Corruption as distinct crime: the need to reconceptualise internal control on controlling bureaucratic occupational fraud

Abstract

Purpose The purpose of this study is to provide theoretical guidance that enables local governments to deal with occupational fraud. Design/methodology/approach The quantitative approach is used to examine the efficacy of the Committee of Sponsoring Organisations of the Treadway Commission (COSO) internal control framework in tackling occupational fraud in local government. To achieve the goals, the authors performed a survey of the Indonesian auditor institutions. Findings It is not appropriate to argue that all types of local government fraud can be deterred by a single internal control. The study suggests that COSO internal controls are not effective for dealing with corruption cases. However, the authors do find the efficacy of those controls are obvious for controlling asset misappropriation and financial statement fraud. This result indicates that if the COSO internal control framework is only designed for routine financial control and asset protection, it significantly and negatively influences its efficacy to deal with occupational fraud. This study has both theoretical and managerial implications, discussed separately. Originality/value In the field of prevention, the authors cannot make generalised theories and approaches for dealing with occupational fraud. Whilst previous authors have offered fraud deterrents in terms of internal controls, they have failed to realise the need to understand their effectiveness for particular forms of fraud. This paper sheds light on the effectiveness of internal controls in achieving their goals. This has both practical applications and stimulates theoretical insights.

Corruption and Fraudulent Activities in Higher Education: A Study of Literature

“…Universities also have to generate funds, giving institutions excellent administration and autonomy. Weaknesses in internal control (Maulidi & Ansell, 2022), settled regulatory norms, and neoliberal policies have created a substantial extra-legal area for appropriation and influence.…”

Faktor-faktor Yang Dapat Mencegah Kecenderungan Kecurangan Akuntansi

“…Penyimpanan fisik properti, akses ke catatan akuntansi, dan pengetahuan atau wewenang untuk menolak kontrol adalah konten utama penipuan dalam buku besar dan laporan keuangan (Setiawan, 2018). Mengingat besarnya skandal yang terjadi di perusahaan besar, beberapa orang berpendapat bahwa pengendalian internal yang efektif menjadi penting secara strategis di banyak organisasi karena terbukti menjadi cara yang hemat biaya untuk mengelola risiko penipuan dalam operasi sehari-hari (Maulidi & Ansell, 2022). Sebuah perusahaan harus memiliki pengendalian internal yang efektif untuk mencegah penipuan yang dapat menyebabkan kerugian besar (Setyaningsih & Nengzih, 2020) Pengendalian internal merupakan faktor yang memiliki peranan penting dalam mengawasi semua kegiatan bisnis dalam suatu instansi atau perusahaan, dengan dilakukannya pengendalian internal, semua aktivitas dalam organisasi dapat berjalan secara sistematis dan patuh terhadap peraturan yang berlaku, termasuk dalam upaya mencegah terjadinya kecurangan.…”

An Analysis of Auditors’ Characteristic and Non-Characteristic Components on Detecting The Fraudulent Occurrences in Public Sectors

“…Financial statement fraud that is deliberately committed by managers or employees by not reporting actual financial statement information, for example fictitious income, expenses reported too low. Financial statement fraud is a contributing factor to the recent crisis and poses a threat to efficiency, liquidity, and security in the capital market (Maulidi and Ansell 2022). As an example of the impact of financial statement fraud, the enforcement of judiciary department had brought in the cases of 343 criminals and 189 defendants, for their fraudulent activities costing more than 120,000 victims or more than $8 billion at the end of the year in America.…”

“…Some studies highlighted that the practice of fraud does not only occur in the corporate world but also in the public sector (Maulidi and Ansell 2022). In this sense, the existence and role of external auditors is very important in detecting existing fraud.…”

“…It can be argued that this type of auditor is required to have a sufficient understanding of fraud and develop an understanding of how to detect indications of fraud that arise early. Ironically the contribution of the level of findings of external auditors is lower than the findings of internal auditors (Maulidi and Ansell 2022). Then, this is an interesting topic to be re-examined in Indonesia by testing and knowing the factors that influence the success of detecting financial statement fraud carried out by external auditors using different samples and cases.…”