accounting Research, 23(3), 373–410. https://doi.org/10.33312/ijar.486
  58. Sukmadilaga, C., Winarningsih, S., Handayani, T., Herianti, E., & Ghani, E. K. (2022). Fraudulent Financial Reporting in Ministerial and Governmental Institutions in Indonesian context: An Analysis Using Hexagon Theory. Economies, 10(4). https://doi.org/10.3390/economies10040086
  59. Suryanto, T. (2016). Audit delay and its implication for fraudulent financial reporting: A study of companies listed in the Indonesian contextn Stock Exchange. European Research Studies Journal, 19(1), 18–31. https://doi.org/10.35808/ersj/503
  60. Thamlim, W., & Reskino. (2023). Fraudulent Financial Reporting with Fraud Pentagon Perspective: The Role of Corporate Governance as Moderator. American Journal of Humanities and Social Science Resesarch (AJHSSR), 07(01), 18–38.
  61. Tricker, B. (2019). Corporate governance: Principles, policies, and practices (4th ed.). Oxford University Press
  62. Utami, E. R. (2019). The Analysis of Fraud Pentagon Theory and Financial Distress for Detecting Fraudulent Financial Reporting in Banking Sector in Indonesian context (Empirical Study of Listed Banking Companies on Indonesian context Stock Exchange in 2012-2017). Advances in Economics, Business and Management Research, 102(ICAF 2019), 60–65.
  63. Velte, P. (2023). The link between corporate governance and corporate financial misconduct. A review of archival studies and implications for future research. In Management Review Quarterly (Vol. 73, Issue 1). Springer International Publishing. https://doi.org/10.1007/s11301-021-00244-7
  64. Vousinas, G. L. (2019). Advancing theory of fraud: the S.C.O.R.E. model. Journal of Financial Crime, 26(1), 372–381. https://doi.org/10.1108/JFC-12-2017-0128
  65. Wardah, Z., Carolina, A., & Wulandari, A. (2022). Pengaruh Whistleblowing System, Internal Control, Leadership dan Budaya Organisasi terhadap Fraud Prevention. Nominal Barometer Riset Akuntansi Dan Manajemen, 11(2), 233–247. https://doi.org/10.21831/nominal.v11i2.49346
  66. Widharma, F., & Susilowati, E. (2020). Auditor Switching, Financial Distress, and Financial Statement Fraud Practices with Audit Report Lag as Intervening Variable. Journal of Accounting and Strategic Finance, 3(2), 243–257. https://doi.org/10.33005/jasf.v3i2.135
  67. Zakaria, N. B., & Mohammed, N. F. (2021). The Influencing Factors of Employee Fraud in Malaysia Financial Institution: The Application of the Fraud Pentagon Theory. Article in Academy of Strategic Management Journal, 6(July), 487.

How to Cite :

The Influence of Fraud Heptagon, Audit Report Lag, and Whistleblowing System on Financial Statement Fraud with Good Corporate Governance as a Moderating Variable: Evidence from Indonesian Manufacturing Companies. Syerli Novita, Tri Widyastuti, Darmansyah, 8(11), 5693-5708. Retrieved from https://ijcsrr.org/single-view/?id=24518&pid=24394

Most read articles by the same author(s)

Syerli Novita, Tri Widyastuti, Darmansyah ,

View

82

Citation

Downloads

Article Details