Antecedents to Prevent Fraud in Klang Valley’s Private and Public Sectors: the Mediating Role of Internal Control System Effectiveness

Lim, Emily Xiao Xuan (2023) Antecedents to Prevent Fraud in Klang Valley’s Private and Public Sectors: the Mediating Role of Internal Control System Effectiveness. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Fraud is a major global threat to businesses and organisations. It is essential for management to work together with its employees to prevent fraud in their organisations. Prevention is the most cost-effective strategy to cope with financial loss caused by fraud. According to the Association of Certified Fraud Examiners (ACFE), a corporation that has been defrauded is difficult to recover its losses. Undoubtedly, fraud is a widespread business issue that affects firms across industries and time zones without regard to firm size. Failure to implement preventive procedures might cause a firm to wind up within days due to the disastrous consequences of fraud. Hence, fraud prevention is a well-defined strategy that is designed to avoid or minimise fraud. The purpose of this study is to investigate the effects of whistleblowing intention, ethical leadership, and whistleblowing attitude on fraud prevention, with the mediating role of internal control system effectiveness. To answer the research questions and objectives, a quantitative and cross-sectional study was carried out using an electronic questionnaire to collect primary data from 230 employees from various private and public sectors in Klang Valley. The data was analysed using the Statistical Package for Social Sciences (SPSS) and Partial Least Squares-Structural Equation Modelling (PLS-SEM as known as SmartPLS). The research findings revealed that the whistleblowing intention, ethical leadership, and whistleblowing attitude could impact fraud prevention through the mediator of internal control system effectiveness. This study contributes to the existing literature by examining the role of whistleblowing intention, attitude and the mediating effect of internal control system effectiveness, which has not been examined before. From a practical perspective, this research findings have highlighted the importance of employee’s intention and attitude to blow the whistle, ethical leadership within the organisation as well as the implementation of an effective internal control system in order to reduce fraud risk and prevent future fraudulent activities. Furthermore, the study has identified the limitations of this research and provided recommendations for future research studies.