Corruption as distinct crime: the need to reconceptualise internal control on controlling bureaucratic occupational fraud
| Date | 27 July 2021 |
| Pages | 680-700 |
| DOI | https://doi.org/10.1108/JFC-04-2021-0100 |
| Published date | 27 July 2021 |
| Author | Ach Maulidi,Jake Ansell |
Corruption as distinct crime: the
need to reconceptualise internal
control on controlling
bureaucratic occupational fraud
Ach Maulidi
Business School, The University of Edinburgh, Edinburgh, UK and
Department of Accounting, BINUS Graduate Program,
Bina Nusantara University, Jakarta Barat, Indonesia, and
Jake Ansell
School of Business, The University of Edinburgh, Edinburgh, UK
Abstract
Purpose –The purpose of this study is to provide theoreticalguidance that enables local governments to
deal with occupationalfraud.
Design/methodology/approach –The quantitative approach is used to examine the efficacy of the
Committee of SponsoringOrganisations of the Treadway Commission (COSO) internalcontrol framework in
tackling occupationalfraud in local government. To achieve the goals, the authors performed a survey of the
Indonesianauditor institutions.
Findings –It is not appropriate to argue that all types of local government fraud can be deterred by a single
internal control. The study suggests that COSO internal controls are not effective for dealing with corruption cases.
However, the authors do find the efficacy of those controls are obvious for controlling asset misappropriation and
financial statement fraud. This result indicates that if the COSO internal control framework is only designed for
routine financial control and asset protection, it significantly and negatively influences its efficacy to deal with
occupational fraud. This study has both theoretical and managerial implications, discussed separately.
Originality/value –In the field of prevention, the authors cannot make generalised theories and
approaches for dealing with occupational fraud. Whilst previous authors have offered fraud deterrents in
terms of internal controls,they have failed to realise the need to understand their effectiveness for particular
forms of fraud. This paper sheds light on theeffectiveness of internal controls in achieving their goals. This
has both practicalapplications and stimulates theoretical insights.
Keywords Local government, Internal control, COSO, Occupational fraud, Fraud deterrent
Paper type Research paper
Retraction notice: The publishers of Journal of Financial Crime wish to retract the article “Corruption
as distinct crime: the need to reconceptualise internal control on controlling bureaucratic occupational
fraud”by A. Maulidi and J. Ansell which appeared in Volume 29, Issue 2, 2022.
It has come to our attention that statistical errors are present within the article and therefore the
findings cannot be relied upon.
As part of an investigation into the article’sfindings, the authors were requested to provide a copy
of the dataset so that the editorial team could verify the findings. The authors were unable to provide
the dataset and stated they had committed statistical errors. The authors would like to note that any
wrongdoing was unintentional.
This article has been retracted at the authors’request.
The author guidelines of the Journal of Financial Crime make it clear that submitted articles must
include data free from errors that may affect the understanding of the article.
The journal sincerely apologises to its readers.
JFC
29,2
680
Journalof Financial Crime
Vol.29 No. 2, 2022
pp. 680-700
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-04-2021-0100
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
Retracted
Introduction
Occupational fraud committed by respectable high social status individuals has attracted
many academic authors (Engdahl and Larsson, 2016;Goossen et al.,2016;Locker and
Godfrey, 2006) and professionals (ACFE, 2018b;PwC, 2018). Quantitative and qualitative
studies of how white collar criminality are perpetrated and how the organization, as well as
regulatory agencies, seekto control such offenses are the most illuminatingpart of the fraud
literature. One of the notions that receive considerable attention is about the preventive
strategies in dealing with white-collar criminality. For example, whilst many scholars
believe that their proposed frameworks (whichare associated with internal control, ethical
culture and management review) can deter any types of illegality, they, however, have
limited effectiveness in practice (Wurthmann, 2020;Bierstaker et al.,2006;Adams et al.,
2006). As explained by prior studies (Maulidi, 2020;Ormerod et al.,2012;Dai et al.,2017),
organisations needto further understand the context to control the risk of fraud.
Experimental research has helped to identify the situational correlates of fraud
behaviours, but lacks a theoretical framework for organising the phenomenon of
organisationalfraud operated by organisational leaders (Power, 2013).In addition, extensive
studies have shown that people engaging in misconduct is not because of the existence of
opportunities of doingso (Gneezy, 2005;Ariely et al.,2019;Knechel and Mintchik, 2021;fora
review about the concept of fraudtolerance). Taken together, those studies support the view
that the increase in the rate of organisational illegalities is not merely a function of the
increased opportunitiesfor doing such acts as well. Of course, it becomes a serious challenge
for organisations and regulatory agencies. As Maulidi (2020) have been explained,
organisation and regulatory agencies are required to understand fraud prevention beyond
the structural factorsthat motivate offenders to commit illegal acts.
In the wake of high-profile corporate scandals, some people argue that effective internal
control is becoming strategically important in many organisations because it is evidenced to be
acost-efficient way to manage the fraud risks in everyday operations (Shonhadji and Maulidi,
2020;Skousen et al.,2009). Shonhadji and Maulidi (2020) mention, the most applied internal
control in both private and public organisations is the internal control framework prescribed by
the Committee of Sponsoring Organisations of the Treadway Commission (COSO). The COSO’s
internal control framework, which is composed of integrated five components, is viewed as the
gold standard of internal control for many organisations (Cendrowski et al.,2007).Flahe rty and
Maki (2004), as executives on the Treadway Commission (COSO), promulgate that the COSO
integrated framework is intended to deal with financial reporting fraud and potential events
that may establish malicious risks, fraud and, as well as exte rnal fraud.
Recent empirical research studies show the efficacy of organisational internal control on
preventing opportunitiesto engage in fraud acts. For example, Al-Dhamari et al. (2018), who
examine the role of the internal audit function (IAF) in Malaysia acknowledge that the IAF
plays a vital role in controlling moral hazard and unethical behaviours. The study also
shows when internal corporate governance mechanisms are relatively weak, and the
enforcement of the legal system is low, financial reporting quality then would deteriorate.
Brokenshire et al. (2011), synthesise a wide range of fraudulent activities encompassing
financial crimes that occurred in the UK’s local governments. They note that due to
sophisticated modus operandi and lack of effective internal control, government bodies
experience difficulties in dealing with tangible or intangible conducts associated with
wrongdoings or frauds. Several contemporary studies (Laxman et al.,2014;Rezaee, 2005)
and existing literatures (Cendrowski et al.,2007;Hopwood et al.,2009;Taylor, 2011) point
out that COSO internal control system comprising five components has a significant
influence on the process of discovering the presence of a potential source of fraud
Corruption as
a distinct
crime
681
Retracted
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