Can Good Corporate Governance Moderates The Influence of Internal Control and Integrity towards Fraud Prevention?

Syifa Nurul Maulani; Putri Syifa Amalia; M. Nur A. Birton

doi:10.21070/jas.v8i1.1731

(1) * Syifa Nurul Maulani Institut Agama Islam Tazkia
Indonesia
(2) Putri Syifa Amalia Institut Agama Islam Tazkia
Indonesia
(3) M. Nur A. Birton Universitas Muhammadiyah Jakarta
Indonesia
(*) Corresponding Author

DOI: https://doi.org/10.21070/jas.v8i1.1731

Abstract

General Background: The prevalence of fraud in financial institutions, notably within Islamic banking, poses significant challenges due to the unique regulatory and ethical frameworks these institutions operate under. Specific Background: Despite Islamic banks employing distinct mechanisms, such as the three lines of defence for fraud prevention, incidents still occur, underscoring the necessity for effective internal controls and auditor integrity. Knowledge Gap: Current literature predominantly examines conventional banks, leaving a gap in understanding the factors influencing fraud prevention in Islamic banks, particularly the role of Good Corporate Governance (GCG) as a moderating factor. Aims: This study aims to empirically assess how internal controls and auditor integrity impact fraud prevention in Islamic banks and evaluate the moderating effect of GCG. Results: The study finds that internal control significantly enhances fraud prevention, while auditor integrity, though positively related, does not significantly affect fraud prevention. Moreover, GCG does not significantly moderate the relationship between internal controls or auditor integrity and fraud prevention. Novelty: This research contributes to agency theory by exploring the dynamics of agency relationships in Islamic banking and offers insights into the complex interplay between internal controls, auditor integrity, and governance structures. Implications: The findings highlight the critical need for robust internal control mechanisms and emphasize the importance of auditor integrity in fraud prevention efforts. They also suggest that relying solely on GCG may not optimize fraud prevention, indicating a need for comprehensive strategies involving all organizational levels.

Downloads

Download data is not yet available.

Metrics

Metrics Loading ...

References

ACFE. (2020). Report To the Nations 2018 Global Study on Occupational Fraud and Abuse.

ACFE Indonesia. (2019). Survei Fraud Indonesia 2019. Indonesia Chapter #111, 53(9), 1–76. https://acfe-indonesia.or.id/survei-fraud-indonesia/

Albrecht, W. S., Albrecht, C. O., Albrecht, C. C., & Zimbelman, M. F. (2012). Fraud Examination. In South-Western Cengage Learning (4th ed.). South-Western Cengage Learning. https://doi.org/10.1017/CBO9781107415324.004

Ambarwati, A. (Universitas H. (2019). Perilaku Dan Teori Organisasi (Issue April 2018). http://himia.umj.ac.id/wp-content/uploads/2020/04/PerilakuDanTeoriOrganisasi.pdf

Anggraini, D. T., & Aziza, N. A. (2022). Dapatkah Religiusitas Islami Memoderasi Pengaruh Sifat Machiavellian dan Pengetahuan Akuntansi terhadap Persepsi Praktik Creative Accounting? Jurnal Akuntansi Dan Governance, 2(2), 76. https://doi.org/10.24853/jago.2.2.76-93

Apriliani Astuti, M., Dewi Y Rozali, R., & Cakhyaneu, A. (2019). Prevention of Fraud in Sharia Banking in Indonesia through Implementation of Sharia Corporate Governance. KnE Social Sciences, 3(13), 183. https://doi.org/10.18502/kss.v3i13.4205

Az-Zahra, R. S. A., Jaelani, A., & Nursi, M. (2021). Pengaruh Pengendalian Internal Dan Integritas Karyawan Terhadap Pencegahan Kecurangan (Fraud) Pada PT. Bank KEB Hana Indonesia Wilayah Jakarta. ADI Bisnis Digital Interdisiplin Jurnal, 2(2), 38–44. https://doi.org/10.34306/abdi.v2i2.555

Badara, M. S. (2017). The Relevant of Contingency Theory and Stewardship Theory on the Internal Audit Research. Journal of World Economic Research, 6(2), 17. https://doi.org/10.11648/j.jwer.20170602.11

Peraturan Bank Indonesia, 5 5 Pelaksanaan Good Corporate Governannce Bagi Bank Umum Syariah dan Unit Usaha 12 (2009). http://downloads.esri.com/archydro/archydro/Doc/Overview of Arc Hydro terrain preprocessing workflows.pdf%0Ahttps://doi.org/10.1016/j.jhydrol.2017.11.003%0Ahttp://sites.tufts.edu/gis/files/2013/11/Watershed-and-Drainage-Delineation-by-Pour-Point.pdf%0Awww

Birton, M. N. A., Ermawati, A., Ektinahati, E., & Muttaqin, M. (2023). Disclosure of Internal Audit Functions of Islamic Banks in Indonesia. Journal of Accounting and Investment, 24(1), 237–251. https://doi.org/10.18196/jai.v24i1.16388

Cahyadi, M. F., & Sujana, E. (2020). Pengaruh Religiusitas , Integritas , dan Penegakan Peraturan Terhadap Fraud pada Pengelolaan Keuangan Desa. 10(2), 136–145.

Chambers, A. D., & Odar, M. (2015). A new vision for internal audit. Managerial Auditing Journal, 30(1), 34–55. https://doi.org/10.1108/MAJ-08-2014-1073

Firmansyah, I. (2021). Pengaruh Audit Internal dan Pengendalian Intenral terhadap Pencegahan Kecurangan (Fraud) di PT Perkebunan Nusantara VIII. Land Journal, 1(2), 138–148. https://doi.org/10.47491/landjournal.v1i2.705

Ghozali, I. (2011). Aplikasi Analisis Multivariate dengan Program IBM SPSS 19 (V). Badan Penerbit Universitas Diponegoro.

Glenardy, Romi, M., Ricky, & Wulandari, B. (2022). Pengaruh Audit Internal, Pengendalian Internal, Kualitas Audit, Good Corporate Governance, Terhadap Pencegahan Kecurangan (Fraud) Pada Bank Bca Area Medan. Jurnal Ilmiah Mahasiswa Akuntansi, 13(1), 2614–1930.

Hajat, S., & Prasetya, E. K. A. R. (2021). Pengaruh Peranan Audit Internal dan Pengendalian Internal terhadap Pencegahan Fraud. 2(2), 230–243.

Haladu, D. A. (2018). Fraud Detection and Internal Control Measures in Deposit Money Banks Listed on the NSE. International Journal of Science and Management Studies (IJSMS), December, 43–54. https://doi.org/10.51386/25815946/ijsms-v1i4p106

Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate governance and information technology in fraud prevention and detection: Evidence from the UAE. Managerial Auditing Journal, 31(6–7), 589–628. https://doi.org/10.1108/MAJ-02-2015-1163

Husaeni, U. A., & Jayengsari, R. (2020a). Implementation of Corporate Governance in Fraud Prevention in Islamic Banking. Jurnal IUS Kajian Hukum Dan Keadilan, 8(3), 453. https://doi.org/10.29303/ius.v8i3.812

Husaeni, U. A., & Jayengsari, R. (2020b). Jurnal IUS Kajian Hukum dan Keadilan Fraud Prevention in Islamic Banking. 62(30), 453–471.

IIA. (2020). the Iia’S Three Lines Model. 1–10.

Ionela, C.-C. (2013). How to Prevent Fraud. Accountants Today, August, 56–58. http://www.mia.org.my/at/at/2013/08/MIA_accountants_today_JUL_AUG_2013.pdf

IPPF. (2015). Code of Ethics Implementation Guide. 1–16.

Irawanto, D. W. (2018). Does Culture Matter in Fraud Prevention Behavior? National Culture Based Study of Indonesian Bankers. Jurnal Keuangan Dan Perbankan, 22(3), 486–495. https://doi.org/10.26905/jkdp.v22i3.2139

Isniawati, A., Salsabella, A., & Heningtyas, O. S. (2022). Analisis Sistem Pengendalian Internal dan Good Corporate Governance dalam Mencegah Kecurangan dengan Moderasi Moralitas Individu. Financial: Jurnal Akuntansi, 8, 50–57.

Jalil, F. Y. (2018). Internal Control, Anti-Fraud Awareness, and Prevention of Fraud. Etikonomi, 17(2), 297–306. https://doi.org/10.15408/etk.v17i2.7473

Jefri, R. (2018). Teori stewardship dan good governance. Jurnal Riset Edisi XXVI, 4(3), 14–28.

Jensen, M. C., & Meckling, W. H. (1976). Theory of The Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 3, 72(10), 305–360. https://doi.org/10.1177/0018726718812602

Juariah, S., Akbar, D. A., & Titin Hartini. (2021). Peran Kinerja Keuangan dalam Memediasi Islamic Corporate Governance terhadap Fraud. Jurnal Ilmiah Indonesia, 6(1), 6.

Kabuye, F., Nkundabanyanga, S. K., Opiso, J., & Nakabuye, Z. (2017). Internal audit organisational status, competencies, activities and fraud management in the financial services sector. Managerial Auditing Journal, 32(9), 924–944. https://doi.org/10.1108/MAJ-09-2016-1452

Kawugana, A., & Faruna, F. S. (2018). Fraud prevention in the Nigerian banking industry. IIARD International Journal of Banking and Finance Research, 4(1), 32–48. www.iiardpub.org

Kurniawan, P. C., & Izzaty, K. N. (2019). Pengaruh Good Corporate Governance Dan Pengendalian Internal Terhadap Pencegahan Fraud. ECONBANK: Journal of Economics and Banking, 1(1), 55–60. https://doi.org/10.35829/econbank.v1i1.2

Kusmayadi, D., Tasikmalaya, U. S., Badruzaman, J., & Tasikmalaya, U. S. (2019). Good corporate governance. May.

Maulida, W. Y., & Bayunitri, B. I. (2021). The influence of whistleblowing system toward fraud prevention. International Journal of Financial, Accounting, and Management, 2(4), 275–294. https://doi.org/10.35912/ijfam.v2i4.177

Meliana, M., & Hartono, T. R. (2019). Fraud Perbankan Indonesia: Studi Eksplorasi. Prosiding Seminar Nasional Pakar Ke 2, 2, 1–7.

Muhsyaf, S. A., Cahyaningtyas, S. R., & Sasanti, E. E. (2021). Three Line of Defense: An Effective Risk Management. Proceedings of the 18th International Symposium on Management (INSYMA 2021), 180(July). https://doi.org/10.2991/aebmr.k.210628.015

Najib, H., & Rini, R. (2019). Sharia Compliance, Islamic Corporate Governance Dan Fraud Pada Bank Syariah. Jurnal Akuntansi Dan Keuangan Islam, 4(2), 131–146. https://doi.org/10.35836/jakis.v4i2.23

Ngumar, S., Fidiana, F., & Retnani, E. D. (2019). Implications of Islamic Governance on Islamic Bank Fraud. Jurnal Reviu Akuntansi Dan Keuangan, 9(2), 226. https://doi.org/10.22219/jrak.v9i2.8735

Otoritas Jasa Keuangan. (2019). Peraturan Otoritas Jasa Keuangan Republik Indonesia Nomor 39/POJK.03/2019 tentang Penerapan Strategi Anti Fraud Bagi Bank Umum. 2. https://www.ojk.go.id/id/regulasi/Pages/Penerapan-Strategi-Anti-Fraud-Bagi-Bank-Umum.aspx

Pamungkas, I. D., Ghozali, I., Achmad, T., Khadafi, M., & Hidayah, R. (2018). Corporate Governance Mechanism in Preventing Accounting Fraud: A Study of Fraud Pentagon Model. Journal of Applied Economic Sciences, XIII(4).

Rochmawati, N. E., Tarjo, & Musyrofah, S. (2020). The Implementation of Good Corporate Governance and Efforts To Prevent Fraud in Banking Companies. Jurnal Reviu Akuntansi Dan Keuangan, 10(1), 136–149. https://doi.org/10.22219/jrak.v10i1.10268

Rohmatin, B. L., Apriyanto, G., & Zuhroh, D. (2021). The Role of Good Corporate Governance to Fraud Prevention: An analysis based on the Fraud Pentagon. Jurnal Keuangan Dan Perbankan, 25(2). https://doi.org/10.26905/jkdp.v25i2.5554

Rosmi, R., & Syamsir, S. (2020). The Importance of Integrity Values as Corruption Prevention Measures. Test Engineering & Management, 83(1), 12043–12054.

Samra, E. (2016). Corporate governance in islamic financial institutions. Journal of Governance and Regulation, 9(2), 75–82. https://doi.org/10.22495/jgrv9i2art5

Santiadji, M., Kartini, Darwis, & Syamsuddin. (2021). The Effect of Internal Control and Individual Morality on Fraud Prevention in PT. Regional Development Bank of Southeast Sulawesi. RJOAS 1 (109), 1(January), 36–42.

Soleman, R. (2013). Pengaruh pengendalian internal dan good corporate governance terhadap pen cegahan fraud. Jurnal Akuntansi & Auditing Indonesia, 17(1), 57–74. https://doi.org/10.20885/jaai.vol17.iss1.art5

Sow, A. N., Basiruddin, R., Mohammad, J., & Abdul Rasid, S. Z. (2018). Fraud prevention in Malaysian small and medium enterprises (SMEs). Journal of Financial Crime, 25(2), 499–517. https://doi.org/10.1108/JFC-05-2017-0049

Ugwu, J. I., & Ochuba, U. L. (2021). Internal Control: A Tool for Fraud Control in Deposit Money Banks in Nigeria. European Journal of Business and Management, August. https://doi.org/10.7176/ejbm/13-13-07

Wulandari, D. N., & Nuryanto, M. (2018). Pengaruh Pengendalian Internal, Kesadaran Anti-Fraud, Integritas, Independensi, dan Profesionalisme Terhadap Pencegahan Kecurangan. Jurnal Riset Akuntansi Mercu Buana, 4(2), 117. https://doi.org/10.26486/jramb.v4i2.557

Yuniarti, R. D. (2017). The effect of internal control and anti-fraud awareness on fraud prevention (A survey on inter-governmental organizations). Journal of Economics, Business & Accountancy Ventura, 20(1), 71. https://doi.org/10.14414/jebav.v20i1.626

Zelmiyanti, R., & Anita, L. (2015). Budaya Organisasi Terhadap Pencegahan Fraud. Jurnal Akuntansi Multiparadigma, 8(november), 67–76.