The Effect of Forensic Accounting and Investigative Auditing on Fraud Prevention and Disclosure, with Internal Control System Effectiveness as a Moderating Variable

Electronic Journal of Education, Social Economics and Technology Vol. 6, No. 2, (2025), pp. 1~10, Article ID: 1305 ISSN 2723-6250 (online) DOI: https://doi.org/10.33122/ejeset.v6i2.1305 Research Article The Effect of Forensic Accounting and Investigative Auditing on Fraud Prevention and Disclosure, with Internal Control System Effectiveness as a Moderating Variable Ayu Ningtyas Dwi Prasasti*, and Fatchan Achyani Department of Accounting, Universitas Muhammadiyah Surakarta, Surakarta, Indonesia, 57169 *Corresponding Author: | Phone: +6281330879029 ABSTRACT This study aims to examine the effect of forensic accounting and investigative auditing on fraud prevention and detection, with the effectiveness of internal control systems as a moderating variable at the Financial and Development Supervisory Agency (BPKP) of Central Java Province. This study uses a quantitative approach. The population in this study consisted of BPKP auditors in Central Java Province, with a total of 60 respondents selected using purposive sampling. The data used in this study was primary data collected by distributing questionnaires. Data analysis used the Structural Equation Modeling (SEM) method through the Partial Least Square (PLS) and Moderated Regression Analysis (MRA) approaches with the SmartPLS Version 4 software application. The results showed that forensic accounting had no effect on fraud prevention and detection, while investigative auditing had a positive and significant effect. The effectiveness of internal control systems was unable to moderate the influence of forensic accounting and investigative auditing on fraud prevention and detection. Keywords: Forensic Accounting; Investigative Auditing; Internal Control; System Effectiveness; Fraud Prevention; Detection 1. INTRODUCTION The high incidence of fraud and corruption in Indonesia’s public sector remains a serious concern for both the government and society. In 2024, Indonesia scored 37 out of 100 on the Corruption Perceptions Index, up from 34 the previous year, ranking 99th out of 180 countries and fifth in ASEAN, indicating persistent high levels of corruption. The Attorney General reported state losses from alleged corruption totaling approximately IDR 310.61 trillion, USD 7.88 million, and 58.135 kilograms of gold, highlighting the urgent need for prevention and detection efforts(Fauziah & Amalia, 2024). The Corruption Eradication Commission (KPK) emphasizes strengthened anti-corruption measures, while the Financial and Development Supervisory Agency (BPKP), as the government’s internal oversight body, plays a crucial role in ensuring accountability, transparency, and proper financial governance across all levels of government by conducting audits, supervision, and providing corrective recommendations to prevent fraud and corruption in public sector projects(Ardiansyah, 2023). In line with its mandate, BPKP’s oversight of the Sheikh Mohammed bin Zayed (MBZ) elevated toll road project revealed state losses of IDR 510 billion due to reduced concrete quality and lower steel box girder volumes, key structural components. These technical manipulations compromised safety, restricting the road to light vehicles while barring heavy trucks (Kompas, 2025). The case underscores the need for strict supervision, fraud detection, and stronger internal controls to ensure project quality and public safety(Hair & Alamer, 2022). Effective fraud prevention requires coordination among oversight bodies, law enforcement, and stringent regulations. In Indonesia, fragmented anti-corruption efforts across KPK, Police, and Prosecutor’s Office often hinder coordination, highlighting that beyond enforcement, systemic improvements in transparency and accountability at all government levels are essential to minimize corruption in both strategic and local projects (Sugiyono, 2016). Central Java Province is notably vulnerable to village fund misappropriation and local government corruption. According to the Central Java High Prosecutor's Office, 30 cases of village fund misuse were recorded by April 2025, up from 29 cases in 2024, involving personal use of funds, inaccurate financial reporting, and document falsification (DetikJateng, 2025). The Corruption Eradication Commission (KPK) highlighted that several village heads faced legal action for fund abuse, indicating persistent challenges despite preventive measures (Dianto, 2023). In response, the provincial government, Page 1 of 10 Prasasti & Achyani Electronic Journal of Education, Social Economic and Technology, Vol. 6, No. 2, (2025), pp.1~10, Article ID: 1305 through the Village Community Empowerment Agency, has promoted regulations on fund management and established public reporting channels, with some officials returning misused funds. Strengthening fraud prevention and detection in the public sector, particularly within the Central Java Financial and Development Supervisory Agency (BPKP), requires a solid understanding of key concepts such as forensic accounting, investigative auditing, and internal control systems(Widjanarko et al., 2019). Forensic Accounting is a specialized field that integrates auditing, accounting, and investigative skills to detect and resolve financial fraud(Sari et al., 2023). Practitioners apply specialized methods to identify, analyze, and compile evidence for legal proceedings, collaborating with law enforcement, lawyers, and relevant parties to address fraudulent activities professionally (Sofyani, 2025a). Its scope spans both public and private sectors: in the public sector, it focuses on state financial losses such as corruption cases, while in the private sector, it addresses contract breaches and corporate fraud. Central to forensic accounting is the “forensic triangle” of loss, unlawful action, and causal relationships, linking accounting, law, and auditing to resolve legal issues (Putri et al., 2024; Rashinta, 2021). Unlike regular audits, which assess the fairness of financial statements, forensic accounting emphasizes the detection, proof, and investigation of fraud using investigative and analytical techniques, including transaction pattern analysis and evidence testing, and often involves serving as expert witnesses in legal proceedings (Chafif, 2025). Forensic accounting is distinguished by its high level of professional skill and independence, integrating accounting, auditing, and legal expertise to detect and address fraud, unlike conventional audits that focus mainly on compliance and financial statement fairness (Stenly, 2024). Investigative auditing systematically collects evidence to identify financial irregularities or fraud, considering both numerical data and the contextual background of transactions (Sari et al., 2023). Techniques include physical inspections, third-party confirmations, document analysis, forensic computing, fund tracing, and tax-related methods to uncover fraudulent schemes (Roffia & Poffo, 2025). Auditors play a critical (...truncated)