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Quality of internal control procedures : antecedents and moderating effect on organisational justice and employee fraud

journal contribution
posted on 2008-01-01, 00:00 authored by K Rae, Navaneetham Subramaniam
Purpose – This study aims to bring together theoretical concepts from the organizational justice, internal control and fraud literature to develop two distinct models relating to employee fraud and the quality of internal control procedures (ICP), respectively.

Design/methodology/approach – Survey data from 64 Australian firms were used to develop the two models. The first model was tested using a logistic regression analysis, and the second model was tested using a multiple regression analysis.

Findings – The first model reveals that the quality of ICP has a moderating effect on the relationship between perceptions of organizational justice and employee fraud. The second model indicates that ICP quality is significantly and positively related to three key organizational factors: the corporate ethical environment, the extent of risk management training of staff, and the internal audit (IA) activity level.

Practical implications – Risk management strategies relating to employee fraud will need to pay greater attention to organizational factors that affect both perceptions of justice at the workplace and ICP quality, including fostering a more ethical and equitable work environment, increasing IA activities and staff training in risk management.

Originality/value – Using the fraud triangle framework, this study extends previous literature by providing empirical evidence on the role of organizational justice and ICP regarding employee fraud.

History

Journal

Managerial auditing journal

Volume

23

Issue

2

Pagination

104 - 124

Publisher

MCB University Press

Location

Bradford, England

ISSN

0268-6902

eISSN

1758-7735

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2008, Emerald Group

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