The Effect Of Sharia Compliance, Leverage, And Corporate Governance Mechanisms On Financial Statement Fraud With Information Transparency As A Moderating Variable

Abstract

This study examines the influence of Sharia compliance, leverage, and corporate governance mechanisms on financial statement fraud among firms listed in the Jakarta Islamic Index (JII), with information transparency as a moderating variable. The research adopts a quantitative, causal-associative design using 150 firm-year observations from 2020–2024. Sharia compliance and transparency were measured through the Islamic Social Reporting (ISR) Index, while financial statement fraud was detected using the Beneish M-Score model. Data were analyzed using multiple regression and Moderated Regression Analysis (MRA) with SPSS software. The results indicate that Sharia compliance and corporate governance significantly reduce the likelihood of financial statement fraud, whereas leverage shows no significant effect. Transparency does not statistically moderate the relationships among the main variables, suggesting that disclosure quality in Islamic firms remains largely procedural rather than substantive. The findings extend the Fraud Pentagon Theory by integrating ethical and spiritual dimensions within the Islamic financial reporting context. Practically, the study highlights the need for regulators such as the Financial Services Authority (OJK) and the National Sharia Board (DSN-MUI) to strengthen Sharia-based disclosure frameworks and promote ethical governance practices. This research contributes to the literature on Islamic corporate governance by providing empirical evidence that moral and spiritual compliance serve as effective deterrents to fraudulent financial reporting.