The Internal Control System Effectiveness Affected by Hierarchical Structure, Transparency in Communication with Employee Engagement as a Mediator among Employee in Malaysia

Beh, Poh Yee (2024) The Internal Control System Effectiveness Affected by Hierarchical Structure, Transparency in Communication with Employee Engagement as a Mediator among Employee in Malaysia. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

Financial statement fraud and corporate scandals have underscored the critical importance of effective internal control systems in mitigating risks and ensuring organisational integrity. Despite extensive research on the nexus between internal controls and audit practices, there remains a gap in understanding their broader implications for management and corporate governance, particularly in fostering business growth and sustainability. This study addresses this gap by examining the mediating role of employee engagement in the relationship between hierarchical structure, transparency in communication, and internal control system effectiveness within Malaysian organisations. Drawing on established theories such as the resource-based view (RBV), this research investigates how hierarchical structure influences internal control system effectiveness and proposes a theoretical framework to elucidate this relationship. Utilising a quantitative crosssectional design with a sample size of 234 respondents, data is collected through an electronic-based questionnaire (e-survey), specifically a Google Form. The research questions focus on uncovering the impact of hierarchical structure, transparency in communication, and employee engagement on internal control system effectiveness. Additionally, the study investigates the mediating effect of employee engagement in the relationships between hierarchical structure, transparency in communication, and internal control system effectiveness. Through empirical analysis, this research aims to contribute to the existing literature by providing insights into the intricate dynamics between hierarchical structure, communication transparency, employee engagement, and internal control systems. The findings are expected to inform organisational practices and strategies, particularly in enhancing internal controls to foster business sustainability and mitigate fraud risks.