FRAUD PENTAGON MODEL AND CORPORATE REPORTING QUALITY OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study investigates the impact of the Fraud Pentagon Model on corporate reporting quality in quoted Deposit Money Banks (DMBs) in Nigeria. The increasing prevalence of financial statement fraud has undermined investor confidence and highlights the need for enhanced fraud detection frameworks. Building upon the traditional Fraud Triangle and Diamond theories, the Fraud Pentagon incorporates five critical elements: Pressure, Opportunity, Rationalization, Capability, and Arrogance. These factors were empirically examined to determine their influence on discretionary accruals, a proxy for corporate reporting quality. The study employed an ex post facto research design, utilizing secondary data extracted from the published annual reports of 13 listed DMBs over a thirteen-year period (2012–2024). Discretionary accruals were measured using the Modified Jones Model. Panel data regression techniques, including Panel EGLS with cross-sectional weights, were adopted for analysis. The results reveal that Pressure and Rationalization have a significant positive effect on discretionary accruals, indicating their contribution to reduced reporting quality. Opportunity, Capability, and Arrogance, however, showed statistically insignificant effects on discretionary accruals, suggesting that these factors do not strongly influence earnings manipulation in the sampled banks. The study recommends among others such as the reinforcement of internal controls, ethical training, and the integration of forensic accounting techniques. The study contributes to the literature by providing evidence from a developing economy and highlights the need for stronger oversight, effective corporate governance, and continuous auditor vigilance.