EFFECT ON EFFECTIVENESS OF INTERNAL CONTROL OPERATION OF GOOD GOVERNANCE AND IMPACT ON THE DECREASE IN FRAUD: Survey on Monitoring the Regional Police Inspectorate of the Republic of Indonesia

Abstract

The purpose of this research is to offer a model that depicts the influence of internal control effectiveness toward good governance and its impact on reducing the fraud by a survey on regional internal audit of the Indonesia National Police (INP).  The model proposed in this research is tested by means of structural equation modeling. The data are collected from a cluster sampling of 217 regional internal auditors in the INP.  The verificative results give empirical evidence that the internal control effectiveness influences on the good governance, that the internal control effectiveness influences toward the fraud, and that the good governance has impact on the fraud in INP. This research demonstrates that INP must improve its internal control effectiveness and good governance in order to minimize the risk of fraud tendency especially in INP as a public sector organization. The model proposed in this research gives a comprehensive understanding that the internal control effectiveness influences on the good governance and the importance of them as devices to manage INP’s fraud exposure.

Keywords: internal control effectiveness, good governance, fraud