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All Journal Agregat: Jurnal Ekonomi dan Bisnis
Muhammad Roihan Nursyifa
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Economics, Econometrics & Finance

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Fraud Heptagon and Fraudulent Financial Reporting: The Moderating Role of Internal Control Atta Putra Harjanto; Muhammad Roihan Nursyifa
Agregat: Jurnal Ekonomi dan Bisnis Vol. 10 No. 2 (2026)
Publisher : Universitas Muhammadiyah Prof. DR HAMKA.

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.22236/agregat_vol10.i2/23804

Abstract

This study examines the effect of the seven elements of the Fraud Heptagon model (pressure, opportunity, rationalization, capability, arrogance, ignorance, and greed) on fraudulent financial reporting, with the Internal Control System (ICS) as a moderating variable. The sample was selected using purposive sampling, comprising 37 manufacturing companies listed on the Indonesia Stock Exchange (IDX) over the period 2019–2025 (259 company-year observations). Hypotheses were tested using fixed-effects panel regression with cluster-robust standard errors. Six elements (pressure, opportunity, rationalization, arrogance, ignorance, and greed) significantly influence fraudulent financial reporting, albeit with varying directional effects. Only capability exhibits a non-significant effect. Furthermore, the ICS exerts a direct negative effect on financial reporting fraud and consistently moderates the relationship between all seven heptagon elements and fraudulent reporting. These findings demonstrate that an effective ICS genuinely suppresses fraudulent practices rather than operating as a mere compliance formality, confirming the Fraud Heptagon as a highly relevant framework for fraud detection in manufacturing firms
Co-Authors Atta Putra Harjanto