Abstract
This research wants to find out how far internal control, organization culture and the quality of accounting information system will help the small-medium enterprises (SMEs) to prevent fraud. by applying the case study approach in achieving its aims and objectives. This study is done by a used case study from SMEs in the agriculture industry in Lampung province, Indonesia. The data were collected through observations and semi-structured interviews with employed and managerial staff. This research applied a mixed method in collecting and analyzing data, which were document analyses and interviews. Applying more than a single method in collecting data enables the researcher to compare and to verify the information accuracy (Brewer and Hunter 2006). This method can increase the credibility and validity of the findings because the final bias will depend on one method which later can be avoided (Yin 2012). This type of research is quantitative descriptive research. The purpose of this descriptive research is to provide a descriptive, systematic, factual and accurate description of the facts, properties, and relationships between the phenomena investigated. All data that will be used in this study is sourced from the results of respondents' answers to the questionnaire given to employees at PT. XYZ as many as 70 respondents with the unit of analysis are part of Business Control, Human Capital, Finance, Marketing, and Operations. The sampling technique that uses saturated sampling, which is a sampling technique where all members of the population will be used as samples. The results of the study show that some weaknesses of the internal controls have been identified as one of the factors of fraud. The results show that Internal Control Organizational Culture and Quality of Information Accounting have a positive significant effect to prevent fraud.
Highlights
Fraedrich, Ferrell, and Ferrell (2017) generally define fraud as any purposeful action that deceives, manipulates, or conceals facts to create a false impression)
According to the ACFE (Association of Certified Fraud Examiners), fraud can be classified into three main blocks: fraud in financial statements, embezzlement or misappropriation of assets, and corruption, with fraud in the financial statements generating the highest costs, it is less common than the misappropriation of assets (ACFE, 2014)
Based on the results of the research conducted and through several hypothesis tests, the following conclusions are obtained: 1. Internal control has a positive effect on fraud prevention
Summary
Fraedrich, Ferrell, and Ferrell (2017) generally define fraud as any purposeful action that deceives, manipulates, or conceals facts to create a false impression). Poor internal controls have been identified as one of the causes of fraud (Siregar and Tenoyo 2015; Zakari, Nawawi, and Salin 2016). A company must possess effective internal controls (KPMG 2004) to prevent fraud which can lead to a big loss. Internal controls can be described as policies or procedures regulated to convince that a certain purposed entity will be achieved. The main purpose of internal controls is to support the entity in administering the risks to achieve the purposed entity being built and to maintain the work ethics. Fraud generally occurs because of pressure to commit fraud or encouragement to take advantage of opportunities. A working system that is not transparent is an opportunity for perpetrators of fraud. A non-transparent system closes the opportunity for many people to supervise and provide input on the current system.
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