Determinants of Fraudulent Financial Reporting within the Fraud Diamond Framework: Firm Size as a Moderating Variable

Abstract

Fraudulent financial reporting remains a critical issue that undermines the credibility of financial statements and investor trust. This study aims to analyze the influence of the elements in the Fraud Diamond Theory on the tendency of fraudulent financial reporting and to examine the moderating role of firm size in this relationship. Employing a quantitative approach, the research utilizes secondary data obtained from the annual financial reports of 27 infrastructure sector companies listed on the Indonesia Stock Exchange (IDX) from 2021 to 2024. The purposive sampling technique was applied, and the data were analyzed using multiple linear regression and Moderated Regression Analysis (MRA) with EViews 9 software. The results reveal that financial targets and firm size have a significant positive effect on fraudulent financial reporting, while total accruals show a negative effect. Furthermore, firm size significantly moderates the relationship between total accruals and fraudulent financial reporting, but does not moderate other variables. These findings suggest that firm size should be considered in efforts to prevent fraudulent financial reporting, although its moderating influence on the Fraud Diamond factors varies. The results also provide valuable insights for management and regulators in strengthening corporate governance and internal control systems