Strengthen internal control systems

Oct 13, 2025 by thesweetdesigns.com 141 views

The Effect of Internal Control Systems, Individual Morality, and HR Competencies on Fraud Prevention with Good Governance as Intervening Variables

Introduction

Fraud prevention is a critical issue in the public sector, particularly in the Regional Apparatus Organization (OPD) of Deli Serdang Regency, North Sumatra. The occurrence of fraud can have severe consequences, including financial losses, damage to reputation, and erosion of public trust. Therefore, it is essential to identify the factors that contribute to fraud prevention and to develop effective strategies to mitigate its occurrence. This study aims to evaluate the impact of internal control systems, individual morality, and human resource competence (HR) on fraud prevention in the OPD of Deli Serdang Regency, with good governance as an intervening variable.

Background

Fraud prevention is a complex issue that involves various factors, including internal control systems, individual morality, and HR competencies. Internal control systems refer to the policies, procedures, and processes that are designed to prevent and detect fraud. Individual morality refers to the ethical principles and values that guide an individual's behavior. HR competencies refer to the skills, knowledge, and abilities that are required to perform a job effectively. Good governance is a critical factor that can influence the effectiveness of internal control systems, individual morality, and HR competencies in preventing fraud.

Methodology

This study uses a quantitative approach and type of causal associative research. The data were collected from all OPDs in the Deli Serdang Regency Government, and the samples taken in this study totaled 83 people. The data analysis was carried out using the PLS (Partial Least Square) technique through SmartPLS software that was run on computer media.

Results

The results of this study showed that the internal control system had a positive and significant influence on the prevention of fraud in the Deli Serdang OPD. This means that when the internal control system is well implemented, it can reduce the potential for fraud. In addition, individual morality also shows a significant positive effect on fraud prevention. This shows that individuals with high morality tend to be more obedient to norms and ethics, so that they are less involved in fraud.

However, interestingly, HR competence does not show a significant effect on fraud prevention. This raises questions about the relevance of technical competencies in the context of fraud prevention, because there can be other factors that are more dominant in controlling fraud actions compared to only competencies.

Furthermore, this study found that good governance acts as an effective mediator in the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention. That is, the application of the principles of good governance can increase the positive impact of the internal control system and the morality of individuals in preventing fraud. However, Good Governance did not succeed in mediating the influence of HR competencies on fraud prevention, which shows that although HR has competence, if the system and morality are not balanced with the practice of good governance, fraud prevention will not be optimal.

Discussion

The results of this study have several implications for the prevention of fraud in the OPD of Deli Serdang Regency. Firstly, the study highlights the importance of internal control systems in preventing fraud. This suggests that the OPD should strengthen its internal control systems to reduce the potential for fraud. Secondly, the study shows that individual morality is a critical factor in preventing fraud. This suggests that the OPD should promote a culture of ethics and morality among its employees. Finally, the study suggests that good governance is a critical factor in mediating the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention.

Conclusion

In conclusion, this study provides evidence that internal control systems, individual morality, and good governance are critical factors in preventing fraud in the OPD of Deli Serdang Regency. The study highlights the importance of strengthening internal control systems, promoting a culture of ethics and morality, and practicing good governance to prevent fraud. The study also suggests that HR competencies may not be a critical factor in preventing fraud, and that other factors may be more dominant in controlling fraud actions.

Recommendations

Based on the results of this study, the following recommendations are made:

Strengthen internal control systems: The OPD should strengthen its internal control systems to reduce the potential for fraud.
Promote a culture of ethics and morality: The OPD should promote a culture of ethics and morality among its employees to prevent fraud.
Practice good governance: The OPD should practice good governance to mediate the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention.
Develop a comprehensive fraud prevention strategy: The OPD should develop a comprehensive fraud prevention strategy that takes into account the results of this study.

Limitations

This study has several limitations. Firstly, the study was conducted in a single region, and the results may not be generalizable to other regions. Secondly, the study used a quantitative approach, and the results may not capture the complexity of the issue. Finally, the study did not examine the role of other factors that may contribute to fraud prevention.

Future Research Directions

This study provides several avenues for future research. Firstly, the study highlights the importance of examining the role of other factors that may contribute to fraud prevention. Secondly, the study suggests that the OPD should develop a comprehensive fraud prevention strategy that takes into account the results of this study. Finally, the study provides evidence that internal control systems, individual morality, and good governance are critical factors in preventing fraud, and future research should examine the effectiveness of these factors in preventing fraud in other contexts.
Q&A: The Effect of Internal Control Systems, Individual Morality, and HR Competencies on Fraud Prevention with Good Governance as Intervening Variables

Q: What is the main objective of this study?

A: The main objective of this study is to evaluate the impact of internal control systems, individual morality, and human resource competence (HR) on fraud prevention in the Regional Apparatus Organization (OPD) of Deli Serdang Regency, North Sumatra, with good governance as an intervening variable.

Q: What are the key findings of this study?

A: The key findings of this study are:

The internal control system has a positive and significant influence on the prevention of fraud in the Deli Serdang OPD.
Individual morality also shows a significant positive effect on fraud prevention.
HR competence does not show a significant effect on fraud prevention.
Good governance acts as an effective mediator in the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention.

Q: What are the implications of this study for the prevention of fraud in the OPD of Deli Serdang Regency?

A: The implications of this study are:

The OPD should strengthen its internal control systems to reduce the potential for fraud.
The OPD should promote a culture of ethics and morality among its employees to prevent fraud.
The OPD should practice good governance to mediate the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention.

Q: What are the limitations of this study?

A: The limitations of this study are:

The study was conducted in a single region, and the results may not be generalizable to other regions.
The study used a quantitative approach, and the results may not capture the complexity of the issue.
The study did not examine the role of other factors that may contribute to fraud prevention.

Q: What are the future research directions based on the findings of this study?

A: The future research directions based on the findings of this study are:

Examining the role of other factors that may contribute to fraud prevention.
Developing a comprehensive fraud prevention strategy that takes into account the results of this study.
Examining the effectiveness of internal control systems, individual morality, and good governance in preventing fraud in other contexts.

Q: What are the recommendations for the OPD of Deli Serdang Regency based on the findings of this study?

A: The recommendations for the OPD of Deli Serdang Regency based on the findings of this study are:

Strengthening internal control systems to reduce the potential for fraud.
Promoting a culture of ethics and morality among employees to prevent fraud.
Practicing good governance to mediate the relationship between internal control systems and fraud prevention, as well as between individual morality and fraud prevention.
Developing a comprehensive fraud prevention strategy that takes into account the results of this study.

Q: What are the benefits of implementing the recommendations of this study?

A: The benefits of implementing the recommendations of this study are:

Reduced potential for fraud in the OPD of Deli Serdang Regency.
Improved culture of ethics and morality among employees.
Enhanced good governance practices.
Development of a comprehensive fraud prevention strategy.

Q: What are the potential challenges of implementing the recommendations of this study?

A: The potential challenges of implementing the recommendations of this study are:

Resistance to change from employees.
Limited resources and budget.
Difficulty in measuring the effectiveness of internal control systems and good governance practices.
Complexity of developing a comprehensive fraud prevention strategy.