THE MEDIATION ROLE OF INTERNAL CONTROL EFFECTIVENESS ON FACTORS INFLUENCING FRAUD PREVENTION IN VILLAGE FINANCIAL MANAGEMENT

Abstract

This study aims to analyze and provide empirical evidence regarding the role of mediation of the effectiveness of internal control on factors that affect fraud prevention such as the competence of village officials, transparency, accountability, and individual morality in village financial management. This research was carried out in 83 villages located in Buton Regency, Southeast Sulawesi Province. The research sample amounted to 415 people through a sampling technique using proportionate stratified random sampling with sampling units, namely the village head, village secretary, finance head, and the Village Consultative Body. The research data was collected through a questionnaire and analyzed by testing the mediation effect using WarpPLS 5.0 software. The results of the study show that the competence of village officials, transparency, accountability, and effectiveness of internal control have a direct influence on fraud prevention, while individual morality has no direct or indirect influence on fraud prevention. The testing of the mediation effect was fulfilled by two paths as partially mediating and two pathways were found to have no mediation effect. The implications of this study show that the effectiveness of internal control is a mediating variable for influencing factors in fraud prevention. This condition confirms the effectiveness of internal control as an internal control mechanism that can increase fraud prevention in village financial management.