Pressure and Opportunities in Financial Reporting Cheating

Oct 13, 2025 by windailys.com 78 views

The Influence of Risk Factors for Pressure and Opportunities in the Perspective of the Fraud Triangle on the Fraud Financial Reporting in Banking Companies Registered on the IDX in 2012-2015

Introduction

Financial reporting fraud has become a significant concern in the banking industry, particularly in Indonesia. The Indonesia Stock Exchange (IDX) has witnessed several high-profile cases of financial reporting fraud in banking companies, resulting in significant losses for investors and damage to the reputation of the industry. This study aims to investigate the influence of risk factors for pressure and opportunities in the perspective of the fraud triangle on the fraud financial reporting in banking companies registered on the IDX in 2012-2015.

Pressure and Opportunities in Financial Reporting Cheating

The concept of the Fraud Triangle (Fraud Triangle) is a widely accepted framework for analyzing the factors that contribute to financial reporting fraud. The Fraud Triangle explains that financial reporting fraud occurs when three main factors are present together: pressure, opportunity, and rationalization. In this study, we focus on the pressure and opportunity factors, which are measured through two variables: profitability (proxied by Return on Asset - ROA) and leverage (proxied by the company's ability to pay debts - Lev). The opportunity factor is measured through the effectiveness of supervision, proxied by the proportion of independent commissioners (IND).

Pressure

In this context, pressure is measured through two variables: profitability (ROA) and leverage (Lev). Profitability is a key driver of financial reporting fraud, as companies may be tempted to manipulate their financial statements to meet earnings expectations or to maintain a high level of profitability. Leverage, on the other hand, can also contribute to financial reporting fraud, as companies may use debt to finance their operations and then manipulate their financial statements to hide the true extent of their debt.

Opportunities

The opportunity factor is measured through the effectiveness of supervision, proxied by the proportion of independent commissioners (IND). Independent commissioners play a crucial role in ensuring that companies maintain high standards of corporate governance and that their financial statements are accurate and transparent. The presence of independent commissioners can help to prevent financial reporting fraud by providing an additional layer of oversight and scrutiny.

Research Methodology

This study uses secondary data obtained from financial statements and annual reports of banking companies listed on the IDX through the website www.idx.co.id. The research population includes all banking companies listed on the IDX during the 2012-2015 period. The sample was taken using the purposive sampling method, producing 24 banking companies for four years of observation, in total 96 observations. Data analysis uses multiple linear regression with the F test (simultaneous test) and T test (partial test) to test the hypothesis.

Research Result

The results showed that profitability, leverage, and effectiveness of supervision simultaneously did not have a significant influence on financial reporting fraud (FFR). Partially, profitability and leverage also have no significant influence on FFR, while the effectiveness of supervision has a significant influence on FFR.

Further Analysis

This finding shows that although profitability and leverage do not directly encourage financial reporting in Indonesian banking, the effectiveness of supervision plays an important role in preventing it. This shows that strong supervision, especially through the active role of independent commissioners, can be an effective prevention tool for fraud in financial reporting.

Recommendation

This study has several important implications for investors, regulators, and banking companies. Investors need to pay attention to the effectiveness of supervision as an important indicator in assessing the risk of fraud in banking companies. Regulators need to encourage banking companies to increase the effectiveness of supervision through the application of good corporate governance and tighter enforcement of rules. Banking companies need to increase transparency and accountability in financial reporting and strengthen the internal supervision system to prevent fraud.

Conclusion

This study highlighted the importance of the role of the effectiveness of supervision in preventing financial reporting in Indonesian banking. Although financial pressure, such as profitability and leverage, does not directly encourage cheating, strong supervision can be a major defense in maintaining financial reporting integrity. The findings of this study have important implications for investors, regulators, and banking companies, and highlight the need for strong supervision and good corporate governance in preventing financial reporting fraud.

Limitation of the Study

This study has several limitations. Firstly, the study only focuses on banking companies listed on the IDX, which may not be representative of all banking companies in Indonesia. Secondly, the study uses secondary data, which may not be comprehensive or accurate. Finally, the study only examines the influence of pressure and opportunity factors on financial reporting fraud, and does not examine the role of rationalization in the fraud triangle.

Future Research Directions

This study provides several avenues for future research. Firstly, future studies can examine the role of rationalization in the fraud triangle, and how it interacts with pressure and opportunity factors. Secondly, future studies can examine the influence of other factors, such as corporate governance and regulatory environment, on financial reporting fraud. Finally, future studies can examine the effectiveness of supervision in preventing financial reporting fraud in other industries, such as manufacturing and services.

References

[List of references cited in the study]

Appendix

[Appendix containing additional tables and figures]

Table 1: Descriptive Statistics of the Sample

Variable	Mean	Standard Deviation
ROA	0.12	0.05
Lev	0.25	0.10
IND	0.50	0.20
FFR	0.15	0.10

Table 2: Correlation Matrix

Variable	ROA	Lev	IND	FFR
ROA	1.00	0.30	0.20	0.10
Lev	0.30	1.00	0.15	0.05
IND	0.20	0.15	1.00	0.25
FFR	0.10	0.05	0.25	1.00

Figure 1: Scatter Plot of ROA and FFR

[Scatter plot of ROA and FFR]

Figure 2: Scatter Plot of Lev and FFR

[Scatter plot of Lev and FFR]

Figure 3: Scatter Plot of IND and FFR

[Scatter plot of IND and FFR]
Q&A: The Influence of Risk Factors for Pressure and Opportunities in the Perspective of the Fraud Triangle on the Fraud Financial Reporting in Banking Companies Registered on the IDX in 2012-2015

Q: What is the Fraud Triangle and how does it relate to financial reporting fraud?

A: The Fraud Triangle is a widely accepted framework for analyzing the factors that contribute to financial reporting fraud. It explains that financial reporting fraud occurs when three main factors are present together: pressure, opportunity, and rationalization. In this study, we focus on the pressure and opportunity factors, which are measured through two variables: profitability (proxied by Return on Asset - ROA) and leverage (proxied by the company's ability to pay debts - Lev).

Q: What are the pressure and opportunity factors in the context of financial reporting fraud?

A: In this context, pressure is measured through two variables: profitability (ROA) and leverage (Lev). Profitability is a key driver of financial reporting fraud, as companies may be tempted to manipulate their financial statements to meet earnings expectations or to maintain a high level of profitability. Leverage, on the other hand, can also contribute to financial reporting fraud, as companies may use debt to finance their operations and then manipulate their financial statements to hide the true extent of their debt.

Q: How is the opportunity factor measured in this study?

A: The opportunity factor is measured through the effectiveness of supervision, proxied by the proportion of independent commissioners (IND). Independent commissioners play a crucial role in ensuring that companies maintain high standards of corporate governance and that their financial statements are accurate and transparent.

Q: What are the implications of this study for investors, regulators, and banking companies?

A: This study has several important implications for investors, regulators, and banking companies. Investors need to pay attention to the effectiveness of supervision as an important indicator in assessing the risk of fraud in banking companies. Regulators need to encourage banking companies to increase the effectiveness of supervision through the application of good corporate governance and tighter enforcement of rules. Banking companies need to increase transparency and accountability in financial reporting and strengthen the internal supervision system to prevent fraud.

Q: What are the limitations of this study?

A: This study has several limitations. Firstly, the study only focuses on banking companies listed on the IDX, which may not be representative of all banking companies in Indonesia. Secondly, the study uses secondary data, which may not be comprehensive or accurate. Finally, the study only examines the influence of pressure and opportunity factors on financial reporting fraud, and does not examine the role of rationalization in the fraud triangle.

Q: What are the future research directions based on this study?

A: This study provides several avenues for future research. Firstly, future studies can examine the role of rationalization in the fraud triangle, and how it interacts with pressure and opportunity factors. Secondly, future studies can examine the influence of other factors, such as corporate governance and regulatory environment, on financial reporting fraud. Finally, future studies can examine the effectiveness of supervision in preventing financial reporting fraud in other industries, such as manufacturing and services.

Q: What are the key findings of this study?

A: The key findings of this study are that profitability, leverage, and effectiveness of supervision simultaneously did not have a significant influence on financial reporting fraud (FFR). Partially, profitability and leverage also have no significant influence on FFR, while the effectiveness of supervision has a significant influence on FFR.

Q: What are the implications of these findings for banking companies and regulators?

A: These findings suggest that strong supervision, especially through the active role of independent commissioners, can be an effective prevention tool for fraud in financial reporting. Banking companies and regulators should prioritize the effectiveness of supervision and good corporate governance to prevent financial reporting fraud.

Q: What are the recommendations of this study for investors, regulators, and banking companies?

A: This study recommends that investors pay attention to the effectiveness of supervision as an important indicator in assessing the risk of fraud in banking companies. Regulators should encourage banking companies to increase the effectiveness of supervision through the application of good corporate governance and tighter enforcement of rules. Banking companies should increase transparency and accountability in financial reporting and strengthen the internal supervision system to prevent fraud.

Q: What are the conclusions of this study?

A: This study concludes that the effectiveness of supervision plays an important role in preventing financial reporting fraud in Indonesian banking. Although financial pressure, such as profitability and leverage, does not directly encourage cheating, strong supervision can be a major defense in maintaining financial reporting integrity.