The Effect Of Ineffective Monitoring In Detecting Fraudulent Financial Reporting With Family Firm As Moderator

Abdul Manan, Imam Ghozali, Tri Jatmiko Wahyu


Ineffective monitoring is one of the opportunities for fraud to occur. This study aims to determine indications of fraudulent financial reporting due to ineffective monitoring in family companies in Indonesia. The sample used in this study is a company in the manufacturing sector. The independent variables in this study are ineffective monitoring of the independent board of commissioners and institutional ownership. Meanwhile, the dependent variable is financial reporting fraud which is measured using the F Score. The moderating variable used is the family firm as measured by family share ownership and family members on the company's board of directors. The results of the study based on a sample of 310 issuers were that ineffective monitoring of independent commissioners had no effect on fraudulent financial reporting and ineffective monitoring of institutional ownership had a significant negative effect on fraudulent financial reporting. The family firm variable which is proxied by family share ownership is not able to moderate the effect of ineffective monitoring both on the independent board of commissioners and institutional ownership on fraudulent financial reporting. Meanwhile, family firms that are proxied by family members in the composition of the board of directors strengthen the effect of ineffective monitoring on institutional ownership on fraudulent financial reporting. However, family members on the board of directors cannot moderate the relationship of ineffective monitoring of the independent board of commissioners to the manipulation of financial reporting.

Keywords: Ineffective Monitoring, Family company, Financial Reporting Fraud

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