Internal controls and fraud – empirical evidence from oil and gas company

Abstract

Purpose The purpose of this study is to examine the type of internal control weaknesses and its impact that leads to fraud activities in an oil and gas company, which is rarely found in empirical research. Design/methodology/approach A case study approach was taken to investigate and analyse the fraud incidents to the deepest understanding. A mixed method of data collection, specifically document analysis and interviews, was used. Findings The study found that internal control weaknesses can be major contributing factors for fraud to be committed. Poor supervision and improper documentation process provide opportunity to misappropriate the assets, worst off if it includes several people that cooperate to conduct those illegal malpractices. Research limitations/implications The results provide further confirmation of the fraud triangle theory on the causes of the fraud, i.e. opportunity because of weak internal control. It also validates with many prior studies conducted by global professional firms such as KPMG, PricewaterhouseCoopers and Association of Certified Fraud Examiners on fraud and its related causes and implications. This study, however, was conducted on only one company with limited number of interviews. Practical implications This study provides some recommendations to improve weak internal control, which in turn will reduce opportunities of fraud committed in the company. Originality/value This study is original, as it focuses on a company that operates in the highly specialized industry, i.e. oil and gas, which is rare in fraud literature, particularly in developing markets such as Malaysia. It has examined various documents and reports of employee fraud that are generally difficult to be accessed by researchers to be finally published in an academic journal. The findings of this study are inferred from direct access of company documents that are private and confidential.

The Implementation of E-procurement System: Indonesia Evidence

“…However, internal control do not influence to fraud prevention of procurement. This finding is consistent with prior research by [14]. The research result also find that internal audit has a positive impact to fraud prevention.…”

“…Internal control can be described as policies and procedures established to provide reasonable assurance that the specific entity objectives will be achieved [14]. Internal control is expected to ensure integrity, accountability, and transparency in the procurement process.…”

“…Internal control should be suitable and compliance with regulations and policies to combat fraud. In contrast, internal control weakness provides an opportunity to commit fraud [14].…”

Pentingkah Nilai Religiusitas dan Budaya Organisasi untuk Mengurangi Kecurangan?

“…Kesempatan yang muncul ti dak hanya dari tidak adanya budaya antike curangan di organisasi. Pengendalian inter nal yang lemah diketahui juga sebagai faktor yang membuat kecurangan terjadinya kecu rangan (Kabuye, Nkundabanyanga, Opi so, & Nakabuye, 2017;Rendon & Rendon, 2016;Zakaria, Nawawi, & Salin, 2016).…”

The Effect of Internal Control, Individual Morality and Ethical Value on Accounting Fraud Tendency

“…Regarding internal control of accounting fraud, prior studies concluded that internal control system plays a significant role to prevent the actions of fraudulent behavior (Suh, Nicolaides and Trafford, 2019;N'Guilla, Basiruddin, Mohammad & Rasid (2018Nawawi and Salin, 2018;Putri and Irwandi, 2016;Zakaria, Nawawi, & Salin, 2016;Siregar and Tenoyo, 2015;Ionescu,2010). A poorly designed Internal Control System can result in a weak corporate control that creates an opportunity for someone to conduct fraudulent behavior that can harm an agency or institution.…”