Government internal auditors
increase their capacity to uncover financial irregularities when they maintain
high professional skepticism and preserve strict independence from audited
entities.
A study published in the International
Journal of Applied Economics, Accounting and Management examined how
psychological and professional attributes shape fraud detection within public
sector oversight agencies. Conducted by researchers Ayu Sidha Wardani and Siti
Noor Khikmah from Universitas Muhammadiyah Magelang, the investigation analyzed
internal auditors across the Kedu Residency Inspectorate in Central Java,
Indonesia. The findings demonstrate that professional skepticism directly
enhances fraud detection and reinforces auditor independence, while work
experience strengthens independence to indirectly boost anti-fraud
capabilities.
The Public Sector Fraud
Challenge
Delays in identifying financial
misconduct pose significant operational and economic risks to public
governance. In Indonesia, corruption cases involving state budget embezzlement
and regional asset mismanagement highlight the necessity of effective internal
oversight. Public sector internal auditors, such as those working within
regional inspectorates, serve as the primary line of defense against financial
mismanagement and fraud.
Despite structural oversight
frameworks, public sector inspectors frequently face challenges in detecting
sophisticated fraud schemes promptly. Factors such as institutional pressure,
familiar working relationships with government employees, and varying levels of
field experience can impact an auditor's objectivity. Understanding how
internal behavioral traits—specifically professional skepticism, career
experience, and objective independence—interact is critical for improving
public sector financial accountability.
Study Methodology
The researchers surveyed
government auditors operating within the Inspectorate of the former Kedu
Residency, encompassing six administrative municipal and regency regions in
Central Java. Out of a population of 298 regional inspectorate employees, the
authors applied a purposive sampling strategy focusing on certified civil
servant auditors with a minimum of three years of operational experience.
The finalized sample consisted of
89 validated auditor responses. Data were processed using Structural Equation
Modeling with Partial Least Squares (SEM-PLS) via SmartPLS 3 software. This
analytical approach evaluated both direct relationships and indirect mediation
paths, testing how independence bridges personal attributes with fraud
detection performance.
Key Findings
The statistical evaluation
yielded several concrete results regarding auditor performance and structural
mediation:
- Direct Impact of Professional Skepticism:
Professional skepticism exerts a strong direct positive effect on an
auditor's ability to detect fraud (path coefficient = 0.503, p = 0.006).
Auditors who maintain a questioning mindset are substantially more
effective at identifying red flags and anomalous transactions.
- Role of Auditor Independence: Independence
significantly improves fraud detection capabilities (path coefficient =
0.170, p = 0.001) and directly influences overall audit objectivity.
- Influence of Work Experience: Work
experience directly improves auditor independence (path coefficient =
0.245, p = 0.039) and fraud detection ability (path coefficient = 0.110, p
= 0.004).
- Skepticism Drives Independence: Higher
professional skepticism directly boosts auditor independence (path
coefficient = 0.383, p = 0.001), helping professionals resist external
client pressure.
- Mediating Effects: Independence serves as a
crucial mediating bridge. The indirect pathway from professional
skepticism through independence to fraud detection is statistically
significant (path coefficient = 0.465, p = 0.001). Similarly, independence
mediates the relationship between work experience and fraud detection
(path coefficient = 0.342, p = 0.004).
Real-World Impact and
Institutional Implications
These findings offer clear
guidance for public administration, anti-corruption agencies, and audit
institutions seeking to improve oversight effectiveness.
For government inspectorates,
technical accounting knowledge alone is insufficient to guarantee financial
integrity. Institutional policies must actively foster professional skepticism
by training auditors to evaluate evidence critically rather than taking client
records at face value. Furthermore, public sector bodies must establish strict
organizational safeguards that preserve internal auditor independence,
insulating staff from political or managerial influence.
By structuring professional
development around critical inquiry and objective independence, regional
governments can significantly reduce delays in detecting public sector fraud
and safeguard state assets.
"Professional skepticism
encourages auditors to be more critical, not easily accept evidence at face
value, and be more sensitive to red flags that indicate irregularities,"
the authors note, emphasizing that independence acts as a vital filter to
maintain objective professional judgment.
Research Authors
- Ayu Sidha Wardani, S.Ak.: Accounting
researcher at Universitas Muhammadiyah Magelang, specializing in public
sector auditing, internal controls, and forensic accounting.
- Dr. Siti Noor Khikmah, S.E., M.Si., Akt., CA:
Assistant Professor of Accounting at Universitas Muhammadiyah Magelang,
focusing on behavioral accounting, auditing standards, and public sector
governance.
Academic Source Information
- Article Title: The Role of Professional
Skepticism and Work Experience in Enhancing Auditors' Ability to Detect
Fraud Through Independence (An Empirical Study at the Kedu Residency
Inspectorate)
- Journal Name: International Journal of
Applied Economics, Accounting and Management (IJAEAM)
- Publication Year: 2026
- DOI: https://doi.org/10.59890/ijaeam.v4i3.175
- Official URL: https://mrymultitechpublisher.my.id/index.php/ijaeam/index
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