Analysis of Hexagon on Fraudulent Financial Reporting with The Audit Committee and Independent Commissioners as Moderating Variables

Abstract

Purpose: This study aims to analyze the effect of the fraud hexagon factor on fraudulent financial reporting and the role of the audit committee and independent commissioners in moderating this influence relationship. Design/methodology/approach: The population in this study are all mining sector companies listed on the IDX 2016-2019. The sample of this study was 27 companies with 95 units of analysis taken based on the purposive sampling method. This research uses the logistic regression analysis technique. Findings: The result of this study indicates that Financial Stability has a positive and significant effect on Fraudulent Financial Reporting. Meanwhile, Auditor Change, Political Connection, CEO Duality, Nature of Industry, and Change of Directors hurt Fraudulent Financial Reporting. in addition, the audit committee was able to weaken Financial Stability, Political Connections, and the Nature of Industry. The audit committee could not weaken the Change of Auditor, CEO Duality and Change of Directors. Independent Commissioners can weaken Financial Stability, Auditor Change, Political Connections, and Change of Directors. The Independent Commissioner is not able to weaken the CEO of Duality and Nature of Industry. Research limitations/implications: The limitation of this study is that it only uses the audit committee and independent commissioners as proxies and GCG. Originality/value: This study uses the perspective of hexagon theory which is still rare research taking a sample of companies in the mining sector because according to ACFE 2020 it shows that the sector has experienced the largest losses in the world due to fraud. According to the Indonesian Fraud Survey, mining is ranked the third study. This method uses the independent commissioner and an audit committee variable as moderating.