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<p>This study investigates how internal audit (IA) quality, defined by independence, compliance with professional standards, and auditor competence, affects fraud management effectiveness across organizational contexts. Drawing on survey data from 668 internal auditors in Indonesia, the study employs partial least squares structural equation modeling (PLS-SEM) to test three hypothesized relationships. Findings reveal that IA competence and compliance are critical drivers of fraud management in non-multinational and non-financial firms, where governance systems are less institutionalized. In contrast, IA independence becomes more significant in multinational corporations and financial institutions, where structural complexity and regulatory expectations are higher. The study contributes to the internal auditing literature by contextualizing IA quality attributes within sectoral and organizational realities. It further offers practical implications for&#xa0;management,&#xa0;internal auditing profession, audit committees and regulators by identifying the conditions under which specific IA attributes most effectively mitigate fraud risk. These findings support a contingency-based approach to internal audit deployment and policy design.</p>

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Internal audit quality and fraud risk management: the role of independence, compliance, and competence across organizational types

  • 期刊论文

  • 发表日期：

    2025年10月4日

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  • Aria Farah Mita,
  • Dyah Setyaningrum,
  • Dini Rosdini

摘要

This study investigates how internal audit (IA) quality, defined by independence, compliance with professional standards, and auditor competence, affects fraud management effectiveness across organizational contexts. Drawing on survey data from 668 internal auditors in Indonesia, the study employs partial least squares structural equation modeling (PLS-SEM) to test three hypothesized relationships. Findings reveal that IA competence and compliance are critical drivers of fraud management in non-multinational and non-financial firms, where governance systems are less institutionalized. In contrast, IA independence becomes more significant in multinational corporations and financial institutions, where structural complexity and regulatory expectations are higher. The study contributes to the internal auditing literature by contextualizing IA quality attributes within sectoral and organizational realities. It further offers practical implications for management, internal auditing profession, audit committees and regulators by identifying the conditions under which specific IA attributes most effectively mitigate fraud risk. These findings support a contingency-based approach to internal audit deployment and policy design.