The Impact of Professional Education, Independence, and Integrity on Fraud Detection: The Role of Internal Control Detection, Risk-Based Audits, and Good Corporate Governance as a Moderating Variable

Abstract

Introduction: Fraud in State-Owned Enterprises (SOEs) in Indonesia remains a significant issue due to its impact on the national economy and public trust. High-profile cases involving SOEs, such as PT Jiwasraya and PT Garuda Indonesia, demonstrate that existing internal control systems are insufficient in detecting fraud.

Objectives: This study aims to analyze the impact of professional education, independence, and integrity of auditors on their fraud detection capabilities through internal control detection and risk-based audits, with Good Corporate Governance (GCG) as a moderating variable in State-Owned Enterprises (SOEs) in East Java.

Methods: The research employs a quantitative approach using PLS-SEM analysis to test the relationships between the variables.

Results: The findings indicate that professional education has a significant positive impact on internal control detection, risk-based audits, and fraud detection. Independence significantly affects internal control detection and risk-based audits, though it does not directly impact fraud detection. Auditor integrity positively affects both internal control detection and fraud detection, but does not significantly influence risk-based audits. Furthermore, Good Corporate Governance strengthens the impactof internal control detection on fraud detection, while weakening the impactof risk-based audits on fraud detection.

Conclusions: This study suggests enhancing auditor professional education, strengthening auditor independence and integrity, and applying Good Corporate Governance principles in SOEs to improve the effectiveness of oversight and fraud detection. By Introducing new concepts such as the integration of internal control detection and risk-based audits, along with the moderating role of GCG, this study makes a significant contribution to strengthening the oversight system in the SOE sector.