KAJIAN AKUNTANSI Bandung Islamic University

Volume 23 No.1 March 2022 PP 50-66

THE ROLE OF INTERNAL AUDIT IN FRAUD PREVENTION AND

DISCLOSURE

1
Khairini Melinda, 2Ariama Susanti, 3Juneva Kastarina Tarigan, 4Deliana,
5
Ilham Hidayah Napitupulu.
12345
Politeknik Negeri Medan
Medan, Indonesia.
Email: khairinimelinda@students.polmed.ac.id

Abstract
This study aims to determine the effect of internal audit in preventing and
disclosing fraud. The number of frauds that occur in an organization shows the need for
an internal audit body in the company so that it can reduce or even eliminate fraud that
occurs. This literature review is a study of the role of internal audit in preventing and
disclosing fraud which aims to find out the variables in internal audit for preventing and
disclosing fraud based on previous studies, so there is still a lot of potential for further
modification/development. Of the ten studies included in this literature review, there are
differences in research results. Eight studies state that internal audit has a significant
effect on preventing and disclosing fraud, but two articles state that internal audit does
not have a significant effect on preventing and disclosing fraud.

Keywords: internal audit, fraud, literature review.

1. INTRODUCTION
In principle, fraud can occur anytime and anywhere and is carried out by
anyone, especially those who have great interests and authority over an entity. Internal
audit is an independent and objective activity to provide reasonable assurance and
provide consultation designed to increase added value in the organization's activities.
Internal audit can also help achieve company goals in increasing the effectiveness and
efficiency of activities through a systematic approach in evaluating and improving the
effectiveness of risk management, control, regulatory processes, and organizational
management.
Internal audit includes an independent internal examination of an organization
that aims to test and evaluate the organization's activities carried out. The inspection is
carried out to ensure that the assigned duties and responsibilities have been carried out
properly and in accordance with the rules that should be. Internal audit conducts

50
51 Melinda et. al.

examinations, assessments and looks for facts and evidence to provide

recommendations and opinions to management to be followed up for improvement and
revision of things that still need to be improved by the organization. Internal audit is
also very possible in finding fraud that arises due to pressure, very possible
opportunities for fraud, systems and procedures that support and justification for the
fraudulent act.
According to (Karyono, 2013) Fraud is fraud which implies irregularities and
illegal acts, which are carried out intentionally for certain purposes. An example of
fraud is the act of deceiving or misleading other parties, by people both inside and
outside the organization. Fraud is designed with the aim of gaining personal and group
benefits and taking unfair advantage of opportunities, which directly or indirectly harm
other parties. Fraud or cheating in the business world has the meaning as a deliberate
lie, untruth reporting of company assets, manipulation of financial data to benefit certain
parties.
Fraud can be done by manipulating records, eliminating document evidence or
mark-ups that can harm the public or the company's finances. Fraud must not only be
prevented, but fraud must be detected as early as possible . (Widaningsih & Nur Hakim,
2015) Fraud is not easy to find but special efforts are needed to trace the fraud. Fraud
can be discovered by chance, but this is very rare. In 2017 there was a case that shocked
Indonesia where there was a suspicion of fraud from one of the State-Owned
Enterprises (BUMN) PT Garuda Indonesia where the former president director of PT
Garuda, Emirsyah Satar was named a suspect in a corruption case by the Corruption
Eradication Commission (KPK) suspected of having received a transfer. bribes and
assets of more than 4 million US dollars (Kompas.com, 2019) . The case above shows
that there is fraud due to the position of the main director which gives flexibility to
commit fraud.
A survey conducted by ACFE Indonesia in 2016 regarding fraud that occurred in
Indonesia showed that corruption was at the top of the list of types of fraud that
occurred. The second position is on the misappropriation of assets (missappropriation
assets), and the third position is financial statement fraud (fraudelent statement).
(Mardani et. al., 2020) . Most of the losses experienced due to fraud are experienced by
government institutions so that fraud is very detrimental to the state and the public.

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 52

Fraud must be prevented and detected to a minimum because of the potential for losses
which, if left unchecked, will only increase, and cause further harm. For prevent fraud
from happening, it is necessary a good system of internal control and internal control is
implemented by consistent. Study this more emphasizing how the role of internal audit
in prevent and disclose fraud.
The internal audit system that has been prepared must be implemented as well as
possible to prevent fraud and carry out inspections on the implementation of tasks that
have been delegated in each organizational work unit. Based on this background, the
researchers chose the title of the study The Role of Internal Audit in Preventing and
Disclosure of Fraud Using the Literature Review Method from several national and
international articles. Destination from study this knowing the role of internal audit in
prevent and disclose fraud.

2. LITERATURE REVIEW
Internal audit
The purpose of internal audit is to ensure its effectiveness in achieving success
in achieving organizational goals. Effectiveness can be measured by achieving targets
according to the goals and objectives that have been determined at the beginning. The
achievements of the organization can be categorized as effective if the organizational
goals have been achieved and are in accordance with organizational goals and provide
benefits (Betri, 2018) .
(Beckmerhagen et. al, 2004) explains that an effective internal audit has
guidelines and is based on applicable audit standards, is perfectly planned, and has an
identification of objectives, the ability of the auditor before carrying out duties, and an
assessment of the ability of the auditor team to find errors.

Definition of Internal Audit

(Indonesian Institute of Certified Public Accountants, 2013) in the SPAP (Public
Accountant Reporting Standard) states that internal audit is an independent assessment
activity within the organization to examine and evaluate organizational activities as to
aid management.

Volume 23 No.1 March 2022

53 Melinda et. al.

Internal audit includes organizational structure, methods and measures that are
coordinated to maintain organizational wealth, check the accuracy and reliability of
accounting data to increase efficiency and encourage compliance with management
policies, (Mulyadi, 2015) . Meanwhile (Muller, 2016) states that internal audit is an
independent assessment function within the company that was formed to test and
evaluate overall operational and non-operational activities.

Internal Audit Standards

The Internal Auditor Professional Organization Consortium has issued the
Internal Auditor Professional Standard (SPAI) which is the beginning of a series of
Internal Audit Practice Guidelines (PPAI). This standard is a reference source for
internal auditors who want to carry out their functions professionally. Internal Audit
Professional Standards (SPAI) include:
1. Attribute Standards, this standard covers the characteristics of organizations,
individuals, and parties who carry out internal audit activities.
2. Performance Standards, relate to the nature of the internal audit activity and are a
measure of the quality of audit work. Attribute Standards and Performance Standards
are used for all types of internal audit engagements.
3. Implementation Standard applies to one assignment. This standard includes:
a. assurance activity standards (A)
b. standard of consulting activities (C)
c. investigative activity standard (I)
d. Control Self-Assessment (CSA) standards.

Objectives of Internal Audit

Internal audit in general has the aim of assisting management in carrying out
their duties and functions, by providing information on the feasibility and effectiveness
of the organization's internal control and the quality of the organization's activities. The
scope of internal audit is to analyze, assess and submit suggestions to top management
which must then be followed up to make improvements to existing findings. According
to (D. Hartanto, 2012) in his book Accounting for Entrepreneurs, the objectives of
internal audit include:

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 54

1. Is the internal control in accounting and operations sufficient and meet the
requirements.
2. Ensure that policies, plans and procedures that have been determined are strictly
adhered to.
3. Are assets in the company safe from loss, damage, and misappropriation.
4. Ensure the accuracy of accounting data and other data within the company
organization.
5. View and monitor the quality and implementation of the tasks assigned to each
management.

The internal control function helps the board of directors to ensure company
goals and business continuity in several ways:
1. Evaluating every activity and company program.
2. Contribute suggestions for effective risk control.
3. Evaluate compliance with applicable regulations, implementation of Good
Corporate Governance.
4. Provide facilities and assist the implementation of external audit (Suginam, 2017).
In general, the purpose of internal audit is to assist the company's management on
an ongoing basis regarding the findings of errors and irregularities by providing
analysis, assessment, recommendations, and comments regarding controls with
established procedures.

Internal Audit Role

Internal auditors act as:
1. Watchdog, includes activities to inspect, observe, check and recheck, and calculate
to ensure compliance with laws, regulations and policies that exist in the company.
In this activity, a compliance audit is conducted that focuses on the internal control
system. The results obtained are usually only in the form of short-term
recommendations.
2. Consultation conducted by internal auditors to provide advice to management for
the management of organizational resources.

Volume 23 No.1 March 2022

55 Melinda et. al.

3. Catalyst, where internal auditors become catalysts to provide services in the form of
constructive suggestions and can be applied in the company but are not involved in
company activities (Suginam, 2017) .

Activities in Internal Audit

In internal audit, auditors carry out their duties and functions which include:
1. Assess whether the management control system, internal control and other
operational controls have been running as they should and develop effective controls
with cost allocations that are not too expensive.
2. Ensuring that compliance with policies, work plans and standard procedures set by
management has been carried out properly.
3. Check and have confidence that company assets are accounted for and protected
from possible theft, fraud, and misuse.
4. Assess that the data management developed within the organization can be trusted.
5. Assessing the quality of work of each section in carrying out the duties of
management.
6. Suggest operational improvements to increase efficiency and effectiveness.

Characteristics of Internal Auditors

According to the International Standards for The Profession Practice of Internal
Audit (IPPF, 2017) there are several must - have characteristics owned by internal
auditors, including that is:
1. Independence and objectivity. Independent is the attitude of the auditor who is free
and not experience coercion to take sides in operate task, while objective is attitude
that doesn't take sides in operate task.
2. Professional skill and accuracy are knowledge and competence possessed covers
whole operation company and information external influence company.
3. Development profession sustainable is what auditors do to increase ability by
periodically.

Factors Supporter Internal Audit Effectiveness

Contributing factors in optimizing internal audit effectiveness:

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 56

1. Internal audit competencies, including intelligence, education and training that

provide Mark plus to the quality of internal auditors (Chambers & Odar, 2015).
Ability technical, analytical, and interpersonal also includes internal audit
competence (Seol & Sarkis (2005).
2. Internal audit size, where big the small size of internal audit will be influence audit
results. Availability source power must balance to not quite enough responsible for
internal audit.
3. Independence of internal auditors. (IPPF, 2017) describes internal audit
independence includes auditor 's ability in doing the responsibility without existence
coercion from other party.
4. Internal audit activities include audit procedures carried out related responsibility on
evaluation risk and the company’s internal control (Kabuye et. al., 2017).
5. D support management to internal auditors include role management to availability
source power as well as action carry on audit findings. When findings no follow up
so internal audit performance will Becomes in vain.

Fraud
1. Definition of Fraud
Fraud is defined as unlawful acts that are carried out intentionally for certain
purposes (manipulation or giving false reports to parties) carried out by people from
inside or outside the organization to gain personal or group benefits which directly or
indirectly harm other parties (Association of Certified Fraud Examiner (ACFE), 2012).
According to (Alison, 2006), fraud is a form of fraud that is intentionally carried
out so as to cause losses without being realized by the injured party and provide benefits
to the perpetrators of fraud, and generally fraud occurs because of pressure to commit
fraud or encouragement to take advantage of existing opportunities and justifications.
generally accepted attitude towards the action (Norsain, 2014).
Data from the Association of Certified Fraud Examiners (ACFE) shows that the
average global cost of fraud is estimated at 5% of total revenue, which is $3.5 trillion
per year, which shows a significant impact of fraud (Free, 2015). The factors that
motivate a person are:
a. Want to live beyond his limits

Volume 23 No.1 March 2022

57 Melinda et. al.

b. Want to get personal benefit

c. Have a big debt
d. Pressure from family, friends, and environment
e. Desire beats the existing system (Abbasi et al, 2004).

Actions that indicate fraud consists of five circumstances:

a. Improper and incorrect presentation because there is data that is not disclosed, and
reporting errors occur.
b. Material data and facts, facts are substantial things that provide an impetus for
someone to act.
c. The existence of a purpose, where the goal has been directed to deceive and the
awareness and knowledge that the report presented is wrong.
d. Dependence must be justifiable, misstatement must be substantial to the detriment of
the other party.
e. An act that is detrimental so that it is unfair or causes harm to victims who
experience fraud (Norsain, 2014).

2. Types of Cheating
a. Corruption (Corruption), this fraud is the most difficult to detect because it involves
cooperation or agreement with other parties such as bribery and collusion. Examples
of corruption include:
1. Abuse of authority and a conflict of interest, such as a game of buying or selling
goods/services, namely by the existence of a relationship between the seller and
the buyer which causes an increase in price or an unreasonable fee.
2. Bribery is a gift or promise so that the recipient does or does not do something in
his/her duties that is contrary to his/her authority/obligation.
3. Illegal gratuities are gifts or gifts with the hidden intention of bribery, which can
be in the form of wedding gifts, birthday gifts, farewell gifts, promotion gifts
and positions to officials.
b. Misappropriation of assets (asset misappropriation), in the form of theft or
embezzlement of company or other party assets. Misappropriation of assets can take
the form of:

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 58

1. Larceny or theft of money in the company or theft of assets.

2. Skimming, which is looting of money before the money physically enters the
company, for example, by lapping and collecting receivables that have been
written off.
3. Fraudulent disbursement or theft through unauthorized spending. It can be done
by imposing fictitious bills, fictitious salaries, fictitious official travel expenses,
falsifying checks, fictitious refunds, canceling fictitious sales.
4. Deviations in supply, for example the illegal sale of subsidized fuel to take
advantage of price differences with non-subsidized fuel.
5. Misuse, which is misusing assets, such as official vehicles or office inventory
being used for personal purposes.
c. Financial Statement Fraud (Fraudulent Statement) conducted with engineer report
finance for cover actual situation for get profit. Generally, with over or
understatement of assets or income, differences in the timing of transaction
recognition, fictitious income, debt.

3. RESEARCH METHODS
This research is a literature study that discusses articles from previous research
regarding the role of internal audit in preventing fraud. The author collects secondary
data from the literature study by collecting theories, research data or findings in
previous studies that are in accordance with the topic under study so that it is hoped that
information will be obtained that will be used to describe the variables, symptoms, or
circumstances that are the focus of the research. The process begins with research
identification by selecting national and international articles, making literature reviews
to determine the role of internal audit in preventing fraud to provide understanding and
research results related to this phenomenon. The data collected was analyzed by
qualitative analysis method with 3 stages, namely: data reduction, the researcher
examines the data and then takes only the relevant data; Data Presentation, after the
reduced data is obtained, the data is presented in the form of a description, the
relationship between categories, so as to facilitate analysis and interpretation;
Conclusion Drawing, in qualitative research are findings obtained from analysis of data

Volume 23 No.1 March 2022

59 Melinda et. al.

in order to answer research problems (Bungin, 2017) . Table. 1 shows article from
previous research on the role of internal audit in preventing fraud.

Table 1
List of Journals According to Review Criteria
Researcher Title Journal Name
Norsaine The Role of Internal Audit in Detecting Journal of “PERFORMANCE”
and Preventing Fraud (Fraud) Business & Accounting Volume
“(Case Study on PNPM Mandiri IV, No.1, March 2014
Kalianget District Urban )”

Thetty S. Rajagukguk Effect of Internal Audit and Fraud Owner, Research & Journal
Prevention on Financial Performance Accounting, Volume 1 Number 1,
“(Study Case at PT Perkebunan February 2017
Nusantara IV)”
Suginam Internal Control on Fraud Prevention Owner, Research & Journal
“(Study Case at PT. Tolan Tiga Accounting, Volume 1 Number 1,
Indonesia)” February 2017
Abdi Saputra Influence of Internal System, Control, Owner, Research & Accounting
Internal Audit and Implementation of Journal, Volume 1 Number 1,
Good Corporate Governance on Banking February 2017
Fraud “(Study the Case of a State-Owned
Enterprise Subsidiary Sharia Bank in
Medan)”
Pupung Purnamasari, The Effect of Internal Auditor on Four International Journal of
Shalsal Niko Arezona, Main Pillars In Fighting Fraud Management and Applied Science
Magnaz Lestira, Mey Volume 4, Issue3, Mar 2018
Maemunah
Nurul Alfi, Runik Puji The Role of Internal Audit in Fraud ASSETS Journal of Accounting
Rahayu Prevention Efforts and Investment, Vol 5, No 1, May
“(Corporate Case Study Banks Listed on 2019
the IDX)”
Yessy Aryanti Lestari, The Effectiveness of the Role of Internal Journal of Accounting and Taxes,
Yustrida Bernawati Audit in Prevent and Detect Cheating 20(2), 2020, 189-196

Dio Fernando, Tigor Internal Audit, Quality Control, Journal of Business & Applied
Sitorus Asymmetry Information, Behavior Management Vol.13 (No. 2): 147 –
Dysfunctional Accounting Staff and Its 205 Th. 2020
Effects to Fraud Accountancy

Mardani, Yesi Mutia Influence of the Audit Committee, Al-Iqtishad Journal Edition 16
Basri, M Rasuli Internal Audit, and Size company To Volume 1 Year 2020
Disclosure Fraud in Banking Companies
Listed on IDX 2018

Ida Fatmawati Internal Auditors' Fraud Detection: A International Journal of

Ar'Reza, Cipto Phenomenological Study Accounting & Finance in Asia
Wardoyo, Pacific

Source: Data Processed, 2021

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 60

4. RESULTS AND DISCUSSION

Based on previous studies selected in this study, there are several variables and
different research results regarding the role of internal audit in preventing and disclosing
fraud due to differences in the objects studied . (Norsain, 2014) stated that internal audit
within the PNPM Mandiri Urban, Kalianget District can prevent and detect fraudulent
practices. Internal audit is one of the evaluations conducted to assess the effectiveness
of the organization's internal control system. The control tool in the form of an internal
supervisor is good enough but is not yet available in all parts of the organization so that
it is still not effective for monitoring all lines of the organization. Internal audit is a tool
for evaluating internal control in the organization. Internal audit performance is not
optimal because the audit team which is the supervisory team lacks an understanding of
their duties and responsibilities as well as inadequate competence from members of the
supervisory body. In order to get reach optimal performance, entity must consider
supporting attributes _ internal auditor competence (Lestari, YES, & Bernawati, Y,
2020). The position of the internal audit department must be directly under top
management to strengthen the internal control system. The internal audit department
must continue to be given training and understanding on a regular basis so that it
understands the overall audit activity, evaluates the internal control system so that audit
activities run optimally, and fraud can be avoided. this in accordance with results
research by Munteanu & Zaharia (2014) which argues that internal audit plays a role in
in internal control system evaluation and analysis risks faced company.
(Rajagukguk, 2017) states that internal audit has a significant effect on fraud
prevention and ultimately leads to improving the quality of the company's financial
statements PT Perkebunan Nusantara IV. This study combines the audit committee, the
implementation of internal control, internal audit and the implementation of corporate
governance if carried out together properly will prevent fraud within the company.
Internal audit really helps the organization so that all activities run well and in
accordance with existing standards. Internal audit will help control activities which will
then be evaluated which results in recommendations if it is necessary to improve the
weaknesses that exist in the organization so that with the existence of internal audits it
can detect fraud that is happening and has occurred in the organization. Not just making
sure presence of internal auditors but entity must also ensure effectiveness of internal

Volume 23 No.1 March 2022

61 Melinda et. al.

audit in carrying out its roles and responsibilities (Lestari, YA, & Bernawati, Y, 2020).
Audit findings and recommendations should ensure that management and auditors have
get response and also do repair on weaknesses and possibilities cheating that will cause
cheating is also bad entity.
Differences in the interests of management and owners will lead to information
asymmetry in financial statements so that the implementation of internal audits and
combined with the implementation of Good Corporate Governance will create quality
financial reports and in accordance with the actual situation to prevent fraud that may be
created by management for certain purposes, this is in accordance with research (Lestari
& Bernawati, 2020) which states that an effective and optimal internal audit will help
companies to identify fraud properly and appropriately so as to minimize fraud that is
not detected by the internal auditor. Differences in the interests of management and
other stakeholders cause each party to maximize its interests so that fraud is very likely
to occur. Management who behaves opportunistically will tend to harm the company so
that internal audit is present to carry out monitoring and evaluation. The higher the
possibility of fraud that will occur, the mitigation and detection of fraud needs to be
improved. The effectiveness of internal audit is also determined by the competence of
the internal auditor, the size of the resources owned, a high level of independence,
activities and the support provided by management to the internal audit department so
that all of them must receive important attention to create a work environment free from
fraud.
(Suginam, 2017) states that internal audit has a significant effect on fraud
prevention PT. Tolan Tiga Indonesia. Internal audit cannot directly place orders on
employees and employees considering that internal audit only performs inspection
actions. This study strengthens previous research by (Cattrysse, 2002) which states that
a good internal audit will be able to prevent fraud in the company and subsequent
research by (Gusnardi, 2009) which says that internal audit has an influence on fraud
prevention. Internal control also has a positive influence in preventing fraud, but it does
not have a significant impact. Fraud prevention is not entirely determined by internal
control alone. The synergy between the audit committee, internal audit department and
internal control in the company will result in good fraud prevention and detection, but
with the cooperation of various elements and all parts of the organization it will

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 62

increasingly create high control over fraud because of the awareness of all individuals in
the organization. As institution internal control of course no could stand up themselves
to produce maximum fraud prevention, synergy implemented internal control by
consistent and done evaluation through internal audit will the more protect entity from
possible cheating happen.
(Saputra, 2017) stated that internal audit has a significant effect on fraud
prevention in the banking world. The implementation of a good internal audit
examination on all operational activities causes the level of fraud that may occur to be
reduced to the lowest level and prevents banks from losses. In addition to internal audit,
the internal control system and Good Corporate Governance also have a significant
influence in preventing fraud in the banking world. This is also in line with the opinion
of (Purnamasari et. al., 2018) stated that internal audit influences fraud prevention. The
better the supervision in the internal audit in the company, the less opportunity to
commit fraud. From the research data, the better fraud prevention indicates the ability of
internal audit to prevent fraud through the existence of a culture of honesty and high
ethics, identifying fraud risks, implementing anti-fraud programs, extensive oversight of
fraudulent report documents, risk assessment and the results of this study are in line
with the research conducted (Taufeni, 2010), (Rizkyana et. al., 2012) and (Tampubolon,
2015). The enhanced role of internal audit will also improve the performance of fraud
prevention thereby minimizing the risk of fraud.
(Alfian & Rahayu, 2019) stated that internal audit has a very important role in
preventing fraud. The internal audit of the four banks that were the sample of the study
(BRI, BNI, BTN, Mandiri) had implemented the audit plan that had been prepared and
implemented it as well as provided recommendations for the problems found in these
banks. All audit activities listed in the audit charter and regulated by the board of
directors’ regulations and internal audit will still be reviewed after the internal audit by
the audit committee to assess how much management is committed to improving the
weaknesses of internal control and internal audit. Areas that have a high risk of fraud
will be more focused on the implementation of internal audit by implementing a risk-
based audit. The banking world has a high risk of fraud, as evidenced by the many cases
of fraud committed by bank employees, especially those with high authority, so that the

Volume 23 No.1 March 2022

63 Melinda et. al.

implementation of risk-based audits is very appropriate so that the audit process is right
on target, saving time and costs.
The whistleblowing system as well as the gratification control awareness program
are used to prevent fraud in addition to internal audits. Fraud or other irregularities still
occur but with a good internal audit the organization can handle the fraud case. Internal
control cannot be separated from internal audit, which is a tool for top management to
properly control the organization to achieve its goals, fraud in the banking world has a
high level of risk so that appropriate sanctions can prevent perpetrators from repeating
their actions.
(Fernando & Sitorus, 2020) provide different research results from the seven
previous studies, considering that this study limits fraud to accounting fraud only. The
results showed that internal audit had no effect on the level of accounting fraud at the
“BM&SW” Group in Jakarta. This result is because the internal audit program, internal
audit risk assessment, and internal audit competence do not run well and cannot reduce
accounting fraud. Internal auditors must have the support of many parties and cooperate
in providing accurate and accountable information. Internal audit can run properly if it
has adequate systems and procedures. Research results this describe internal audit does
not have adequate competence and capacity in the field accountancy detect and mitigate
fraud that occurred. Research (Saputra, 2017) has the same result, where internal
auditors have no effect on fraud prevention at BPR West Sumatra. Meanwhile research
(Yusriwarti, 2017) produces a different opinion, where internal audit has an effect on
preventing accounting fraud in Banking Companies in Pekanbaru. (Mardani et al., 2020)
argue that internal audit has no significant effect on the disclosure of fraud in banking
companies listed on the Indonesia Stock Exchange in 2017-2018. The size of the
internal audit does not have a significant impact on the disclosure of fraud. The results
of this study state that if the audit committee plays a significant role in disclosing fraud
in banking companies listed on the Indonesia Stock Exchange in 2017-2018, the larger
the audit committee in the company, the better the disclosure of fraud will be and vice
versa. The size of the company also determines the disclosure of fraud, the results of the
study reveal that the larger the company, the better the disclosure of fraud. Large
companies with a large number of transactions and information will be directly
proportional to information asymmetry when compared to smaller companies (Handoko

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 64

& Ramadhani, 2017). The size of the company has an influence on the disclosure of
fraud because the greater the operational and non-operational activities, the more
opportunities for fraud to occur. These results provide an interesting conclusion for the
ranks of the company's leadership to apply risk-based auditing to large companies
without reducing the quality of internal audits for small companies.
(Ar'Reza et. al., 2020) revealed that internal audit influences the prevention and
disclosure of fraud. Potential fraud can be detected from the discovery of errors during
the audit examination, then it is concluded whether there is a need for in-depth audit
findings. Risk-based internal audit provides corrective solutions but is not required to
provide certainty of fraud, but only to provide evidence showing that fraud is likely to
occur and provide recommendations for improvement to reduce any risk. Thus, internal
auditors gain legitimacy because they have carried out their activities, roles and
competencies as expected. risk big cheating demand effort mitigation as well as proper
detection. Good internal audit effectiveness will help company identify fraud with good
and appropriate so that cheating is not detected by internal auditors can minimized
(Sustainable, YES, & Bernawati, Y, 2020).

5. CONCLUSION
Internal audit is one of the evaluations conducted to assess the effectiveness of
the organization's internal control system. Internal auditors must be equipped with
adequate competence in carrying out their duties by being given regular training. The
position of the internal audit department must be directly under top management to
create audit independence. Internal audit performance will maximum when audit
committee, internal audit department and internal control, implementation of Good
Corporate Governance, collaboration from various elements and all parts of the
organization in the company are synergized will result in better fraud prevention and
detection. If the internal audit program, assessment internal audit risk, and internal audit
competence does not walk with good so level fraud no could lower to the lowest level.
Recommended results on audit findings should also be run by management so that fraud
no repeated.

Volume 23 No.1 March 2022

65 Melinda et. al.

6. BIBLIOGRAPHY
Alfian, Nurul, and Runik Rahayu. 2019. “Peran Audit Internal Dalam Upaya Preventif
Fraud (Study Kasus Perusahaan Perbankan Yang Terdaftar Di Bei).” Aktiva:
Jurnal Akuntansi dan Investasi 4(1): 45–59.
Alison. 2006. “Fraud Auditing.” The Audit Journal 85(1): 2071–79.
Ar’Reza, Ida Fatmawati, Cipto Wardoyo, and Sheila Febriani Putri. 2020. “Internal
Auditors’ Fraud Detection: A Phenomenological Study.” International Journal
of Accounting & Finance in Asia Pasific 3(2): 68–76.
Association of Certified Fraud Examiner (ACFE). 2012. “Report to the Nations on
Occupational Fraud and Abuse.” Journal of Money, Investment and Banking
(20): 75–87.
Beckmerhagen et al. 2004. “Case Studyon The Effectiveness of Quality Management
System Audits.” Proceedings of the 5th International Conference on Quality
and Reliability 16(1): 14–25.
Betri. 2018. “Pemeriksaan Manajemen.” In Noer Fikri, , 36–38.
Bungin, Burhan. 2017. Metodologi Penelitian Kualitatif. Depok: Raja Grafindo Persada.
D. Hartanto. 2012. “Akuntansi Untuk Usahawan.” Fakultas Ekonomi Universitas
Indonesia 9.
Fernando, D, and T Sitorus. 2020. “Internal Audit, Kualitas Pengendalian, Asimetri
Informasi, Perilaku Disfungsional Staff Accounting Dan Pengaruhnya Terhadap
Kecurangan Akuntansi.” Journal of Business & Applied … 13(2): 147–64.
Handoko, Bambang Leo, and Kinanti Ashari Ramadhani. 2017. “Pengaruh Karakteristik
Komite Audit, Keahlian Keuangan Dan Ukuran Perusahaan Terhadap
Kemungkinan Kecurangan Laporan Keuangan [The Influence of Audit
Committee Characteristics, Financial Expertise, and Company Size toward the
Possibility of Financial Repo.” DeReMa (Development Research of
Management): Jurnal Manajemen 12(1): 86.
Institut Akuntan Publik Indonesia. 2013. “Standar Profesional Akuntan Publik.”
Jakarta: Salemba Empat: 1–7.
Karyono. 2013. 1 ANDI Forensic Fraud. 1st ed. Yogyakarta.
Kompas.com. 2019. “Eks Dirut Garuda Indonesia Dan Pengusaha Ditahan KPK.”
kompas.com. https://nasional.kompas.com/read/2019/08/07/18260161/eks-dirut-
garuda-indonesia-dan-pengusaha-ditahan-kpk.
Lestari, Yessy Aryanti, and Yustrida Bernawati. 2020. “Efektifitas Peran Internal Audit
Dalam Mencegah Dan Mendeteksi Kecurangan.” Jurnal Akuntansi dan Pajak
20(2): 189–96.
Mardani, Mardani, Yesi Mutia Basri, and M Rasuli. 2020. “Pengaruh Komite Audit,
Audit Internal, Dan Ukuran Perusahaan Terhadap Pengungkapan Kecurangan
Pada Perusahaan Perbankan Yang Terdaftar Di Bei 2018.” Jurnal Al-Iqtishad
16(1): 1.
Mulyadi, D. 2015. Perilaku Organisasi Dan Kepemimpinan Pelayanan. Bandung:
Alfbeta.
Norsain, Norsain. 2014. “PERANAN AUDIT INTERNAL DALAM MENDETEKSI
DAN MENCEGAH KECURANGAN (FRAUD) (Studi Kasus Pada PNPM
Mandiri Perkotaan Kecamatan Kalianget).” PERFORMANCE “ Jurnal Bisnis &
Akuntansi” 4(1): 13–21.

ISSN : 1693-0164 │ e-ISSN : 2581-074X

The Role Of Internal Audit In Fraud Prevention And Disclosure. 66

Rajagukguk, Thetty S. 2017. “Pengaruh Internal Audit Dan Pencegahan Fraud Terhadap
Kinerja Keuangan (Studi Kasus Pada PT Perkebunan Nusantara IV).” Owner
Riset & Jurnal Akuntansi 1(1): 1689–99.
Saputra, Abdi. 2017. “Pengaruh Sistem Internal , Kontrol , Audit Internal Dan
Penerapan Good Corporate Governance Terhadap Kecurangan ( FRAUD )
Perbangkan ( Studi Kasus Pada Bank Syariah Anak Perusahaan BUMN Di
Medan ).” Owner Riset & Jurnal Akuntansi 1(1): 48–55.
Suginam, Suginam. 2017. “Pengaruh Peran Audit Internal Dan Pengendalian Intern
TerhadapPencegahan Fraud ( Studi Kasus Pada PT. Tolan Tiga Indonesia).”
Owner 1(1).
Widaningsih, Mimin, and Desy Nur Hakim. 2015. “Pengaruh Profesionalisme Auditor
Internal Terhadap Pencegahan Dan Pendeteksian Kecurangan (Fraud).” Jurnal
Riset Akuntansi dan Keuangan 3(1): 586.

Volume 23 No.1 March 2022