International Journal of Accounting, Finance and Risk Management

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The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting

Received: Oct. 17, 2023    Accepted: Nov. 21, 2023    Published: Nov. 29, 2023
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Abstract

This research explores the impact of audit committee characteristics on potential fraudulent financial reporting, focusing on independence, financial expertise, and tenure. The study utilizes the Beneish M-score index to identify fraudulent financial reporting in manufacturing firms listed on the Indonesia Stock Exchange (IDX) between 2018 and 2021, employing purposive sampling for sample selection. The analysis employs Partial Least Squares (PLS) statistical tools. The results of the study reveal that both independence and tenure of the audit committee significantly influence the occurrence of financial reporting fraud. However, financial expertise within the audit committee does not exhibit a significant impact on fraudulent financial reporting. These findings underscore the importance of an independent audit committee and its tenure in safeguarding against fraudulent financial reporting. Investors are advised to carefully examine the presence of an independent audit committee when assessing potential investments. The research suggests that a robust audit committee, characterized by independence and a longer tenure, plays a pivotal role in mitigating the risks associated with financial reporting fraud. Furthermore, the study recommends a periodic reassessment of corporate governance practices as a prudent step before making investment decisions in a company. This research contributes valuable insights to the ongoing discourse on corporate governance and financial reporting integrity in the context of manufacturing firms on the IDX.

DOI 10.11648/j.ijafrm.20230804.14
Published in International Journal of Accounting, Finance and Risk Management ( Volume 8, Issue 4, December 2023 )
Page(s) 113-122
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Fraudulent Financial Reporting, Independent Audit Committee, Financial Expertise, Tenure of the Audit Committee

References
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  • APA Style

    Trisanti, T. (2023). The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting. International Journal of Accounting, Finance and Risk Management, 8(4), 113-122. https://doi.org/10.11648/j.ijafrm.20230804.14

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    ACS Style

    Trisanti, T. The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting. Int. J. Account. Finance Risk Manag. 2023, 8(4), 113-122. doi: 10.11648/j.ijafrm.20230804.14

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    AMA Style

    Trisanti T. The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting. Int J Account Finance Risk Manag. 2023;8(4):113-122. doi: 10.11648/j.ijafrm.20230804.14

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  • @article{10.11648/j.ijafrm.20230804.14,
      author = {Theresia Trisanti},
      title = {The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {8},
      number = {4},
      pages = {113-122},
      doi = {10.11648/j.ijafrm.20230804.14},
      url = {https://doi.org/10.11648/j.ijafrm.20230804.14},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijafrm.20230804.14},
      abstract = {This research explores the impact of audit committee characteristics on potential fraudulent financial reporting, focusing on independence, financial expertise, and tenure. The study utilizes the Beneish M-score index to identify fraudulent financial reporting in manufacturing firms listed on the Indonesia Stock Exchange (IDX) between 2018 and 2021, employing purposive sampling for sample selection. The analysis employs Partial Least Squares (PLS) statistical tools. The results of the study reveal that both independence and tenure of the audit committee significantly influence the occurrence of financial reporting fraud. However, financial expertise within the audit committee does not exhibit a significant impact on fraudulent financial reporting. These findings underscore the importance of an independent audit committee and its tenure in safeguarding against fraudulent financial reporting. Investors are advised to carefully examine the presence of an independent audit committee when assessing potential investments. The research suggests that a robust audit committee, characterized by independence and a longer tenure, plays a pivotal role in mitigating the risks associated with financial reporting fraud. Furthermore, the study recommends a periodic reassessment of corporate governance practices as a prudent step before making investment decisions in a company. This research contributes valuable insights to the ongoing discourse on corporate governance and financial reporting integrity in the context of manufacturing firms on the IDX.
    },
     year = {2023}
    }
    

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    T1  - The Influence of the Audit Committee Characteristics on Fraudulent Financial Reporting
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    Y1  - 2023/11/29
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    DO  - 10.11648/j.ijafrm.20230804.14
    T2  - International Journal of Accounting, Finance and Risk Management
    JF  - International Journal of Accounting, Finance and Risk Management
    JO  - International Journal of Accounting, Finance and Risk Management
    SP  - 113
    EP  - 122
    PB  - Science Publishing Group
    SN  - 2578-9376
    UR  - https://doi.org/10.11648/j.ijafrm.20230804.14
    AB  - This research explores the impact of audit committee characteristics on potential fraudulent financial reporting, focusing on independence, financial expertise, and tenure. The study utilizes the Beneish M-score index to identify fraudulent financial reporting in manufacturing firms listed on the Indonesia Stock Exchange (IDX) between 2018 and 2021, employing purposive sampling for sample selection. The analysis employs Partial Least Squares (PLS) statistical tools. The results of the study reveal that both independence and tenure of the audit committee significantly influence the occurrence of financial reporting fraud. However, financial expertise within the audit committee does not exhibit a significant impact on fraudulent financial reporting. These findings underscore the importance of an independent audit committee and its tenure in safeguarding against fraudulent financial reporting. Investors are advised to carefully examine the presence of an independent audit committee when assessing potential investments. The research suggests that a robust audit committee, characterized by independence and a longer tenure, plays a pivotal role in mitigating the risks associated with financial reporting fraud. Furthermore, the study recommends a periodic reassessment of corporate governance practices as a prudent step before making investment decisions in a company. This research contributes valuable insights to the ongoing discourse on corporate governance and financial reporting integrity in the context of manufacturing firms on the IDX.
    
    VL  - 8
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Author Information
  • Department Accounting, Stie Ykpn, Sekolah Tinggi Ilmu Ekonomi YKPN, Yogyakarta, Indonesia

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