Governance and Financial Statement Fraud: Evidence from Indonesia Listed Banking

The purpose of this study is to obtain empirical evidence regarding the effectiveness of audit committees and the quality of external auditors on the possibility of fraudulent financial statements. The population in this study are banking companies listed on the Indonesia Stock Exchange. The method used in this study is a quantitative method using secondary data which is measured using ratios and statistical processing. The research results show that the audit committee effectiveness variable partially does not significantly influence the possibility of fraudulent financial reporting. The reason underlying the results of this study is that the independence contained in the audit committee has not contributed to avoiding the likelihood of fraudulent financial reporting in a company. External auditor quality does not significantly influence the possibility of fraudulent financial reporting. This is because most companies use the services of non-Big Four Audit Firms to audit their financial statements. Simultaneously, it can be stated that the effectiveness of the audit committee and the quality of the external auditors significantly influence the possibility of fraudulent financial reporting. It is also concluded that the predicting power of the model is high.