Authors:

Lilik Handajani, Saipul Arni Muhsyaf, Ayudia Sokarina

Abstract:

“There are increased corporate mechanisms for detecting fraud cases in financial institutions. This study aimed to investigate the impact of corporate governance and whistleblowing systems (WBS) on fraud disclosure. A multiple regression analysis was performed on 34 public banks listed on the Indonesia Stock Exchange (IDX) from 2016 to 2020. The findings showed that the bank’s corporate governance rating significantly and negatively affects the disclosure of fraud. This implies that a better corporate governance rating increases the bank’s ability to detect fraud. However, the increased violations reported through WBS mechanism did not indicate fraud following the investigation. Another finding showed that the potential for fraud in government-owned and large banks increases due to political intervention and conflicts of interest in business policymaking. Therefore, this study has practical implications for implementing a WBS in fraud violations in the banking sector. Keywords: fraud, corporate governance, whistleblowing system policy”

Keywords

fraud, corporate governance, whistleblowing system policy

Downloads:

Download data is not yet available.

References

  • Abdullahi, R., & Mansor, N. (2018). Fraud Prevention initiatives in the Nigerian Public Sector: Understanding the Relationship of Fraud incidences and the Elements of Fraud Triangle theory. Journal of Financial Crime, 25(2), 527–544. https://doi.org/10.1108/JFC-02-2015-0008
  • ACFE indonesia. (2016). Survai Fraud indonesia 2016. in Auditor Essentials.
  • ACFE indonesia Chapter. (2019). Survai Fraud indonesia 2019. in Association of Certified Fraud Examiners: indonesia Chapter.
  • Akyol, A. C. (2020). Corporate Governance and Fraud. Corporate Fraud Exposed, 2017, 107–125. https://doi.org/10.1108/978-1-78973-417-120201007
  • Andon, P., Free, C., Jidin, R., Monroe, G. S., & Turner, M. J. (2018). the Impact of Financial incentives and Perceptions of Seriousness on Whistleblowing intention. Journal of Business Ethics, 151(1), 165–178. https://doi.org/10.1007/s10551-016-3215-6
  • Association of Certified Fraud Examiners. (2020). Report to the Nations on Occupational Fraud and Abuse: 2020 Global Fraud Study. in Association of Certified Fraud Examiners, inc. https://www.acfe.com/report-to-the-nations/2020/
  • Avortri, C., & Agbanyo, R. (2021). Determinants of Management Fraud in the Banking Sector of Ghana: the Perspective of the Diamond Fraud theory. Journal of Financial Crime, 28(1), 142–155. https://doi.org/10.1108/JFC-06-2020-0102
  • Cordis, A. S., & Lambert, E. M. (2017). Whistleblower Laws and Corporate Fraud: Evidence From the United States. Accounting Forum, 41(4), 289–299. https://doi.org/10.1016/j.accfor.2017.10.003
  • Devilier, N. (2016). Whistleblowing Policy and Corporate Governance Strategy. European Journal of Economic and Management, 3(1), 57–73.
  • Gao, L., & Brink, A. G. (2017). Whistleblowing Studies in Accounting Research: A Review of Experimental Studies on the Determinants of Whistleblowing. Journal of Accounting Literature, 38(May), 1–13. https://doi.org/10.1016/j.acclit.2017.05.001
  • Gay, L. R., Mills, G. E., & Airasian, P. W. (2012). Educational Research: Competencies For Analysis and Applications (Tenth Edit). https://www.ptonline.com/articles/how-to-get-better-mfi-results
  • Hair, J. F., Black, W. C., Babin, B. J., & anderson, R. E. (2010). Multivariat Data Analysis (seventh Ed).
  • Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate Governance and information Technology in Fraud Prevention and Detection: Evidence From the UAE. Managerial Auditing Journal, 31(6–7), 589–628. https://doi.org/10.1108/MAJ-02-2015-1163
  • Handajani, L., Muhsyaf, S. A., & Sokarina, A. (2022). Whistleblowing Disclosure of the Banking Sector. Valid: Jurnal Ilmiah 20 (1), 22–32.
  • Homer, E. M. (2020). Testing the Fraud Triangle: A Systematic Review. Journal of Financial Crime, 27(1), 172–187. https://doi.org/10.1108/JFC-12-2018-0136
  • Huang, H.-W., & Thiruvadi, S. (2004). Audit Committee Characteristics and Restatements. Auditing, 23(1), 69–87. https://doi.org/10.2308/aud.2004.23.1.69
  • Johansson, E., & Carey, P. (2016). Detecting Fraud: the Role of the Anonymous Reporting Channel. Journal of Business Ethics, 139(2), 391–409. https://doi.org/10.1007/s10551-015-2673-6
  • Kaawaase, T. K., Nairuba, C., Akankunda, B., & Bananuka, J. (2021). Corporate Governance, internal Audit Quality and Financial Reporting Quality of Financial institutions. Asian Journal of Accounting Research, 6(3), 348–366. https://doi.org/10.1108/AJAR-11-2020-0117
  • Komite Nasional Kebijakan Governance. (2014). Pedoman Good Corporate Governance Perbankan indonesia. https://knkg.or.id/publikasi/
  • Komite Nasional Kebijakan Governance. (2008). Pedoman Sistem Pelaporan Pelanggaran - SPP (Whistleblowing System - WBS) 2008. http://www.knkg-indonesia.org/dokumen/Pedoman-Pelaporan-Pelanggaran-Whistleblowing-System-WBS.pdf
  • Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings Management and investor Protection: An international Comparison. Journal of Financial Economics, 69(3), 505–527. https://doi.org/10.1016/S0304-405X(03)00121-1
  • Lokanan, M. E. (2019). the Banks and Market Manipulation: A Financial Strain Analysis of the Libor Fraud. in Advances in Public interest Accounting (Vol. 21). https://doi.org/10.1108/S1041-706020190000021004
  • Lou, Y.-I., & Wang, M.-L. (2011). Fraud Risk Factor of the Fraud Triangle Assessing the Likelihood of Fraudulent Financial Reporting. Journal of Business & Economics Research (JBER), 7(2), 61–78. https://doi.org/10.19030/jber.v7i2.2262
  • McNulty, J. E., & Akhigbe, A. (2015). towrad a Better Measure of Bank Corporate Governance. in the Eletronic Library (Vol. 34, Issue 1).
  • Mohd-Sanusi, Z., Rameli, M. N. F., Omar, N., & Ozawa, M. (2015). Governance Mechanisms in the Malaysian Banking Sector: Mitigation of Fraud Occurrence. Asian Journal of Criminology, 10(3),231-249. https://doi.org/10.1007/s11417-015-9211-4
  • Mousavi, M., Zimon, G., Salehi, M., & Stępnicka, N. (2022). the Effect of Corporate Governance Structure on Fraud and Money Laundering. Risks, 10(9), 1–25. https://doi.org/10.3390/risks10090176
  • Okafor, O. N., Adebisi, F. A., Opara, M., & Okafor, C. B. (2020). Deployment of Whistleblowing As An Accountability Mechanism to Curb Corruption and Fraud in A Developing Democracy. Accounting, Auditing and Accountability Journal, 33(6), 1335–1366. https://doi.org/10.1108/AAAJ-12-2018-3780
  • Özcan, A. (2016). Firm Characteristics and Accounting Fraud: A Multivariate Approach. Journal of Accounting, Finance and Auditing Studies, 2(2), 128–144.
  • Rachagan, S., & Kuppusamy, K. (2013). Encouraging Whistle Blowing to Improve Corporate Governance? A Malaysian initiative. Journal of Business Ethics, 115(2), 367–382. https://doi.org/10.1007/s10551-012-1402-7
  • Razali, W. A. A. W. M., & Arshad, R. (2014). Disclosure of Corporate Governance Structure and the Likelihood of Fraudulent Financial Reporting. Procedia - Social and Behavioral Sciences, 145, 243–253. https://doi.org/10.1016/j.sbspro.2014.06.032
  • Salleh, S. M., & Othman, R. (2016). Board of Director’s Attributes As Deterrence to Corporate Fraud. Procedia Economics and Finance, 35(16), 82–91. https://doi.org/10.1016/s2212-5671(16)00012-5
  • Seifert, D. L., Sweeney, J. T., Joireman, J., & Thornton, J. M. (2010). the influence of Organizational Justice on Accountant Whistleblowing. Accounting, Organizations and Society, 35(7), 707–717. https://doi.org/10.1016/j.aos.2010.09.002
  • Shi, W., Aguilera, R., & Wang, K. (2020). State Ownership and Securities Fraud: A Political Governance Perspective. Corporate Governance: An international Review, 28(2), 157–176. https://doi.org/10.1111/corg.12313
  • Shonhadji, N., & Maulidi, A. (2021). the Roles of Whistleblowing System and Fraud Awareness As Financial Statement Fraud Deterrent. international Journal of Ethics and Systems, 37(3), 370–389. https://doi.org/10.1108/IJOES-09-2020-0140
  • Smaili, N., & Arroyo, P. (2019). Categorization of Whistleblowers Using the Whistleblowing Triangle. Journal of Business Ethics, 157(1), 95–117. https://doi.org/10.1007/s10551-017-3663-7
  • Suh, J. B., & Shim, H. S. (2020). the Effect of Ethical Corporate Culture on Anti-Fraud Strategies in South Korean Financial Companies: Mediation of Whistleblowing and A Sectoral Comparison Approach in Depository institutions. international Journal of Law, Crime and Justice, 60(July), 100361. https://doi.org/10.1016/j.ijlcj.2019.100361
  • Swandaru, R., & Muneeza, A. (2022). Can Fraud in Islamic Financial institutions Be Prevented Using High Standards of Shariah Governance? international Journal of Law and Management. https://doi.org/10.1108/IJLMA-07-2022-0162
  • Tan, D. T., Chapple, L., & Walsh, K. D. (2017). Corporate Fraud Culture: Re-Examining the Corporate Governance and Performance Relation. Accounting and Finance, 57(2), 597–620. https://doi.org/10.1111/acfi.12156
  • Trompeter, G., Carpenter, T., Desai, N., Jones, K., & Riley, R. (2013). A Synthesis of Fraud Related Research. Auditing: A Journal of Practice and theory, 32, 287–321.
  • Ţurlea, E., Mocanu, M., & Radu, C. (2010). Corporate Governance in the Banking industry. Accounting and Management information Systems, 9(3), 379–402. http://dictionary.reverso.net/
  • Vousinas, G. (2018). Elaborating on the theory of Fraud. New theoretical Extensions. SSRN Electronic Journal, 1–17. https://doi.org/10.2139/ssrn.3163337
  • Wolfe, D. T., & Hermanson, D. R. (2004). the Fraud Diamond : Considering the Four Elements of Fraud. the CPA Journal, 74(12), 38–42.
  • Yeoh, P. (2014). Whistleblowing: Motivations, Corporate Self-Regulation, and the Law. international Journal of Law and Management, 56(6), 459–474. https://doi.org/10.1108/ijlma-06-2013-0027
  • Yiu, D. W., Wan, W. P., & Xu, Y. (2019). Alternative Governance and Corporate Financial Fraud in Transition Economies: Evidence From China. Journal of Management, 45(7), 2685–2720. https://doi.org/10.1177/0149206318764296

PDF:

https://jurnal.harianregional.com/jiab/full-92850

Published

2023-01-31

How To Cite

HANDAJANI, Lilik; MUHSYAF, Saipul Arni; SOKARINA, Ayudia. The Effectiveness of Corporate Governance and Whistleblowing System on Fraud Disclosure.Jurnal Ilmiah Akuntansi dan Bisnis, [S.l.], v. 18, n. 1, p. 29-42, jan. 2023. ISSN 2303-1018. Available at: https://jurnal.harianregional.com/jiab/id-92850. Date accessed: 28 Aug. 2025. doi:https://doi.org/10.24843/JIAB.2023.v18.i01.p03.

Citation Format

ABNT, APA, BibTeX, CBE, EndNote - EndNote format (Macintosh & Windows), MLA, ProCite - RIS format (Macintosh & Windows), RefWorks, Reference Manager - RIS format (Windows only), Turabian

Issue

Vol 18 No 1 (2023)

Section

Articles

Creative Commons License This work is licensed under a Creative Commons Attribution 4.0 International License