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

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ach Maulidi ◽  
Jake Ansell

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.

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nanang Shonhadji ◽  
Ach Maulidi

Purpose The purpose of this study is to extend existing theory by developing a contingency theory for the public sector and to provide a landscape for local government to deal with white-collar crime. In recent years, the theme of risk management and internal controls, which is popular in the industry and private sector, has been mirrored by public sector organisations. Of course, it is to improve fraud risk control systems. We have to accept that public sector organisations have a growing need to control the (fraud) risks in a rapidly changing economic environment. Within this situation an effective internal control is becoming strategically important in many organisations, as it is proving to be a cost-efficient way to manage these risks in everyday operations. Here, the authors conducted a case study on the risk management control system at an Indonesian local government. Design/methodology/approach This study uses mixed methods, integrating quantitative and qualitative data – in-depth interviews and questionnaires were required to address the social phenomenon being investigated. Findings This study found that the structure of the control system fits a generic model, in which control systems are fundamental factors to all departments. It shows that control systems can support managers to align employee capabilities, activities and performance with the organisation’s goals and missions. In addition, the authors could identify, risk assessment and monitoring activities are effective measures of controlling organisation’s activities, and potentially could diagnose potential (fraud) risks, deterring to the achievement of organisational aims. Ideally, those aspects should be performed on a continuous basis if organisations want to prevent the spread of numerous potential menaces. In other words, if an organisation fails to carry out risk assessment correctly, it will result in unidentified possibility of fraud risks. The more explicit the risk assessment, the more effective the detection of fraud. Practical implications It can be alternative to consider Committee of Sponsoring Organizations of the Treadway Commission’s internal control as fraud mitigation in local government. Originality/value This study offers new directive discussion about internal controls as notion of fraud mitigation.


2016 ◽  
Vol 31 (1) ◽  
pp. 208 ◽  
Author(s):  
Novita Puspasari ◽  
Eko Suwardi

This paper aims to examine the influence of individual morality and internal controls on individuals’ propensity to commit accounting fraud at the local government level. This is a quasi- experimental research paper. Individual morality and internal controls are hypothesized to be having an interaction with each other in influencing the propensity to commit accounting fraud. Individuals who have low levels of moral principles are hypothesized to have the tendency to commit accounting fraud in the absence of any internal controls. To test this, a 2x2 factorial experiment was conducted involving 57 students from the Masters in Economics Development programme at Gadjah Mada University. The result shows that there is an interaction between individual morality and internal controls. The absence of internal controls does not cause an individual with high moral principles to commit accounting fraud. However, individuals with low morality levels tend to commit accounting fraud when internal controls are absent. Keywords: Accounting Fraud, Morality, Internal Controls, Local Government


2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ach Maulidi ◽  
Jake Ansell

Purpose The purpose of this paper is to provide a warning sign for fraud studies in developing occupational fraud deterrent, and offer possible solution to deal with it. Design/methodology/approach This study was conducted in one of regencies in Indonesia. The authors interviewed nine top managers across local agencies and four senior local government internal auditors. The people involved have formal and informal networks with a regent who has been arrested by Indonesia’s Corruption Eradication Commission, because of white-collar crime syndicates, when running governmental systems. Findings While many approaches to fraud mitigation have been proposed, organisations in practice particularly in the public sector find it hard to implement successful methods to understand, detect and prevent fraud. In practice, this occurs due to simplified assumption on or multiplicity of overlapping fraud concepts. There is also a lack of appreciation of impact of organisational dynamics which facilitates fraud. Behavioural and political issues within an organisation need to be addressed when proposing fraud prevention. The study emphasises that it is too naïve to offer internal control as one-size-fits-all fraud prevention. For practitioners, corrupt behaviour tends to be the most challenging part, compared to other fraud schemes such as asset misappropriation and financial statement fraud. In this paper, the authors urge organisation to adapt a more systematic approach, involving across governmental anti-corruption agencies and civil society actors. This may be facilitated through communication among those parties, including a sound whistleblowing system. Then, organisation also should consider preventive measures that go beyond from administrative or technical internal controls. Originality/value The results may give new directions for designing fraud prevention.


2019 ◽  
Vol 7 (1) ◽  
pp. 77-86
Author(s):  
Hero Priono ◽  
Indrawati Yuhertiana ◽  
Siti Sundari ◽  
Devy Sylvia Puspitasari

Purpose  of  Study: This study aimed to analyse the influence of the financial management of local government on its performance related to internal control and the competence of the apparatus. Methodology: The study population includes all local government managers in 38 cities of East Java provinces and out of 1067 units of local government (offices) only  samples of 81 local government offices are used in this study for analysis. Partial Least Squares and t.test were used to test the hypotheses. Results: It has been found that the competence of personnel directly affect the performance of local governments’ public services, but has no effect indirectly through local financial management, while internal controls affect the performance of local governments’ public services, either directly or indirectly through local financial management.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Karol Król ◽  
Dariusz Zdonek

Purpose The range of official business that can be handled online has grown in the recent decade. In many cases, e-services are a must. At the same time, the economic impact and social importance of mobile technology have increased. Mobile devices are becoming more and more popular, and their applications diversify. It comes as no surprise that mobile users expect e-services and official information to be available through this channel. The purpose of this paper is to identify problems (difficulties) occurring when browsing websites of local government units (LGU) on mobile devices. Design/methodology/approach The comfort of website browsing depends mostly on the development technique, and the way content is published. Responsive websites are much easier to view on mobile devices than “static” ones. The study involves 400 websites of LGU in Poland. The websites were subjected to quantitative and qualitative analyses with selected techniques and computer tools. Findings The set of 400 websites contained 119 (29.75%) that were not responsive. It exhibited a substantial potential for the optimisation of websites for mobile devices. The study revealed the most common usability failures such as distorted images, “scattered icons”, partial responsiveness and bothersome messages in pop-ups. Originality/value The research identified the most widespread problems with the tested websites. The study yielded recommendations for local governments, which may be useful when managing content, upgrading the website or replacing it with a new one.


2018 ◽  
Vol 3 (1) ◽  
pp. 123-138 ◽  
Author(s):  
I Made Pradana Adiputra ◽  
Sidharta Utama ◽  
Hilda Rossieta

Purpose The purpose of this paper is to provide empirical evidence about the influence of the size of local government, the quality of local government financial statements, the level of local government response to the disclosure of financial information and the local political environment on the transparency of local government in Indonesia. Design/methodology/approach The study sample consisted of 34 regional governments (provinces) in Indonesia in 2016, using purposive sampling and multiple regression analysis. Findings The results showed that the quality of financial reporting through the audit opinion and political environment have a significant positive effect on the transparency of local government in Indonesia. On the other hand, the size of the local government and local government response rate on the regulation do not affect the transparency of local government in Indonesia. Originality/value The agency, legitimacy and institutional theory have an important role in the underlying local government transparency practices in Indonesia. The results of this study should be used as the basis of thought and study to determine the factors that affect the performance of local governments from the financial and non-financial aspects.


2017 ◽  
Vol 12 (2) ◽  
Author(s):  
Novtania Mokoginta ◽  
Linda Lambey ◽  
Winston Pontoh

Application of Internal Control System and Regional Financial Accounting System in management of local government financial statements is a very important thing. This financial statements of local governments must meet the following characteristics : relevant, reliable, comparable, and understandable.  The purpose this study to examine the influence of the Internal Control System,Regional Financial Accounting System on the quality of goverment financial statements. The population in this study are all working in BPKAD Bolaang Mongondow Utara.  The sample in this study is the staff / employees of the financial part of the respondents were 30 respondents. The samples were selected by using a purposive samplingmethod. Data was collected by distributing questionnaires to the respondents directly concerned. Technical analysis of the data used is multiple regression with SPSS 22. The result showed that : the Internal Control System has a significant effect on the quality of government financial statements and the Regional Financial Accounting System has a positive significant effect on the quality of goverment financial statements.Keywords : Internal Control system, Regional finsncisl accaounting system, quality of goverment financial statements.


2019 ◽  
Vol 3 (2) ◽  
pp. 170
Author(s):  
Hadi Jauhari ◽  
Evada Dewata

The focus of this research study includes the influence of local government actions, leverage, weaknesses in the internal control system, and audit findings (Republic of Indonesia Supreme Audit Agency) both partially and simultaneously on the implementation performance of provincial governments in Indonesia for the 2015-2016 period. Partially, the size of local government has a positive and significant influence on the performance of local governments. Leverage, weaknesses in the internal control system and findings of the Board of Audit of the Republic of Indonesia do not have a significant effect on the performance of local governments. Simultaneously, the size of local government, leverage, weaknesses of the internal control system, and findings of the Board of Audit of the Republic of Indonesia have a significant influence on the performance of local governments with a contribution of the R square effect of 21.29. %.


2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mary C. Johnsson ◽  
Matthew Pepper ◽  
Oriana Milani Price ◽  
Lauren P. Richardson

Purpose Measurement practices have long been considered vital for informing the management of performance in organisations. Their application to local governments is a more recent, yet multi-decade phenomenon facilitated by New Public Management trends. This paper aims to review the landscape of publications that discuss performance measurement (PM) practices in Australian and New Zealand local government contexts and identify implications for future research. Design/methodology/approach A systematic review methodology was used to identify a shortlist of publications. Next, a rating-based researcher appraisal process was applied. Multiple iterations of search and appraisal were conducted to form the basis for inductive thematic analysis and synthesis. Findings Analysing 65 PM publications, two interrelated themes, namely, discourses of performance as efficiency, accountability or strategic growth and change were identified, which influence the adoption of local PM tools and frameworks. As demands for strategic growth and more complex service delivery increase, strategic and localised adaptation of PMs may be required to integrate learning and communicative competencies with technical and operational capabilities. Research limitations/implications The systematic review methodology has been applied to address some of the limitations of publication and reporting biases in literature. This research provides a starting point for future investigations and broadening of discourse in local government contexts. Originality/value This paper represents the first systematic review of 1995–2020 publications on performance management practices used by local governments in Australia and New Zealand.


2019 ◽  
Vol 34 (5) ◽  
pp. 606-626 ◽  
Author(s):  
Mark J. Nigrini

Purpose This study aims to classify the numbers used in recent financial statement, corruption and asset misappropriation fraud schemes in such a way that these classes can be used to design effective proactive analytics-based fraud detection tests. Design/methodology/approach The data sources for the classification scheme include the court records of fraud prosecutions, investigative reports and research papers related to fraud cases. Findings Fraudulent numbers are most often amounts that are round, have a strong period-over-period growth, are just above or below internal control thresholds or other targets, are deviations from Benford’s Law, are purposeful duplicates of authentic transactions, are outliers due to being excessively large and are excessively rounded up or down. The study includes several examples of fraudulent numbers. Research limitations/implications The fraudulent number types are based on a sample of fraud-related court documents, and the sample might not be representative of the population of detected and undetected frauds. Further research is needed into the detection of corruption/bribery schemes. Practical implications The results are important for auditors and forensic accountants running proactive fraud detection tests. The discussions emphasize that the analysis should include refining and rerunning the tests, and then using groupings and filtering to deal with false positives. The importance of an effective audit of the notable transactions is stressed in the concluding section. Originality/value The study is an original in-depth coverage of the patterns found in fraudulent numbers. The discussion sections review implementation issues and considerations for future research.


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