Abstract
This study empirically aims to analyze the influence of government internal control system and internal monitoring on fraud prevention and its implications on the quality of local financial statements. The data in this study were 89 respondents of local government officials in the city of Bogor and Depok. The methodology using multiple linear regression analysis. The results of the study showed the internal control system positively affects fraud prevention, on the other hand the internal monitoring has no effect on fraud prevention. Fraud prevention has a positive effect on the quality of financial statements. While the government internal control system has a negative effect, the internal monitoring has a positive effect on the quality of local financial report. Government internal control system indirectly affects the quality of local financial statements through fraud prevention, whereas the internal control directly affects the quality of local financial statements through fraud prevention. The result also indicate the fraud prevention has a greater impact on the quality of local financial statements. Internal control system might be minimized fraud and possibility of error. It indicates that fraud prevention support the quality of local financial reporting.
Highlights
OF THE STUDYAccounting fraud gained much public attention and become familiar of business communities worldwide
We proposed some hypotheses for further investigation as follows: H1: The government's internal control system has a positive effect on fraud prevention; H2: Internal supervision has a positive effect on fraud prevention; H3: Fraud prevention has a positive effect on the quality of local government’s financial statements; H4: The government's internal control system positively affects the quality of financial statements; H5: Internal supervision has a positive effect on the quality of local government’s financial report
Based on the test results in the table above, it is found that the significance value of 0.000 which is less than 0.05, meaning that the government internal control system (SPIP), internal supervision simultaneously influence the prevention of fraud
Summary
Accounting fraud gained much public attention and become familiar of business communities worldwide. In Indonesia, the fraud has become vicious phenomena from year to year. Financial fraud is a deliberate performance that can result in financial losses. According to Wilopo (2006) accounting fraud is related to corruption in general, which is the common practice is to manipulate record, document removal, and mark-ups are detrimental to the state's finances or economies. The tendency of fraud is regarded to be a trend for corruption in terminology definition because of the involvement of some elements consisting of misleading facts, rule violations or misuse of trust, and critical fact commission. Many cases of corruption are committed by influential officials who have the power; creating critical (absolute) impacts as a result of their violation
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