Abstract
This research evaluates the effect of strengthening government internal audit’s (APIP) roles on reducing state budget loss in Indonesia. Since 2014, the role of internal audit as a provider of objective quality assurance is strengthened by adding comprehensive consulting activities that are inherent in each cycle of state budget process to make sure that there are no irregularities on managing the stage budget. By using the difference-in-differences (DID) approach, this study analyzes state budget loss data obtained from the Audit Board of Republic of Indonesia (BPK) in 492 cities/districts during 2009-2018. The results show that strengthening internal audit’s roles decreased state budget losses in the regions that have a relatively high capital expenditure by 0.435% and it is significant at 1% level. This finding shows the positive effect of adding a consulting role to government internal audit on reducing the state budget losses in Indonesia.
Highlights
Internal audit is a control mechanism for public sector organizations towards good governance (Sawyer, 2005; Cohen & Sayag 2010; Wibisono, 2010; Florea 2013)
Even though the value of the losses caused is quite large and material, this study aims to identify the impact of implementing policies to strengthen the role of internal audit in reducing the total value of state losses in Indonesia
Robustness check which aims to see the consistency of the equation regression and equation testing to see the impact of strengthening the role of internal audit on state losses
Summary
Internal audit is a control mechanism for public sector organizations towards good governance (Sawyer, 2005; Cohen & Sayag 2010; Wibisono, 2010; Florea 2013). The accounting fraud occurred because of the space for opportunistic behavior of state financial managers, the misalignment of goals between the community and the government, the opportunity and limited supervision from the public caused by asymmetric information (Eisenhardt, 1989; Richardson, 1998; Scott 2000; Andvig et al, 2001; Dorminey et al, 2012). Whilst in Indonesia during 2018, the financial management losses of local governments reached IDR 1.3 trillion and there were at least 6,259 cases of noncompliance with the laws and regulations (BPK, 2019)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
