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

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.