Control Environment and Financial Reporting Reliability in Islamic Philanthropic Organizations: Evidence from Indonesia
##plugins.themes.EpsilonTheme.article.main##
Jasman Jasman*
Alex Winarno
Mahendra Fakhri
The gap between Indonesia’s zakat potential and actual collection underscores the need for greater public trust through enhanced governance. This study addresses the increasing demand for accountability and transparency in zakat management, which highlights the importance of reliable financial information in maintaining stakeholder trust and supporting organizational sustainability. The objective of this study is to examine the influence of the control environment on financial reporting reliability within an Islamic philanthropic organization in Indonesia. Drawing on Agency Theory and the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control Framework, this research investigates how organizational integrity, ethical values, governance structures, accountability mechanisms, and employee competence contribute to financial reporting reliability. A quantitative explanatory approach was employed using survey data collected from 171 employees of Rumah Zakat, one of Indonesia’s leading National Zakat Institutions. The collected data were examined through Partial Least Squares Structural Equation Modeling (PLS-SEM). The results indicate that the control environment has a positive and significant effect on financial reporting reliability, with a path coefficient of 0.668 (t-statistic= 15.926), explaining 44.6% of the variance in financial reporting reliability (R²= 0.446). The analysis points out that organizations characterized by strong ethical cultures, effective oversight, clear authority structures, and competent personnel are more likely to produce accurate, relevant, understandable, and comparable financial information. The implications of this study suggest that strengthening the control environment through enhanced ethical values, governance structures, employee competence, and accountability mechanisms can improve financial reporting reliability and reinforce public trust in Islamic philanthropic organizations.
Adiwibowo, A. S. (2026). A Kaizen–QCDSM–6M diagnostic framework for lean six sigma–based improvement in financial reporting processes. International Journal of Lean Six Sigma, 1–33. https://doi.org/10.1108/ijlss-11-2025-0319
Alqarawee, I. H. A. (2023). The Importance of the COSO oversight framework in improving the internal control structure. International Journal of Research in Finance and Management, 6(1), 263–272. https://doi.org/10.33545/26175754.2023.v6.i1c.218
Chan, K. C., Chen, Y., & Liu, B. (2021). The Linear and Non-Linear Effects of Internal Control and Its Five Components on Corporate Innovation: Evidence from Chinese Firms Using the COSO Framework. European Accounting Review, 30(4). https://doi.org/10.1080/09638180.2020.1776626
COSO. (2013). Internal Control - Integrated Framework. Committee of Sponsoring Organizations. https://www.coso.org/guidance-on-ic
Devi, K., Kartawinata, B. R., Wijayangka, C., & Nugraha, D. W. (2021). Financial Knowledge and Financial Behavior to Financial Satisfaction To The Millennial Generation In The City Of Bandung. In Proceedings of the International Conference on Industrial Engineering and Operations Management. IEOM Society International. https://doi.org/10.46254/an11.20210941
Eulerich, M., Gruene, J., & Wood, D. A. (2024). Achieving Effective Internal Control Over Robotic Process Automation: Integrating RPA Governance with the COSO Internal Control Integrated Framework (ICIF). Committee of Sponsoring Organizations of the Treadway Commission. https://www.studocu.com/es-ar/document/universidad-nacional-de-la-plata/contabilidad-1/achieving-effective-internal-control-over-rpa-aligning-with-coso-framework/162057084?sid=8ba0095c-76be-40db-9169-290d35fd92761787373642
Fadel, A., Wasesa, A., Utami, A., & Nisa, F. (2024). Analisis Minat Pada Mahasiswa Universitas Pembangunan Nasional Veteran Jatim Jurusan Ekonomi Pembangunan Semester 7 Tentang Perencanaan Setelah Lulus. Jurnal Ilmiah Wahana Pendidikan, 10(19), 64–73. https://doi.org/10.5281/zenodo.14038122
Fatimah, I. N., Pamastutiningtyas, T. S., & Anafih, E. S. (2024). Pengaruh Sistem Informasi Akuntansi Dalam Pengambilan Keputusan Manajemen, Efisiensi Operasional Perusahaan, dan Pengendalian Internal Perusahaan. Journal of Sustainability and Science Economics, 2(1), 39–49. https://doi.org/10.62337/jsse.v2i1.13
Fithri D., M. N., Mahfudnurnajamuddin, Semmaila, B., & Nurfadillah, N. (2022). Determinants of Financial Report Reliability: Internal Control System Perspective: An Empirical Study on Takalar District Government. European Journal of Business and Management Research, 7(1), 44–50. https://doi.org/10.24018/ejbmr.2022.7.1.1220
Gadelha, A. L. L., Gouveia, L. B., & Sarmento, A. M. (2022). Essential internal control: evidence from the executive branch of the State of Ceará. Revista de Gestão, 30(1), 32–46. https://doi.org/10.1108/rege-08-2020-0073
Hair, J. F., Hult, G. T. M., Ringle, C. M., & Sarstedt, M. (2022). A Primer on Partial Least Aquares Structural Equation Modeling (PLS-SEM). Sage Publication.
Hendrastuti, R., & Harahap, R. F. (2023). Agency theory: Review of the theory and current research. Jurnal Akuntansi Aktual, 10(1), 85–100. https://doi.org/10.17977/um004v10i12023p085
Henseler, J., Ringle, C. M., & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), 115–135. https://doi.org/10.1007/s11747-014-0403-8
Humaidi, H., Umar, U., Abdullah, M. R., & Khaerunnisa, K. (2022). Comparative Study of Zakat Funds Collection Through Manual Fundraising and Digital Fundraising in Indonesia. Jurnal Ilmiah Ekonomi Islam, 8(1), 347–351. https://doi.org/10.29040/jiei.v8i1.4601
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Judijanto, L., Nurdiani, T. W., Ningsih, T. W., & Ryketeng, M. (2023). The Effect of Regulatory Compliance and Digital Audit Adoption on Auditor Performance and Financial Reporting Accuracy in Indonesia. The ES Accounting And Finance, 2(1), 77–86. https://doi.org/10.58812/esaf.v2i01.154
Junusi, R. El. (2020). COSO-based internal control: efforts towards good university governance. Journal of Islamic Accounting and Finance Research, 2(1), 27–50. https://doi.org/10.21580/jiafr.2020.2.1.4773
Kartawinata, B. R., Fakhri, M., Pradana, M., Hanifan, N. F., & Akbar, A. (2021). The role of financial self-efficacy: Mediating effects of financial literacy & financial inclusion of students in West Java, Indonesia. Journal of Management Information and Decision Sciences, 24(S2), 1–9. https://www.abacademies.org/articles/The-role-of-financial-self-efficacy-mediating-effects-of-financial-literacy-financial-inclusion-of-students-in-West-Java-Indonesia-1532-5806-24-7-304.pdf
Kenton, W. (2026). Understanding Internal Controls: Essentials and Their Importance. Investopedia. https://www.investopedia.com/terms/i/internalcontrols.asp
Lestari, R. P., & Nisa, F. L. (2024). Efektivitas Pengelolaan Zakat oleh Badan Amil Zakat Nasional (BAZNAS) di Indonesia : Periode Tahun 2018-2022. Jurnal Rumpun Manajemen Dan Ekonomi, 1(3), 503–509. https://doi.org/10.61722/jrme.v1i3.1469
Li, X. (2020). The effectiveness of internal control and innovation performance: An intermediary effect based on corporate social responsibility. PLOS ONE, 15(6), e0234506. https://doi.org/10.1371/journal.pone.0234506
Mitakos, A., & Mpogiatzidis, P. (2024). Operational Efficiency of Public Hospitals in Greece During the COVID-19 Pandemic: A Comparative Analysis Using DEA and AHP Models. Journal of Market Access & Health Policy, 12(4), 388–402. https://doi.org/10.3390/jmahp12040030
Nabila, F. S., Fakhri, M., Pradana, M., Kartawinata, B. R., & Silvianita, A. (2023). Measuring financial satisfaction of Indonesian young adults: a SEM-PLS analysis. Journal of Innovation and Entrepreneurship, 12(1), 16. https://doi.org/10.1186/s13731-023-00281-4
Otoo, F. N. K., Nti Adjei, G., Eduah, G. A., & Otoo, E. A. (2026). Measuring the impact of internal control systems on performance of Ghanaian banks: the mediating role of good corporate governance. African Journal of Economic and Management Studies, 1–54. https://doi.org/10.1108/ajems-02-2025-0096
Rahman, S. (2021). Komponen Sistem Pengendalian Internal pada Badan Amil Zakat Nasional (BAZNAS). Islamic Economics and Finance Journal, 1(2), 171–183. https://doi.org/10.55657/iefj.v1i2.57
Ramadhan, M. F. S., & Hapsari, D. W. (2023). Pengaruh Penerapan Standar Akuntansi Pemerintah, Sistem Akuntansi Keuangan Daerah, Sistem Pengendalian Internal, Dan Kompetensi Sumber Daya Manusia Terhadap Kualitas Laporan Keuangan (Studi Pada Satuan Kerja Perangkat Daerah Kabupaten Karawang 2022). EProceedings of Management, 10(4). https://openlibrarypublications.telkomuniversity.ac.id/index.php/management/id/article/view/20807
Scott, W. R. (2015). Financial Accounting Theory. Pearson.
Sem, D. Van, & Hastuti, T. D. (2024). The Impact of Audit Quality, Audit Committe, and Internal Control Systems on Financial Report Quality (IDX Finance Sector). KEUNIS, 12(2), 120–132. https://doi.org/10.32497/keunis.v12i2.5507
Setiawan, I., Hestianisari, & Anjelina, P. (2023). Effect of Internal Control, Accountability, and Transparency of Financial Statements on the Financial Statements Quality (Case Study on Amil Zakat Institute of the Indonesian Zakat Initiative). Journal of Accounting and Finance in Emerging Economies, 9(2), 83–96. https://doi.org/10.26710/jafee.v9i2.2623
Setiyawati, H. (2020). Analysis of Zakat Accounting and the Role of the Internal Control System based on Financial Accounting Standards Guidelines (PSAK 109) Zakat Agency in Indonesia. International Journal of Financial Research, 12(1), 192–204. https://doi.org/10.5430/ijfr.v12n1p192
Tahsaldar, M., Chehade, I., El Nemar, S., Kokkinopoulou, E., & Vrontis, D. (2026). Optimizing internal control systems for effective management: a COSO framework of water governance. Kybernetes, 1–21. https://doi.org/10.1108/k-06-2025-1606
Tang, D., Prasad, R. R., Tang, X., & Wang, J. (2026). Internal control, regulatory quality, multi-dimensional corporate governance and earnings performance – evidence from Fiji’s emerging market. Pacific Accounting Review, 1–35. https://doi.org/10.1108/par-03-2025-0051
Younas, A. (2022). Review of Corporate Governance Theories. European Journal of Business and Management Research, 7(6), 79–83. https://doi.org/10.24018/ejbmr.2022.7.6.1668
