The Strengthening Fraud Prevention in Higher Education: An Empirical Study of Internal Control System and Good University Governance

Rudiawie Larasati; Heru  Tjaraka

doi:10.48161/qaj.v5n3a1903

Authors

Rudiawie Larasati Department of Accounting, Faculty of Economics and Business, Airlangga University, Surabaya 60286, Indonesia; Department of Accounting, Cenderawasih University, Jayapura 99351, Indonesia.
Heru Tjaraka Department of Accounting, Faculty of Economics and Business, Airlangga University, Surabaya 60286, Indonesia;

DOI:

https://doi.org/10.48161/qaj.v5n3a1903

Keywords:

internal control systems, good university governance, fraud prevention, higher education, structural equation modeling (SEM).

Abstract

This research investigates how internal control systems and Good University Governance (GUG) influence fraud prevention in higher education institutions in Eastern Indonesia. Various instances of fraud in Indonesian universities have been attributed to the Internal Supervisory Unit (SPI), which plays a crucial role in enforcing GUG. The study adopts a quantitative approach with purposive sampling to analyze a mediating model involving internal control systems, fraud prevention, and GUG. Structural Equation Modeling (SEM) with the Partial Least Squares (PLS) method was employed for data analysis. The findings demonstrate that both GUG and the implementation of internal control systems significantly contribute to fraud prevention. Moreover, the research highlights the indirect effect, where GUG acts as a mediator between internal control systems and fraud prevention. The results emphasize the importance of incorporating robust governance practices to reduce fraud in educational institutions in Indonesia.

Downloads

Download data is not yet available.

References

Giroux, H. A. (2012). Neoliberalism, youth, and the leasing of higher education. In Global neoliberalism and education and its consequences. Routledge.

Supartono, W., Wahyuni, H. I., Yulianto, V. I., & Umemiya, N. (2024). The impact of studying abroad on the three pillars of higher education at Universitas Gadjah Mada, Indonesia: Challenges and breakthroughs. In Sustainable Development Goals Series (pp. 163–179). Springer.

Etzkowitz, H., & Klofsten, M. (2005). The innovating region: Toward a theory of knowledge-based regional development. R and D Management, 35(3), 243–255.

Huang, F. (2017). University governance in China and Japan: Major findings from national surveys. International Journal of Educational Development, October 2016.

Joseph, C., Omar, N. H., Janang, J. T., Rahmat, M., & Madi, N. (2021). Development of the university fraud prevention disclosure index. Journal of Financial Crime, 28(3), 883–891.

Hallak, J., & Poisson, M. (2007). Corrupt schools, corrupt universities: What can be done? Paris: International Institute for Education Planning.

Osipian, A. L. (2017). University autonomy in Ukraine: Higher education corruption and the state. Communist and Post-Communist Studies, 50(3), 233–243.

Shore, C. (2018). How corrupt are universities? Audit culture, fraud prevention, and the big four accountancy firms. Current Anthropology, 59(S18), S92–S104.

Arifin, J. (2020). Determinan kecurangan akuntansi di lingkungan perguruan tinggi. EKUITAS (Jurnal Ekonomi dan Keuangan), 4(2), 187–204.

Ikbal, M., Irwansyah, I., Paminto, A., Ulfah, Y., & Darma, D. C. (2020). Explores the specific context of financial statement fraud based on empirical from Indonesia. Universal Journal of Accounting and Finance, 8(2), 29–40.

Thoyibatun, S. (2012). Faktor-faktor yang berpengaruh terhadap perilaku tidak etis dan kecenderungan kecurangan akuntansi serta akibatnya terhadap kinerja organisasi. EKUITAS (Jurnal Ekonomi dan Keuangan), 16(2), 245.

Andriani, L., Nugroho, Y. W., Firdaus, M. A., & Kholidah, K. (2023). Juridical analysis of land asset utilization on legal entity college State University of Surabaya. E3S Web Conf., 450, 03008.

Umar, H., Safaria, S., Mudiar, W., & Purba, R. B. (2022). Analysis of the implementation of corruption detection using Hu-model in state financial management institutions. Vol. 6(12), 765–778.

El Junusi, R. (2020). COSO-based internal control: Efforts towards good university governance. Journal of Islamic Accounting and Finance Research, 2(1), 27.

Geng, X., & Geng, X. (2023). RETRACTED: Combining grey relation analysis with MCGDM to evaluate the higher education management quality with interval-valued neutrosophic sets. Journal of Intelligent & Fuzzy Systems, 45(3), 3791–3805.

Larasati, R., Asnawi, M., & Hafizrianda, Y. (2018). Analisis penerapan good university governance pada perguruan tinggi di Kota Jayapura. Journal of Applied Managerial Accounting, 2(2), 304–323.

Tempo. (2023). ICW temukan lima modus korupsi di kampus. Koran Tempo.

Wiguna, I. M. A., Atmadja, A. T., & Yuniarta, G. A. (2022). Fraud dalam pengelolaan keuangan desa adat. Vol. 12(3), 547–558.

BPK. (2019). Ikhtisar hasil pemeriksaan BPK.

Trakman, L., & South, N. (2008). Governance. Vol. 62(April), 63–83.

UGSC. (2012). The University Governance Screening Card: A Tool for Benchmarking University Governance. The World Bank, 1–2.

Wijatno, S. (2009). Pengelolaan Perguruan Tinggi Secara Efisien, Efektif dan Ekonomis. Jakarta: Salemba Empat.

Danescu, T., Prozan, M., & Danescu, A. C. (2011). Internal Control Activities: Cause and Effect of a Good Governance of Accounting Reportings and Fiscal Declarations. Annales Universitatis Apulensis Series Oeconomica, 2(13), 339–349.

Braithwaite, J. (1982). All use subject to JSTOR Terms and Conditions Enforced Self-Regulation: A New Strategy for Corporate Crime Control. Michigan Law Review, 80(7), 1466–1507.

Daniri, M. A., Wahyudi, S., Pangestuti, I. R. D., & Hersugondo. (2023). The Role of Good University Governance for Transformation Towards the Entrepreneurial University. Corporate and Business Strategy Review, 4(1), 167.

Rezyta, D. A. (2019). Pengaruh Satuan Pengawasan Internal (SPI), Internal Control, dan Budaya Organisasi Terhadap Good University Governance (GUG). Doctoral Dissertation, Unimed.

Rashid, C. A. (2022). The Role of Internal Control in Fraud Prevention and Detection. Journal of Global Economics and Business, 3(8), 4355.

Ogwiji, J., & Lasisi, I. O. (2022). Internal Control System and Fraud Prevention of Quoted Financial Services Firms in Nigeria: A Smart PLS-SEM Approach. European Journal of Accounting, Auditing and Finance Research, 10(4), 1–33.

Bhat, S. (2023). The Effectiveness of Internal Controls in Preventing Fraud and Financial Misconduct. Journal of Law and Sustainable Development, 11(5), e1178.

Hendrastuti, R., & Harahap, R. F. (2023). Agency Theory: Review of the Theory and Current Research. Jurnal Akuntansi Aktual, 10(1), 85100.

Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(30).

Cressey, D. R. (1953). Other People’s Money: A Study of the Social Psychology of Embezzlement.

Wolfe, D. T., & Hermanson, D. R. (2004). The Fraud Diamond: Considering the Four Elements of Fraud. The CPA Journal, 74(12), 38–42.

Horwath, C. (2011). IIA Practice Guide: Fraud and Internal Audit. Western Regional Conference, pp. 1–49.

Bader, A. A. A., Hajar, Y. A. A., Weshah, S. R. S., & Almasri, B. K. (2024). Predicting Risk of and Motives Behind Fraud in Financial Statements of Jordanian Industrial Firms Using Hexagon Theory. Journal of Risk and Financial Management, 17(3), p. 120.

Vousinas, G. L. (2019). Advancing Theory of Fraud: The S.C.O.R.E. Model. Journal of Financial Crime, 26(1), 372–381.

Bajari, P., & Ye, L. (2003). Deciding Between Competition and Collusion. Review of Economics and Statistics, 85(4), 971–989.

Luz, R. D., & Spagnolo, G. (2017). Leniency, Collusion, Corruption, and Whistleblowing, 13(4).

Sadowksi, G., & Rathle, P. (2015). The World’s Leading Graph Database Fraud Detection: Discovering Connections Using Graph Databases.

Khan, A., & Krishnan, S. (2021). Moderating Effects of Business-Systems Corruption on Corruption in Basic National Institutions and Electronic Government Maturity: Insights from a Dynamic Panel Data Analysis. International Journal of Information Management, 59, p. 102349.

Paredes, M., Gianella, C., & Olivera, S. (2024). Corrupting Climate Change Institutions from the Inside: Systemic Collusion in the Peruvian Forest Governance. Political Geography, 108, p. 102991.

Lestari, E. B., Tarjo, & Prasteyono. (2017). The Factors Affecting Tendency of Fraud in Government Sector. Journal of Auditing, Finance, and Forensic Accounting, 5(2), p. 67.

Martin, J. A., & Butler, F. C. (2017). Agent and Stewardship Behavior: How Do They Differ? Journal of Management & Organization, 23(5), 633–646.

Donaldson, L., & Davis, J. H. (1991). Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns. Australian Journal of Management, 16(1), 49–64.

Torfing, J., & Bentzen, T. Ø. (2020). Does Stewardship Theory Provide a Viable Alternative to Control-Fixated Performance Management? Administrative Sciences, 10(4), Art. no. 4.

Rubino, M., & Vitolla, F. (2014). Internal Control Over Financial Reporting: Opportunities Using the COBIT Framework, 29(8).

Boynton, W. C., Johnson, R. N., & Kell, W. G. (2001). Modern Auditing, Subsequent edition. New York: John Wiley & Sons Inc.

Yuwono, C. (2011). Pengaruh Peranan Auditor Internal Terhadap Penerapan Good Corporate Governance Pada BUMN Jember. SKRIPSI Universitas Diponegoro.

David, J., Tewall, B., Sendow, G. M., Trang, I., & Lumintang, G. G. (2022). Good University Governance, Reputation Risk, and Public Accountability in Private Universities (PTS). Jurnal Ilmiah Manajemen dan Bisnis, 7(2), 142–156.

Agrawal, A., & Cooper, T. (2015). Insider Trading Before Accounting Scandals. Journal of Corporate Finance, 34, 169–190.

Kassem, R., & Higson, A. W. (2016). External Auditors and Corporate Corruption: Implications for External Audit Regulators. Current Issues in Auditing, 10(1), 1–10.

Sudarmo, A., Sawardi, T., & Yulianto. (2008). Fraud Auditing (5th ed.). Bogor: Pusat Pendidikan dan Pelatihan Pengawasan - Badan Pengawasan Keuangan dan Pembangunan.

Rathakrishnan, S., & Baskar, T. (2024). Fortifying Financial Integrity: Insights into Fraud Detection and Prevention Strategies Across Various Financial Companies in Sri Lanka from the Perspectives of Accountants and Internal Auditors in an Analytical Review. International Journal of Research and Innovation in Social Science, VII(VI), 2168–2181.

Sujana, E., & Saputra, K. A. K. (2020). Fraud Detection and Prevention Methods: Inspector’s Auditor’s Perception in Bali. Journal of Advanced Research in Dynamic and Control Systems, 12(4), 08–16.

Muslim, M. (2025). The Failure of Governance and Internal Controls in Preventing Fraud in the Company. Advances in Managerial Auditing Research, 3(1), 15–29.

Ziorklui, J. E. K., Ampofo, F. O., Antwi, B. O., & Nyonyoh, N. (2024). Effectiveness of Internal Controls Mechanisms in Preventing and Detecting Fraud. Finance & Accounting Research Journal, 6(7), 1259–1274.

Ansori, A. F., Evana, E., & Gamayuni, R. R. (2018). The Effect of Good University Governance, Effectiveness of Internal Controlling System, and Obedience of Accounting Regulation on the Tendency of Fraud in PTKIN-BLU. Research Journal of Finance and Accounting, 9(4), 105112.

Halbouni, S. S., Obeid, N., & Garbou, A. (2016). Corporate Governance and Information Technology in Fraud Prevention and Detection: Evidence from the UAE. Managerial Auditing Journal, 31(6/7), 589–628.

Qinthara, A. F., & Prasetyo, H. (2023). Penguatan Rancangan Good University Governance Dalam Pencegahan Korupsi Di Perguruan Tinggi. RechtIdee, 8(1), 87–105.

Kurrohman, T., Lailiyah, A., & Wahyuni, N. I. (2017). Determinant of Fraudulent in Government: An Empirical Analysis in Situbondo Regency, East Java, Indonesia. International Journal of Economics and Management, 11(1), 133–140.

Yulianti, R., Maryam, C., Hamdiah, Mahdi, & Khairuna. (2024). The Role of Internal Control Systems and Good Corporate Governance in Fraud Prevention Efforts: A Literature Review. Frontiers in Business and Economics, 3(1), 39–54.

Wijanto, S. (2009). Pengelolaan Perguruan Tinggi Secara Efisien, Efektif, dan Ekonomis. Jakarta: Salemba Empat.

Edwards, J. (2012). Company Investigations. In Fraud. Routledge.

Mappanyukki, R., Setyawati, H., & Muti’ah. (2012). Pengaruh Penerapan Pengendalian Internal terhadap Pencegahan Fraud Pengadaan Barang dan Implikasinya pada Kinerja Keuangan (Studi pada Rumah Sakit Pemerintah dan Swasta di Jakarta). Profita, IV, 11–26.

Altamuro, J., & Beatty, A. (2010). How Does Internal Control Regulation Affect Financial Reporting?. Journal of Accounting and Economics, 49(1), 58–74.

Bongani, N. (2013). Application of Internal Controls in NGOs: Evidence from Zimbabwe. Journal of Finance and Accounting, 1(2), Art. no.2.

Shattock, M. (2006). Policy Drivers in UK Higher Education in Historical Perspective: ‘Inside Out’, ‘Outside In’ and the Contribution of Research. Higher Education Quarterly, 60(2), 130–140.

Periansya, P., Dewata, E., R, S. A., Sari, Y., & Basyith, A. (2023). Whistleblowing, Fraud Prevention, and Fraud Awareness: Evidence from the Palembang Local Government of Indonesia. Problems and Perspectives in Management, 21(2), 556–566.

Kamaliah, K., Marjuni, N.-S., Mohamed, N., Mohd-Sanusi, Z., & Anugerah, R. (2018). Effectiveness of Monitoring Mechanisms and Mitigation of Fraud Incidents in the Public Sector. REVISTA ADMINISTRATIE SI MANAGEMENT PUBLIC, 2018(30), 82–95.

Riana, K. E., & Hadiwidjaja, R. D. (2024). Good University Governance to Universities Performance: Systematic Literature Review. Eduvest - Journal of Universal Studies, 4(5), 4229–4243.

Shore, L. M., Cleveland, J. N., & Sanchez, D. (2018). Inclusive Workplaces: A Review and Model. Human Resource Management Review, 28(2), 176–189.

Muir, T., & Geiger, V. (2016). The Affordances of Using a Flipped Classroom Approach in the Teaching of Mathematics: A Case Study of a Grade 10 Mathematics Class. Math Ed Res J, 28(1), 149–171.

Ramos, R., Gonçalves, J., & Gonçalves, S. P. (2020). The Unbearable Lightness of Academic Fraud: Portuguese Higher Education Students’ Perceptions. Education Sciences, 10(12), Art. no. 12.

Chapman, D. W., & Lindner, S. (2016). Degrees of Integrity: The Threat of Corruption in Higher Education. Studies in Higher Education, 41(2), 247–268.

Campa, D. (2018). Regulatory Enforcement and the Effectiveness of Fraud Training: A European Investigation into Earnings Manipulation. Comptabilité Contrôle Audit, 24(1), 81–111.

Youngblood, J. R. (2015). A Comprehensive Look at Fraud Identification and Prevention. New York: Routledge.

Sethna, B. N. (2024). Changing and Unchanging Principles in an Uncertain Age of University Governance: Autonomy, Accountability, and Innovation. In The Routledge Handbook of Global and Digital Governance Crossroads, Routledge India.