The mediating effect of fraud awareness on the relationship between risk management and integrity system

Abstract

PurposeGovernment institutions in Indonesia have implemented an integrity system as a strategy to prevent fraud and corruption by integrating the risk management and organizational ethics. This integration is important to increase the awareness of fraud in the organization. Based on self-determination theory, this study examines the mediating effect of fraud awareness on risk management and integrity systems.Design/methodology/approachThe study was carried out by using a quantitative approach. The participants of the survey were auditors of the inspectorate of Ministries and Government Agencies in Indonesia. The number of respondents was 103 auditors. The hypothesis testing method used the partial least squares structural equation modeling (PLS-SEM) approach. The data were processed by using WarpPls 7.0 software.FindingsThere are two main results in this study. First, risk management directly affect the integrity of the system. Second, fraud awareness mediates the relationship between risk management and integrity systems.Practical implicationsThe result of this study implicates the policymakers in Ministries and Government Agencies in Indonesia to increase organizational fraud awareness through the involvement of internal audits with risk management. The fraud awareness will greatly improve the performance of the integrity system.Originality/valueThis is the first study examined fraud awareness of integrity systems and risk management. This study can enrich the literature on internal audits, especially the duties of auditors with risk management.