Internal control implementation in higher education institutions: determinants, obstacles and contributions toward governance practices and fraud mitigation

Published date08 March 2021
Date08 March 2021
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorHafiez Sofyani,Haslida Abu Hasan,Zakiah Saleh
Internal control implementation in
higher education institutions:
determinants, obstacles and
contributions toward governance
practices and fraud mitigation
Hafiez Sofyani
Department of Accounting, University of Malaya, Kuala Lumpur, Malaysia and
Department of Accounting, Universitas Muhammadiyah Yogyakarta,
Bantul, Indonesia, and
Haslida Abu Hasan and Zakiah Saleh
Department of Accounting, University of Malaya, Kuala Lumpur, Malaysia
Purpose This study aims to investigate internal control (IC) implementation in higher education
institutions (HEIs). Thisstudy also explores determinants, obstacles and contributionsof IC implementation
within HEIs.
Design/methodology/approach The study uses a qualitative researchmethod by conducting semi-
structuredinterviews with internal auditors of HEIs.
Findings This study found a difference of IC among all HEIs in terms of design. IC implementation is
perceived to have a positive contribution to accountability enhancement and fraud mitigation. Several
determinantsand obstacles faced by HEIs in implementing IC are presented in the paper.
Practical implications The IC has to be operated effectively to achieve its benef‌it. However, not all
HEIs implementIC properly.
Originality/value This paper is a pioneer study that raises IC implementationin HEIs and its role in
governancepractices and corruption mitigation.
Keywords Accountability, Fraud, Higher education institution (HEI), Internal control (IC)
Paper type Research paper
Corruption has become rampant in all areas of life. It not only occurs in government and
company sectors but also in the higher education institutions (HEIs). Alarming news has
been reported by Indonesian CorruptionWatch (ICW) about corruption cases that occurred
in several HEIs in Indonesia from 2006 to 2016. ICW reported that 37 cases had occurred
during the period, and as a consequence, Indonesia suffered from state f‌inancial losses of
around Rupiah 218bn, which is equivalent to US$15.6m( The emergence of
various corruption cases indicates poor governance practices in Indonesian HEIs (Halbouni
et al.,2016;Krambia-Kapardis, 2002). The Indonesian Government has issued specif‌ic
regulations to improve the HEIsgovernance practices to tackle those problems. One of them
is the Indonesian Regulation of NationalEducation Minister Number 16 of 2009 concerning
the Indonesian HEIs internalcontrol (IC) system.
practices and
Journalof Financial Crime
Vol.29 No. 1, 2022
pp. 141-158
© Emerald Publishing Limited
DOI 10.1108/JFC-12-2020-0246
The current issue and full text archive of this journal is available on Emerald Insight at:
According to various literatures, it is considered that IC has played a signif‌icant role in
mitigating fraud in an organization. Nawawi and Salin (2018) found that a strong IC
implementation and a better remuneration paid to the employees could reduce the risk of
occupational fraud committed in the company. Meanwhile, IC weaknesses can be major
contributing factors for committing fraud (Zakaria et al.,2016). Rendon and Rendon (2016)
contend that the fraud incidents generally occurred during the source selection and the
contract administration phases and involved control activities, monitoring and control
environment components of IC. Hence, they suggested that to mitigate fraud, the
organization needs to emphasize capable contracting processes and improve effective IC
Today, however, Chalmerset al. (2019) found that studies related to IC implementation in
not-for-prof‌it organizations(NFPO), such as HEIs, particularly about problems and benef‌its
of IC, have gotten limited attentionfrom academics. Several studies related to the role of IC
implementation in HEIshave been carried out by several researchers, namely, in Uganda by
Ssuuna (2011), in Taiwan by Duh et al. (2014) and in Somalia by Hassan Abdullahi and
Muturi (2016). Those studies found that IC implementation has a positive impact on HEIs
f‌inancial performance. Nevertheless, until today, there is a lack of research in how IC is
actually implemented at HEI and how it contributes more broadly in HEI apart from
f‌inancial performance,specif‌ically related to governance practices and corruptionissues. To
address this gap,this study is executed.
Explicitly, this research aims to investigate the implementation and role of IC toward
good governance practicesand corruption mitigation in Indonesian HEIs. The currentstudy
also explores the determinants and obstacles faced by HEIs in implementing the IC. This
study involved both public and private HEIs in getting comparative results. As such, this
study captured richer insight about IC implementation and discovered the differences of IC
in both public and privateHEIs. Comparison between public and private HEIsis essential to
be explored as IC implementation in public HEIs is supervisedby the Ministry of Education
and Culture of Indonesia by involving the inspectorate general and f‌inancial and
development oversight body while that in private HEIs does not. Specif‌ically, the research
questions of the current study are as follows:
RQ1. How do the Indonesian public and private HEIs implement IC, and what are its
RQ2. Howdoes IC contribute to HEI?
RQ3. Whatare the obstacles faced by HEIs in implementingIC?
This paper contributes practically to regulators in consideringimprovements related to
effective IC implementation in HEIs, both public and private, specif‌ically in Indonesia.
This paper also provides input to HEI management to be strongly committed to
building tone on the top, primarily to mitigate fraud in HEI. Even though this study
was conducted in Indonesia, this studys results can be an input for other HEIs inother
countries, especially those referring to the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) framework in implementing IC. Theoretically, this
study contributes to the development of a body of knowledge related to the topic of
good university governance practices based on several theories, namely, new
institutional and managerial hegemony, mainl y associated with IC policy
implementation in the context of the HEI sector that still receives limited attention
(Chalmers et al., 2019).

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