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

Kirsty Rae (Department of Accounting, Finance and Economics, Griffith University, Southport, Australia)
Nava Subramaniam (Department of Accounting, Finance and Economics, Griffith University, Southport, Australia)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 4 January 2008

10640

Abstract

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.

Keywords

Citation

Rae, K. and Subramaniam, N. (2008), "Quality of internal control procedures: Antecedents and moderating effect on organisational justice and employee fraud", Managerial Auditing Journal, Vol. 23 No. 2, pp. 104-124. https://doi.org/10.1108/02686900810839820

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

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