GOOD CORPORATE GOVERNANCE MODERATES THE EFFECTIVENESS OF INTERNAL CONTROLS AND THE SUITABILITY OF COMPENSATION AGAINST INDICATIONS OF FRAUD

Abstract

This research aims to analyze the influence of the effectiveness of internal control and appropriateness of compensation on indications of fraud, as well as to test whether good corporate governance is able to strengthen this influence. The population in this study were all LPD employees in Karangasem district, namely 824 employees with a sample size of 89 respondents. Determination of the sample using the simple random sampling method. Data were collected by distributing questionnaires which were distributed to employees who were the research samples. The data analysis technique used in this research is Structural Equation Modeling (SEM) based on Partial Least Square (PLS) using SmartPLS 3.0 Software.

The research results show that (1) The effectiveness of internal control has a negative effect on indications of fraud and accepts H1. (2) Suitability of compensation has a negative effect on indications of fraud and accepts H2. (3) Good Corporate Governance strengthens the influence of internal control effectiveness on indications of fraud and accepts H3. (4) Good Corporate Governance weakens the effect of suitability of compensation on indications of fraud and rejects H4. For further research, it is recommended to increase the number of samples used by expanding the research area. In addition, for further research, we can look for other variables that have not been tested in this study related to indications of fraud.