The role of internal control in fraud prevention and detection

Abstract

An effective internal control system should be able to provide managers with increased accountability for their plans and reasonably ensure that the plans they guide reach the set goals. However, effective systems are not limited to digital systems but also systems that can prevent and detect fraudulent activities. The overall goal of this research is to analyze the impact of internal control systems on fraud detection and prevention. It is necessary to set an appropriate tone at the top, and top management should encourage ethical behaviour in a transparent manner. A risk assessment process needs to be set up, and the risk of fraud can be assessed by brainstorming to deceive the organization. It is necessary to create report and the investigation process. Thus, this work attempted to review and analyze 20 articles among different countries to reveal the importance of internal control system in preventing and detecting fraud in commercial companies. It is discovered that it has a significant role in fraud prevention.

Organizational culture moderates the effect of bystander effect and internal control on accounting fraud trends in village credit institutions in Jembrana Regency

“…The results of this study are in line with research by (Rashid & Abdullah, 2022), (Astuti et al, 2017), (Setyaningsih & Nengzih, 2020) and (Bell & Carcello, 2000) that the internal control system has an important role to prevent the occurrence of fraud so that the effectiveness of internal control has a negative and significant effect on the tendency of accounting fraud.…”

“…The internal control system in a company or organization has an important role to prevent fraud (Rashid & Abdullah, 2022) so the effectiveness of internal control has a negative and significant effect on the tendency of accounting fraud (Astuti et al, 2017). Weak internal control is one of the factors that causes fraud (Setyaningsih & Nengzih, 2020) (Bell & Carcello, 2000).…”

“…Fraud prevention can occur if the company or organization has an adequate internal control system (Rashid & Abdullah, 2022) so that the effectiveness of internal control has a negative and significant effect on the tendency of accounting fraud (Astuti et al, 2017).…”

“…Bystanders may choose to ignore it, fearing for his safety or wanting not to be involved (Darley & Latane, 1968), the internal control system is another variable studied, which is thought to also influence the tendency of accounting fraud. The internal control system in a company or organization has an important role to prevent fraud (Rashid & Chnar Abdullah, 2022). Organizational culture is a habit that is made in an organization as a guide for carrying out activities that are intended for both employees and others.…”

The Influence of the Bystander Effect and Internal Control on the Trend of Accounting Fraud at Village Credit Institutions in Jembrana Regency

“…On the other hand, the results of research by [9], [10], show that the bystander effect does not have a significant effect on the tendency of accounting fraud. The internal control system has an important role to prevent fraud [11]. The results of previous studies indicate that the effectiveness of internal control has a negative and significant effect on the tendency of accounting fraud [12] and weak internal control is one of the factors that causes fraud [13], [14].…”