IDEAS home Printed from https://ideas.repec.org/a/iaf/journl/y2019i4p112-118.html
   My bibliography  Save this article

Can Internal Control Prevent Fraud in Managing Village Funds?

Author

Listed:
  • Winda Lestari

    (Sriwijaya University, Palembang, Indonesia)

  • Azwardi Azwardi

    (Sriwijaya University, Palembang, Indonesia)

  • Saadah Siddik

    (Sriwijaya University, Palembang, Indonesia)

Abstract

In 2015, the Indonesian Government rolled a new scheme of transfer called "Village Fund", based on the Law 6/2014 (known as the Village Law). The scheme requires the Central Government to allocate funding of at least 10 per cent on top of inter-governmental transfers to provinces and districts. Village Funds Program is for the purpose of realizing economic growth and equity of income with priority to finance the development and empowerment of the community. The purpose of this study is to provide empirical evidence regarding to the effects of the internal control system implementation including control environment, risk assessment, control activities, information and communication, and monitoring activities to prevent fraud in managing village funds on Bangka Island. This research was initiated due to number of problems occurred in managing village funds which leads to fraud on Bangka Island. The sample of this study was chosen using purposive sampling method of 108 samples consisted of the village consultative assembly, village companion and experts in 24 villages. Data was collected through questionnaire with a Likert scale which then increased to interval scale using methods of Successive interval. The hypothesis was tested using multiple regression analysis. The results of this study indicate negative influence between the implementation of the Internal Control System in the form of environmental control, risk assessment, information and communication, control and supervision activities of fraud in managing village funds on Bangka Island. The implementation of the internal control system on Bangka Island has also been good, but the reduction in fraud has not yet yielded maximum results. This happens because there are still some weaknesses in the implementation of the internal control system such as low understanding of village government, overlapping rules and changes in the rules for managing village funds. Seeing the influence of the implementation of the internal control system on fraud, Indonesian government should increase the effectiveness of internal control to prevent fraud.

Suggested Citation

  • Winda Lestari & Azwardi Azwardi & Saadah Siddik, 2019. "Can Internal Control Prevent Fraud in Managing Village Funds?," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 112-118, December.
    • Handle: RePEc:iaf:journl:y:2019:i:4:p:112-118
    as

    Download full text from publisher

    File URL: http://www.afj.org.ua/pdf/706-chi-mozhe-vnutrishniy-kontrol-zapobigti-shahraystvu-v-upravlinni-silskimi-fondami.pdf
    Download Restriction: no
    File URL: http://www.afj.org.ua/en/article/706/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. ter Bogt, Henk & Tillema, Sandra, 2016. "Accounting for trust and control: Public sector partnerships in the arts," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 37(C), pages 5-23.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. Dongyang Zhang, 2017. "Is working capital management value-enhancing through alleviating financial constraints? Evidence from Chinese non-listed firms," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 15(4), pages 373-406, October.
    4. Siti Nuryanah & Sardar M. N. Islam, 2015. "Corporate Governance and Financial Management," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-43561-3.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Haroon ur Rashid Khan & Waqas Bin Khidmat & Muhammad Danish Habib & Sadia Awan, 2022. "Academic directors in board and corporate expropriation: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(2), pages 372-397, March.
    2. Al-Faryan, Mamdouh Abdulaziz Saleh & Dockery, Everton, 2017. "Ownership structure and corporate governance: What does the data reveal about Saudi listed firms?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 14(4-2), pages 413-424.
    3. Thomas Kiptanui Tarus & Joel K Tenai & Joyce Komen, 2020. "Does Ownership Structure Affect Risk Management? Evidence from an Emerging Economy, Kenya," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(1), pages 1-10.
    4. Servaes, Henri & Amiraslani, Hami & Lins, Karl & Tamayo, Ane, 2017. "A Matter of Trust? The Bond Market Benefits of Corporate Social Capital during the Financial Crisis," CEPR Discussion Papers 12321, C.E.P.R. Discussion Papers.
    5. Udeh, Francis Nnoli & Abiahu, Mary-Fidelis Chidoziem & Tambou, Liberty Ejomafuvwe, 2017. "Impact of Corporate Governance on Firms Financial Performance: A Study of Quoted Banks in Nigeria," MPRA Paper 94923, University Library of Munich, Germany, revised 07 Jul 2019.
    6. Kun Zhang & Yuanyuan Wang & Xuegang Cui & Hong Yue, 0. "Can the academic experience of senior leadership improve corporate internal control quality?," Asian Business & Management, Palgrave Macmillan, vol. 0, pages 1-30.
    7. Shoukat Ali & Ramiz Ur Rehman & Muhammad Ishfaq Ahmad & Joe Ueng, 2021. "Does Board Diversity Attract Foreign Institutional Ownership? Insights from the Chinese Equity Market," JRFM, MDPI, vol. 14(11), pages 1-15, October.
    8. Zhang, Dongyang, 2021. "Is export tax rebate a quality signal to determine firms’ capital structure? A financial intermediation perspective," Research in International Business and Finance, Elsevier, vol. 55(C).
    9. Elamer, Ahmed A. & Ntim, Collins G. & Abdou, Hussein A. & Pyke, Chris, 2020. "Sharia supervisory boards, governance structures and operational risk disclosures: Evidence from Islamic banks in MENA countries," Global Finance Journal, Elsevier, vol. 46(C).
    10. Marta Leite Collares, 2020. "Corporate Governance: A Major Factor in Shareholder Activism in Brazil," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 24(5), pages 414-431.
    11. Choonsik Lee & Heungju Park, 2016. "Financial constraints, board governance standards, and corporate cash holdings," Review of Financial Economics, John Wiley & Sons, vol. 28(1), pages 21-34, January.
    12. Mejbel Al-Saidi, 2020. "Capital Structure and Corporate Governance Mechanisms in Kuwait Stock Exchange (KSE)," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(6), pages 1-38, June.
    13. Mahdi Salehi & Grzegorz Zimon & Arash Arianpoor & Fatemeh Eidi Gholezoo, 2022. "The Impact of Investment Efficiency on Firm Value and Moderating Role of Institutional Ownership and Board Independence," JRFM, MDPI, vol. 15(4), pages 1-13, April.
    14. Sang Ho Kim & Yohan An & Prabhu Udawatte, 2020. "Does Foreign Ownership Restrict Earnings Management? The Case of China," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 16(1), pages 63-86.
    15. Huang, Haijie & Lee, Edward & Lyu, Changjiang & Zhu, Zhenmei, 2016. "The effect of accounting academics in the boardroom on the value relevance of financial reporting information," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 18-30.
    16. Markonah, 2017. "The Effect of Good Corporate Governance and Premium Growth on the Performance of Insurance Companies ," GATR Journals jfbr123, Global Academy of Training and Research (GATR) Enterprise.
    17. Shann Turnbull, 2017. "Grounding a Theory of Firms in the Natural Sciences," Humanistic Management Journal, Springer, vol. 1(2), pages 159-186, April.
    18. José Ángel Moreno Izquierdo, 2019. "De la empresa accionarial a la empresa participativa," Revista de Economía Crítica, Asociación de Economía Crítica, vol. 28, pages 55-68.
    19. Sathyamoorthi C. R. & Christian J. Mbekomize & Mogotsinyana Mapharing & Popo Selinkie, 2018. "The Impact of Corporate Governance on Working Capital Management Efficiency: Evidence from the Listed Companies in the Consumer Services Sector in Botswana," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(12), pages 135-135, December.
    20. Christofer Adrian & Sue Wright, 2020. "Perceptions of shareholders and directors on corporate governance: what we learn about director primacy," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1209-1236, April.

    More about this item

    Keywords

    Village Fund; internal control system; fraud; use of village funds; problems of village government;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iaf:journl:y:2019:i:4:p:112-118. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Serhiy Ostapchuk (email available below). General contact details of provider: https://edirc.repec.org/data/iafkvua.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.