Fraud at Islamic Commercial Banks in Indonesia is Seen in Good Corporate Governance (GCG) and a Whistle-Blowing System

Abstract

This article discusses the dynamics of internal irregularities in Islamic commercial banks in Indonesia. This paper uses secondary data for 2017-2020, published annually by Islamic commercial banks. The sample of this study consisted of 10 Islamic commercial banks, which were determined based on the criteria and the availability of existing data. The data analysis is in the form of panel data regression analysis with the help of eviews and excels applications. This study indicates that partially the proportion of independent commissioners has a significant positive effect on fraud, and the variable number of audit committee meetings and the whistle-blowing system has no significant adverse effect on fraud. While simultaneously, the variable of good corporate governance with indicators of the proportion of independent commissioners, the number of audit committee meetings, and the whistle-blowing system have a significant positive effect on fraud in Islamic commercial banks in Indonesia for the 2017-2020 period.

Whistleblowing System: The Effective Solution to Prevent Financial Accounting Fraud?

“…As a vital instrument, this system directly contributes to enhanced GCG, increasing stakeholders' trust in the company. Research (Siregar et al, 2022) reinforces this view by revealing that whistleblowing is crucial in strengthening GCG. Through effective implementation, this system acts as a reporting mechanism and a first line of defense against corruption and abuse of power.…”

Impact of Whistleblowing System Between the Vousinas Fraud Hexagon Theory and Financial Statement Fraud

“…According to ACFE (2020), businesses that can train their staff in WBS will have far more success in combating fraud within the organization. Without worrying about information being extensively disseminated to the public, managers can tackle internal issues using WBS (Siregar et al, 2022). This benefit can assist management in upholding the company's positive reputation (Nurhidayat & Kusumasari, 2018).…”

“…According to Hanifah and Clyde (2022), this circumstance gives WBS the chance to minimize and reduce the opportunities that fraudsters have. WBS exists in an entity, and fraudsters may also feel the dread effect (Siregar et al, 2022). This result guarantees that every employee contributes to reducing the risk of fraud (Rani et al, 2022).…”