UNIVERSITY FOR DEVELOPMENT STUDIES

SCHOOL OF BUSINESS AND LAW

DEPARTMENT OF ACCOUNTING AND COMMERCE

THE IMPACT OF INTERNAL CONTROLS IN FRAUD PREVENTION USING THE

COSO FRAMEWORK: EVIDENCE FROM THE FINANCIAL SECTOR IN WA

BY
GROUP FIVE (5)

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF A

BACHELOR OF COMMERCE DEGREE IN ACCOUNTING, A DISSERTATION WAS
SUBMITTED TO THE UNIVERSITY'S SCHOOL OF BUSINESS AND LAW FOR
DEVELOPMENT STUDIES.

SEPTEMBER, 2022
 DECLARATION
With the exception of documents and articles that were properly cited and listed in our reference

list, we the undersigned students hereby declare that this project work is our own original work,

that the research was carried out independently, and that, to the best of our knowledge, no part of

it has been used to grant a degree at the university or in another institution. Consequently, we

take full responsibility for the entirety of this work.

STUDENTS NAMES STUDENTS ID SIGNATURE

ABEOM ANAMBARI SIMON BCM/0032/19 …………………

NASHIRU NAIM NYABA BCM/0042/19 …………………

JOSHUA EDEM FIABU BCM/0027/19 …………………

ABDUL MUMIN MOHAMMED BCM/0046/19 …………………

BAWAWILLE ERIC BCM/0028/19 …………………

RIJANA MOHAMMED BCM/0043/19 …………………

AGYEIBEA ANITA BCM/0024/19 …………………

DATE: ……………………………

i
 CERTIFICATION
I hereby attest that the project work was managed in line with the University's established
procedures.

……………………………………… ………………………

MR. TONY AZAANAMAL DATE

(SUPERVISOR)

ii
ACKNOWLEDGEMENT
We give God the glory for his unending love, grace, and provisions that have made it possible

for us to successfully finish this research. Throughout these difficult times, he has been our

source of support.

Our supervisor, Mr. Tony Azaanamal, deserves a special note of appreciation for his knowledge,

direction, and unending love, care, and support. We really thought, sir, that you were a "God-

Sent" for our professional advancement. We now comprehend research, and we think this will be

a good reference point for our future study.

We would like to express our sincere gratitude to all of the professors at the University for

Development Studies' School of Business and Law for sharing your knowledge with us during

this trying journey. We thank God for your wise counsel, which has propelled us thus far. May

He richly reward each and every one of you. We express our gratitude to the dean and vice dean

of the school for their great contributions to the operations of the school of business and law. We

also like to wish them God's blessing for their devotion and hard work on behalf of the faculty.

Finally, we thank the writers of the articles that made this effort possible.

iii
DEDICATION
This work is dedicated to the quest of knowledge and the combined efforts of our hardworking

group of seven people. We have incorporated our ideas and goals into this project via numerous

hours of study, analysis, and cooperation. We have lit the way to comprehending the complex

world of internal controls and fraud prevention through our shared journey, guided by the

wisdom and guidance of Mr. Tony Azaanamal.

We recognize the value of cooperation, tenacity, and direction as we present our project to the

University for Development Studies (UDS). This pledge attests to our constant drive to quality

and the search for answers that have a real impact. We hope that by working together, we might

encourage new researchers and increase understanding in this important area.

iv
ABSTRACT
This study examines the crucial role internal controls play in reducing the risk of fraud within

firms, using the renowned COSO framework as a foundation for analysis. The study also

incorporates primary data collecting and uses partial least squares structural equation modeling

(PLS-SEM) to reveal complex connections between crucial COSO framework elements and their

significant impact on fraud prevention efficacy.

The framework provided by COSO, which includes Control Environment, Risk Assessment,

Control Activities, Information and Communication, and Monitoring and Evaluation, is the basis

for this analysis. This research carefully examines the distinctive contributions made by each

COSO component to the overarching objective of fraud prevention by drawing on primary data

that was gathered across various organizational contexts.

By harnessing the power of PLS-SEM, a robust statistical approach suitable for intricate

relationship exploration, this research delivers insightful findings. Notably, Control Activities

exhibit a compelling path coefficient of 0.529 (T = 12.183, p < 0.001), Information and

Communication demonstrates a strong connection with a path coefficient of 0.301 (T = 10.938, p

< 0.001), Monitoring and Evaluation also showcases its importance, exhibiting a positive path

coefficient of 0.107 (T = 2.208, p = 0.027), Risk Assessment plays a crucial role with a path

coefficient of 0.126 (T = 3.590, p < 0.001), The path coefficient for Control Environment to

Fraud Prevention relationship stands at -0.007 (T = 0.162, p = 0.871), this proves that Internal

Controls may influence COSO Framework-based fraud prevention.

Utilizing primary data and PLS-SEM, this study also reveals important insights into the complex

link between COSO framework elements and the success of fraud prevention. Organizations may

v
modify their internal control measures to better prevent fraud by understanding the precise

factors that have a big influence. The results of this study provide a strong framework for

improving fraud prevention strategies inside the COSO framework, delivering a more secure and

resilient organizational environment as organizations traverse an increasingly complicated risk

landscape.

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TABLE OF CONTENT
ABSTRACT....................................................................................................................................i
DEDICATION..............................................................................................................................iii
CHAPTER ONE............................................................................................................................1
INTRODUCTION.........................................................................................................................1
1.1 Background of the study......................................................................................................1
1.2 Problem statement...............................................................................................................5
1.3 Research objectives..............................................................................................................6
1.4 Research questions...............................................................................................................6
1.5 Importance of the study.......................................................................................................7
1.6 Scope of the study.................................................................................................................8
1.7 Organization of the study....................................................................................................8
CHAPTER TWO.........................................................................................................................10
LITERATURE REVIEW...........................................................................................................10
1.1 Introduction........................................................................................................................10
2.2 Concept Definition.............................................................................................................10
2.2.1 Internal Controls.............................................................................................................10
2.2.2 Fraud................................................................................................................................11
2.3 Various control Measures.................................................................................................12
2.3.1 Measures for Prevention................................................................................................12
2.3.2 Detective control..............................................................................................................12
2.3.3 Corrective controls..........................................................................................................12
2.3.4compensating controls.....................................................................................................13
2.4 The COSO Internal Controls Framework.......................................................................13
2.3. Theoretical Review............................................................................................................14
2.3.1 Contingency Theory (CT)..............................................................................................14
2.3.2 System Theory (ST)........................................................................................................15
2.4 Empirical review................................................................................................................16
2.4.1 Control environment and fraud prevention....................................................................19

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 2.4.2 Control activities and fraud prevention...........................................................................20
2.4.3 Information and communication....................................................................................22
2.4.3 Monitoring and evaluation..............................................................................................22
2.4.4 Risk assessment and fraud prevention............................................................................23
2.5 Conceptual framework........................................................................................................25
CHAPTER THREE.....................................................................................................................27
RESEARCH METHODOLOGY...............................................................................................27
3.1 Introduction........................................................................................................................27
3.2 Research design..................................................................................................................27
3.2.1 Research paradigm.........................................................................................................29
3.3 Population and sampling...................................................................................................30
3.3.1 Population........................................................................................................................30
3.3.2 Sampling method..............................................................................................................30
3.3.2.1 Sampling selection criterion.........................................................................................31
3.4 Data and Data Gathering Methods..................................................................................31
3.4.1 Forms of Data..................................................................................................................31
3.4.2 Data Gathering Method...................................................................................................32
3.4.2.1 Questionnaire Developing............................................................................................33
3.4.2.2 Survey Design...............................................................................................................33
3.5 Summary of study constructs............................................................................................34
3.5.1 Definitions and Measurement of Constructs................................................................34
3.6 Data Processing..................................................................................................................35
3.6.1 Descriptive Data Analysis Techniques............................................................................36
3.6.2 Multivariate Data Analysis..............................................................................................36
CHAPTER FOUR.......................................................................................................................38
DATA ANALYSIS AND DISCUSSION....................................................................................38
4.1 Introduction........................................................................................................................38
4.2 Demographic characteristics.............................................................................................38
4.3. Measurement model assessment......................................................................................40
4.3.1 Indicator reliability loadings..........................................................................................40
4.3.2 Internal consistency reliability.......................................................................................42

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 4.3.3 Convergent validity.........................................................................................................43
4.3.4 Discriminant validity......................................................................................................44
4.4 Structural model assessment.............................................................................................46
4.4.1 Multicollonearity.............................................................................................................47
4.4.2. Path significance.............................................................................................................48
4.4.3 Goodness of fit.................................................................................................................50
4.5 Discussion of results...........................................................................................................50
CHAPTER FIVE.........................................................................................................................54
CONCLUSION AND RECOMMENDATION.........................................................................54
SUMMARY, CONCLUSION AND RECOMMENDATIONS...............................................54
5.1 Introduction........................................................................................................................54
5.2 General Conclusion............................................................................................................55
5.3 Research Findings..............................................................................................................55
5.4 Research Contribution and Implications.........................................................................57
5.4.1 Implications for Practice and Policy.............................................................................57
5.4.2 Research Implications.....................................................................................................58
5.5 Limitations and Recommendations..................................................................................60
REFERENCES:...........................................................................................................................60

ix
 CHAPTER ONE

INTRODUCTION
1.1 Background of the study
Every business, nonprofit, and government agency has to deal with limited funds and other

resources. As a consequence, the business takes measures and follows established processes

to make the most of its resources. Furthermore, many companies with the goal of optimizing

limited resources are often at danger of theft, mistakes, misappropriations, inefficiency, and

ineffectiveness. Based on this, procedures are taken to reduce, if not eliminate completely, these

risks by implementing rules, regulations, policies and procedures for improving profit and this is

the focus of this study.

Whether for private gain or to advance the objectives of a business, fraud is a form of financial

fraud that serves no legitimate purpose. Deception or false recommendations will be used to

carry out this offence Chang, Chen, Cheng, and Chi (2019). Companies have collapsed because

of scandals and dishonesty. In order to be competitive and relevant in the financial sector,

businesses need a system to help them deal with the many internal and external challenges they

confront. This means that the established method and the availability of internal control systems

(ICS) are crucial to its success (Joseph, Albert, & Byaruhanga, 2015).

Those of positions of authority within an organization create and implement ICS in order

to ensure that the business's accounting records are accurate and that it complies with all relevant

laws and regulations (Taufik, 2019). A corporation's internal controls are designed to prevent

theft, waste, and abuse of the business's resources, as well as to detect and prevent fraud.

Liquidity issues, insufficient statements of income, a lack of transparency of monetary assets,

fraud and improper use of organizational capital, and the failure to achieve the desired results

1
from a set of decisions are just some of the issues related to internal controls that have been

reported Fernandhytia and Muslichah (2020).

Due to its rising incidence, combating fraud is more crucial than ever (Efrizon, Febrianto, &

Kartika, 2020). As a counterpoint, internal controls help both thwart would-be fraudsters and

take advantage of opportunities uncovered by fraud detection and prevention procedures. If top

executives can use reliable data to determine the level of risk the company is prepared to take

and to develop anti-fraud measures, the business may be better able to put in the controls it

requires to achieve its goals. Internal control is an essential practice that management

consistently engages in to guarantee the company's objectives are being met. Internal control is a

method used by managers to unify and streamline their operations, which in turn helps them

address problems, boost output, reduce waste, and establish reliable procedures. A company's

goals can only be realized, as stated by Zakaria, Nawawi, and Salin (2016), by the

implementation of an ICS that considers all important aspects throughout all pertinent time

frames. Lyinomen and Nkechi (2016) reports that in order to improve their own ICS, companies

are frequently making little but significant changes to their internal policies.

It is in everyone's best interest for companies of all kinds to function as smoothly and

productively as possible. This calls for careful administration of the company's resources.

Therefore, the organization must establish rigorous safeguards for its assets and stick to

established operational standards (Cavaliere et al., 2021). The phrase "internal controls" is used

to describe a business's procedures and policies that are designed to protect its assets and keep

things running smoothly (Sofia, 2016). The objective is to prevent fraudulent activities and the

resulting losses. Internal control techniques help find and fix inconsistencies in financial records.

As an example, you may take action to establish a structured authorization process and a system

2
of checks and balances. The fundamental goal of approval is to guarantee the integrity of all

monetary transactions. Having clearly delineated roles and duties helps businesses quickly

identify and fix problems in their operations. The purpose is to streamline processes and make

communication easier. Establishing and maintaining a transparent chain of command is an

integral part of internal control, especially in the realm of human resources.

The majority of prominent company controversies in the United States of America, especially

those regarding Enron and WorldCom, have been attributed to flaws in internal control systems

(Maria, Darusalam, Yulsiati, & Said, 2023). These incidents led the U.S. Congress to pass the

Sarbanes-Oxley Act of 2002, which includes regulations regarding systems for internal control.

According to Maria et al. (2023), since the act was enacted, numerous studies have focused on

the effectiveness of businesses' internal control systems. As a result, the study of such

mechanisms experienced meteoric growth.

The SOX Act is mentioned in the 2013 revision of the COSO framework for internal controls.

The cube-like representation of the framework accounts for its five components (control

environment, risk assessment, control activities, information and communication, and

monitoring), three objectives (operations, reporting, and compliance), and four tiers (entity,

division, operating unit, and function) (Joseph et al., 2015). The control environment is the

foundation of internal control because it provides a structure for the discipline and organization

of the company. The executive team and board of trustees have shown their knowledge and

expertise, in addition to their honesty and ethical conscience, and are therefore entrusted with

guiding the business. The evaluation of a company's risk assessment was based on how well it

identified, examined, and reduced risks so that its financial statements were in accordance with

international accounting standards (Joseph et al., 2015). In order to achieve their objectives, the

3
majority of companies utilize different kinds of risk management, which are referred to as

"control activities" (Taufik, 2019). Activity monitoring is a technique for evaluating the

efficiency and effectiveness of ICS over time. Nonetheless, monitoring is essential for companies

since it ensures efficient and consistent monitoring of credit process activities, which in turn

reduces risk (Thuan et al., 2020). The flow of information and communication throughout a

business, from the board of directors and senior management to each individual employee, is a

crucial component of any effective ICS.

It is widely accepted that the effectiveness of a company's internal control framework determines

the reliability of its financial reporting (Njeri, 2014). Cavaliere et al. (2021) found that the

quality and efficacy of a business’s ICS greatly effects the entity's likelihood of survival. Internal

controls help with on a daily basis business and make sure the company is in line with all laws

and rules (Nugraha & Bayunitri, 2020). It encapsulates the business's guiding principles, the

stability of its structure, and the responsibility of its management, and it lays out the guidelines

and processes necessary to run the business effectively and smoothly (Dimitrijevic, Milovanovic,

& Stancic, 2015). No organization, commercial or not-for-profit large or little, can afford to be

without an efficient ICS (Hoai, Hung, & Nguyen, 2022).

Internal and external methods have been implemented by financial service providers to boost

customer satisfaction, service quality, service delivery, corporate social responsibility, and

control system efficacy (Lennox & Wu, 2022). Financial services firms are essential to the global

monetary system because they provide services such as low-interest borrowing and insurance

against asset loss. Financial institutions play a crucial role in encouraging economic growth and

alleviating poverty because of their concentration on the working and business elite (Turner,

Weickgenannt, & Copeland, 2022).

4
1.2 Problem statement
Despite universal agreement that management techniques like internal control systems are used,

fraud and theft are common in the financial sector because many firms fail to recognize the

benefits of internal control and take its execution for granted (Bao, Hilary, & Ke, 2022). The

prevalence of fraud can considerably reduce a business's efficiency, and internal control has a

considerable impact on management (Bao et al., 2022). Therefore, without proper internal

controls, losses due to theft, fraud, and gross understatement of assets and revenues are possible.

Due to rampant fraud and monetary misuse, consumers' faith in financial companies is eroding.

There is an increase in bank losses due in part to inadequate internal controls, according to

(Mohd-Sanusi, Mohamed, Omar, & Mohd-Nassir, 2015). An increase in fraud and ineffective

operations has been related to a lack of robust internal control procedures. It's crucial to have

these guidelines in place from the get-go because many businesses function without adhering to

fundamental management concepts like internal control measures. Consequently, operations are

not effectively separated to form an obvious division of duty and power, leading to inefficient

workforce, lack of correct documentation and record keeping, which leads to mistakes in

documentation and fraud, etc. (Taufik, 2019). In addition, many organizations do not have

efficient methods of monitoring and evaluating their security posture, and they do not take

adequate measures to protect their assets, procedures, and data.

Internal control failures commonly preceded high-profile company disasters in the US, such as

the Enron and WorldCom scandals (Kabue, 2015). Internal control system provisions were

included in the Sarbanes-Oxley Act of 2002 as a result of these events. After the legislation was

passed, researchers reportedly poured into studying the efficacy of ICS in firms (Zakaria et al.,

2016). This explains the exponential growth in the research of such systems.

5
Reviewing the relevant literature Adetiloye, Olokoyo, and Taiwo (2016), we see that the great

bulk of previous empirical study has looked at the effect of ICS on minimizing fraud using

various indicators. To my knowledge, no studies have used the COSO framework to evaluate the

effectiveness of internal controls in avoiding fraud and other types of operational mistake. The

primary goal of this study is to determine the efficacy of internal control methods in preventing

and detecting fraud and operational errors in Ghanaian enterprises.

The purpose of this research is to ascertain if internal control measures in Ghana have any

bearing on the reduction of fraud and the occurrence of operational faults. The importance of this

research cannot be overstated, as internal control has a significant impact on industrial

performance in areas other than financial reporting. These areas include: risk management; the

prevention of fraud and mistakes that could lead to material misstatements; the improvement of

operational efficiency and effectiveness; the provision of accurate, complete, and timely

information on which to base decisions; and regulatory compliance.

1.3 Research objectives

1. To examine how the control environment influences fraud prevention in Ghanaian firms.

2. To identify whether control activities influence fraud prevention.

3. To examine the impact of information and communication on fraud prevention.

4. To investigate the extent to which monitoring influences fraud prevention.

5. To examine the impact of risk assessment procedures on fraud prevention.

1.4 Research questions

1. How does the control environment influence fraud prevention?

2. To what extent do control activities impact fraud prevention?

6
3. What is the impact of information and communication on fraud?

4. How and to what extent do monitoring and evaluation influence fraud prevention?

5. What is the impact of the risk assessment procedure on fraud prevention?

1.5 Importance of the study

The significance of this research cannot be underestimated, as it seeks to discover the positive

effects of an effective and efficient ICS in preventing fraud in financial organizations, as well as

the negative effects of inefficient and ineffective internal control mechanisms. As a result,

financial institution managers and policy-makers will have a better understanding of the types of

policy mechanisms related to good governance that they may use to mold their own institutions

into ones that are more effective, viable, and dream-oriented.

Internal controls are the foundation of good governance, as was mentioned at the outset. Internal

controls serve a crucial role in safeguarding public funds and other vital parts of public

institutions' missions in the public sector. In order to better plan for the future, it is appropriate to

evaluate the effect that internal control operations have had on fostering good governance in the

financial institutions of Ghana. The results of this study will aid in the prevention of fraud,

hence increasing firm output and decreasing internal risk. It is hoped that firms will be able to

gain a better understanding of what constitutes for an effective internal control system thanks to

the findings of this study. Leaders in business and industry can benefit from this study by

learning how control measures affect fraud prevention and the consequences of operational

failures. The results of this study will, once again, help management reduce risk and theft inside

their organizations to increase trust among stakeholders.

7
Furthermore, the study will be more relevant to management and students because they will gain

insight into the impact of ICS on avoiding fraud and operational mistakes of businesses. It also

serves as a wake-up call to the reality that as a manager, there are numerous concerns regarding

internal control inside the businesses that, if left unattended to, could jeopardize the overall

objective of the company. The study will hopefully add to the existing body of knowledge while

also giving businesses a road map to follow in their battle against theft and operational faults.

Policymakers interested in reducing corporate fraud through enhanced internal controls will also

find this study valuable.

Finally, this study's findings will contribute to the expanding body of literature on internal

controls and their impact on averting fraud and mending operational flaws in businesses.

1.6 Scope of the study

The study's goal is to examine how well internal controls work in Ghanaian financial companies

most especially Wa to reduce instances of fraud and other sorts of operational failures. To that

purpose, this study will investigate the connections between the COSO framework internal

controls, fraud prevention, and operational failures. Financial companies listed on Ghana's stock

exchange will be an area of study. Due to the high volume of records and other information that

banks are required to keep for their clients and other interested parties, this study concentrates on

banks.

1.7 Organization of the study

This research is divided into five parts. The first chapter lays the groundwork for the rest of the

study by providing context, a problem statement, a purpose, research objectives, research

questions, relevance, scope, and an overview of the study's structure. Chapter 2 focused on a

review of the theoretical and empirical works that were relevant to the study's objectives. The

8
reader will benefit from a summary and presentation of key concepts from prior studies.

Methodological details, including research layout, target population, sampling plan, sample size,

sampling procedure, data collection tool, and information aggregation points, are presented in

Chapter 3. Chapter 4 presents the results of a comprehensive analysis. In this final section, we

offer our concluding thoughts and any recommendations for future study or practical use.

9
 CHAPTER TWO

LITERATURE REVIEW
1.1 Introduction
In this section, we'll take a look exiting literature on internal control and its role in preventing

fraud. The concepts employed in the research are defined in this chapter. Internal control

procedures and discussion of core ideas were covered. The literature study and theoretical

framework are elaborated upon. At long last, the theoretical underpinnings of the investigation

are laid out here.

2.2 Concept Definition

2.2.1 Internal Controls
Internal controls (ICs) are the measures used by the accounting division of an organization

to ensure the reliability of accounting records and the observance of regulatory obligations, as

described by (Alabdullah & Maryanti, 2021). Compliance with the law and the avoidance of

fraud are two areas where IC can help firms (Faiteh & Aasri, 2022). If regulations are followed,

capital losses are found, budgets are fulfilled, budget deficits are found, and accurate

records are generated for executives, they could also lead to enhanced efficiency and

productivity (Alabdullah & Maryanti, 2021). Internal audits are a method used by businesses to

test and evaluate their own ICs, especially their company governance and accounting practices.

To prevent fraud, increase responsibility and conformity, and ensure the integrity of financial

statements and accounting, businesses implement a variety of internal controls (Faiteh & Aasri,

2022). ICs can help businesses stay compliant with standards ensure precise accounting records

(Kotb, Elbardan, & Halabi, 2020), which in turn can boost efficiency in operations. A company's

ICs are there to keep things running smoothly by preventing errors, spotting problems early,

and ensuring that corrective action is implemented when necessary. Owing to the inherent nature

10
of measures in operational procedures, business decision-makers frequently implement control

mechanisms that have a dialogue with the structure of control instead of recognizing the

operational systems (Li, Li, Xiang, & Djajadikerta, 2020).

2.2.2 Fraud
As defined by Al-Hashedi and Magalingam (2021), fraud occurs when one party intentionally

or unintentionally provides false information to someone else in exchange for a benefit

that would not otherwise be available. By manipulating the truth to one's advantage, one

commits fraud (Kotb et al., 2020). Several types of fraud have been identified by researchers

(Zhu et al., 2021): accounting fraud, managerial fraud, corporate fraud, operations fraud,

deliberate accounting record falsification, as well as reporting fraud. Fraud is defined as

any business practice that relies on dishonesty to make a profit. Fraud is described

as "the intentional misrepresentation of a material fact or the omission of a material fact with

the intent to deceive" by Black's Law Dictionary.

Organizational fraud occurs when its staff utilizes deception to steer the company's actions in

their own interests (Zahari, Said, & Arshad, 2020). Together, these pursuits serve only to

advance their interests, rather than those of the company throughout its entirety. If the systems of

a company are compromised, business operations will be disrupted because the system will

be unable to carry out its intended function and mission as efficiently as the operator would like

operations (Maulidi & Ansell, 2021). It's possible that fraud is to blame for slowing down

operations (Zahari, Said, & Muhamad, 2022). In this regard, it is recommended that enterprises

exercise good system management in order to limit the occurrence and spread of fraud inside

their operations.

11
2.3 Various control Measures
2.3.1 Measures for Prevention
Preventative measures try to anticipate potential problems and make adjustments before they

happen. Preventative control is described by Christ, Emett, Summers, and Wood (2012)

as "organizational methods designed to avoid and foresee confrontations with tactics

and procedure." The ability to foresee potential failures and implement efficient steps to avoid

them is a key benefit of preventative control for top-level administration. The effectiveness

of this sort of control depends on several factors, including regular training of employees,

the assignment of responsibilities to the most qualified individuals, the division of roles,

and the presence of sufficient approval and confirmation.

2.3.2 Detective control

Simply said, it's a method for identifying when a business's intentions have deviated from their

intended course. This indicates that the errors were present but unrecognized.

Detective control shows problems like fraud, inconsistencies, and mistakes, according to (Lartey,

Kong, Bah, Santosh, & Gumah, 2020). In the meantime, Sun, Tan, Li, Lu, and Tang (2013) state

that detective controls can identify and notify when an error or intentional behavior has been

committed. Errors can be detected by detective controls, and prevented by effectively executed

preventative controls. Therefore, detective controls provide evidence that preventative measures

are effective in averting undesirable events (Neto et al., 2021). Audits, exams, inquiries,

reconciling accounts, and physical inventory are all examples of events that fall within detective

control, stated by (Lartey et al., 2020).

2.3.3 Corrective controls

When mistakes are found, they can be corrected using this method. According to Xu, Zhu, and

Pinedo (2020), corrective mechanisms are the type of control that can be used to fix problems

occurring within the control system itself. By implementing corrective controls, you can mitigate
12
potential harm and address the root cause of errors. The errors uncovered by detective

controls are fixed by corrective controls, which then implement the appropriate procedures

to reduce the frequency of subsequent incidents, as stated by (Du, Lin, Bi, Li, & Ke, 2022).

Corrective measures involve things like adjusting the system, keeping an eye on things,

reviewing previous entries, and using consequences for particularly merciless behavior, as

proposed by (Barrot, 2023).

2.3.4 compensating controls

In the absence of sufficient resources, it is necessary to resort to compensation restrictions. This

proves the necessity of security measures that may appear ineffective at first.

2.4 The COSO Internal Controls Framework

As previously mentioned, the concept of COSO is an extremely well-known and popular

model of internal controls. it is widely used by listed traded companies across the globe.

According to the Committee on the Structure of Organizations (COSO), the primary purpose

of internal control is to "offer reasonable confidence about the accomplishment of goals

in the subsequent groupings: Efficiency and effectiveness of operation, Dependability of

financial information, Conformity with relevant laws and regulations," and to safeguard

the company's assets (Al Rahhaleh, Al-Khyal, Daghran Alahmari, & Al-Hanawi, 2023).

For businesses, COSO is useful because of the "thought leadership and guidance" it offers in

areas like "internal control," "Enterprise Risk Management," and "deception prevention" (Al

Rahhaleh et al., 2023). COSO's first structure came into effect in 1992 and was called

the internal control - interconnected framework (COSO, 2003). After major corporate theft cases

including Enron came to light and the Sarbanes-Oxley Act (SOX) was passed, the framework

received a lot of publicity in the United States. Since its initial publication in 1992, the Integral

Controls System has undergone only one revision in 2013 (COSO, 2004).

13
The Control Environment, Risk Assessment, Control Activities, Information and

Communication, and Monitoring Activities make up the backbone of COSO's 17-principle

Internal Control Framework (COSO, 2011). Figure one (1) depicts these five parts (Appendix

One contains the full list of 17 tenets).

2.3. Theoretical Review

2.3.1 Contingency Theory (CT)

According to Woodward, (1958), the theory of contingencies was created by Woodward. The

idea of contingencies, as argued by Woodward (1958), is widely recognized and employed in

management, finance, and accounting literature. Management is based on the principle that

the context of a company dictates the appropriateness of any given style of management or

system (Araral, 2020). The contingency theorist argues that it is impossible to predict how

a corporation will respond to changes in its environment (Safari & Saleh, 2020). There exists

no single best way to manage a corporation, organize a team, or make decisions, according

to the contingency theory of organizations (Woodward 1958). However, external factors are also

important in determining the best plan of actions. When faced with unexpected modifications in

the business's operating atmosphere, contingency management have the capacity to quickly

adjust their choices of action and technique selection (Safari & Saleh, 2020).

According to the work of S. Smith, Jayaram, Ponsignon, and S. Wolter (2019), CT is a technique

of firm theory that emphasizes the uniqueness of each company's culture and framework, as well

as the ways in which these factors may be modified by external factors or internal innovations.

The term "contingency approach" is preferable to "contingency theory" because the idea

14
of contingency is presently so widely recognised, especially in the sphere of company,

and certainly the viewpoints centered around it are quite different (S. Smith et al., 2019). Most

notably, the contingency approach debunks the myth that a single optimal corporate structure

exists. According to the notion, the combination of both internal and external factors is what

really drives an organization forward (Amghar, 2022).

Internal and external systems must be effectively applied to improve the health of businesses,

according to the contingency theory (Amghar, 2022). As a result, internal control measures—

including the control environment, control activities, monitoring, and risk assessment—are

connected to contingency theory on both the inside and the outside. As a result, when ICs

are properly functioning, the principles of contingency theory may be put into practice.

2.3.2 System Theory (ST)

A system is a collection of interrelated entities that act in concert to achieve a common goal

(Laszlo, 2021). All of these components are interdependent, so if one goes down, the whole

system falls apart. According to ST, a corporation is a complex system that relies on its many

sub-systems to function effectively as a means to accomplish its goals (Laszlo, 2021). This

is why the theory is so important to the success of each company. As stated by Abbate,

Centobelli, Cerchione, Nadeem, and Riccio (2023), proponents of the ST argue that, for

a corporation to succeed in its goals, the system it employs must be both functional and effective.

A company's internal controls, like any other system, need to be effectively established to ensure

that management and employees are being monitored at all times.

15
An effective internal control system is a unified whole made up of interdependent parts, ideas,

and traits (Laszlo, 2021). According to Harvey and Brown (1998), the control activities, the

accounting system, and the methodologies make up the three key components of internal control.

Managerial oversight, a philosophy of regulation, risk awareness and appraisal, evaluation and

job categorization, information transmission, maintenance and expansion, and defect correction

are all components of an effective internal control system, as outlined by Grieves (2000).

According to system theory, for an organization to succeed, the mechanisms set up to guide its

operations must perform as intended (Von Bertalanffy, 2019). Therefore, the theory of systems is

related to internal control measures such control environment, monitoring and evaluation, control

activities, and risk assessment. As a result, an organization's system can be put into practice

successfully if its environmental and operational controls are functioning as intended.

2.4 Empirical review

It has been hypothesized in a number of researches Herawaty and Hernando (2021) that internal

control procedures have an effect on organizational fraud and operational errors.

Lamboglia and Mancini (2021) conducted research that examined how auditors' human capital

factors influenced their assessments of control environments. This study delves into the link

between auditors' human capital attributes and their assessment of the control environment.

The research employed main sources of information. Structural equations modeling and

regression analysis were employed for data crunching in this investigation. One hundred Italian

external auditors were surveyed for this study, and their responses indicate that "Interaction and

16
adjudication of ethics and integrity standards" is an essential part of performing control

environment studies.

Laszlo (2021) did similar research, this time looking at how internal control settings affect the

value and significance of profits. This study looks into the hypothesis that a well-established

system of controls leads to higher quality earnings by increasing the reliability of financial

reporting. The research employed primary sources of information. Standard regression modeling

was used in the study's analysis. The study found that the importance of profitability increases

when there is greater advancement in the professional careers of IC employees. From 2005 to

2010, a total of 1,834 firm-year observations of publicly traded Korean companies were analyzed

to reach this conclusion. The findings suggest that deploying educated IC personnel with higher

professional expertise can help establish a suitable control environment.

Internal control activities' effect on financial transparency and accountability in Borno State,

Nigeria's local governments was also researched by (Mauroy, Susuki, & Mezić, 2020). The study

relied on cross-sectional survey data to get its conclusions. Out of a total of 1886 workers in the

Cabinet, Accounting, Management, Auditing, and Local Government Council in the 5 local

government regions of Borno State, 330 were chosen as a representative sample for the study.

The data for the survey was collected via a questionnaire. The information was analyzed using

a variety of statistical methods, including a simple descriptive analysis, chi-square testing,

and regression. The chi-square analysis shows that local administrations in Borno state have

weak internal control activity. The regression results show that in Borno State, internal control

activity has a positive effect on financial transparency but a small effect on accountability for

finances.

17
The impact of the Mediator variable of Internal Control Activities on Risk Assessment and

Efficiency in Nigerian insurance firms was investigated as well by Adesunkanmi and Oluwasola

(2022). This investigation uses a cross-sectional survey design to collect quantitative data. The

study employed a random sampling technique to collect primary data from 232 Nigerian

insurance industry employees via questionnaire. The two hypotheses were tested using partial

least squares - structural equation modeling and the Smart PLS 3 program. The findings show

that risk assessment significantly contributes to the success of insurance companies in Nigeria.

The findings also show that internal control acts as a powerful moderator between risk

assessment and performance in insurance firms operating in Nigeria.

In addition, Hartikainen, Rintala, Pylväs, and Nokelainen (2019) investigated the concept

of pupil participation in Finland and how academic accomplishment is measured. The research

employed primary sources of information. Both a structural equation model and a regression

model were employed to analyze the data. Various meanings of student participation

were employed, while in other studies no description was given in any way, as was uncovered by

the research. There were very few reports of theoretical or empirical explanations for the use

of student participation. Finally, the metrics used to evaluate the impact of proactive knowledge

on students' academic progress heavily relied on self-report data from the students themselves

and emphasized on the development of deeper subject-matter expertise. It is possible that

the availability of research-based remedies and the application of student’s participation could be

improved through the employment of appropriate methodological approaches, the provision

of more in-depth explanations and conceptual reasons, and the assessment of students'

accomplishment.

18
Risk assessment and management for emerging viral illnesses and food security was the focus of

research by Trivellone, Hoberg, Boeger, and Brooks (2022). The research employed primary

sources of information. The study found that EIDs are likely to increase manufacturing costs

beyond what can be afforded, with those costs eventually exceeding national and global GDPs

over the next 70 years. By coordinating the efforts of government experts in agriculture and

global health assurance with those of local residents, risks can be mitigated. To protect individual

rights, SP and Trabeculae ultimately work to increase access to healthy food, medical care, and

environmentally sound farming practices.

An empirical approach to supply chain risk assessment in the pharmaceutical industry was

the subject of research by Sreedharan, Kamala, and Arunprasad (2019). The study's overarching

goal is to assess the hazards inherent to the pharmaceutical industry and their effect on supply

chain efficiency. Employing these factors, we were able to create a well-structured questionnaire.

Sixty-six percent of people in the pharmaceutical business participated in an online survey. To

verify the hypothesized relationship between these factors, structural equation modeling was

employed. The findings suggest that worries about demand are warranted, and they also show

that all other risks have a deleterious effect on supply chain operating effectiveness.

2.4.1 Control environment and fraud prevention

A corporation is a complex system with many interdependent parts and sub-systems that must all

function together so as to accomplish the company's goals (Laszlo, 2021). This is why system

theory holds that understanding how an organization's systems work is crucial to improving how

well a business operates. From this vantage point, control activity as an indicator of internal

control over preventing fraud is related to the system theory, that posits that for a business

19
to accomplish its desired objective, the system put into effect must work diligently

and effectively (Mauroy et al., 2020). As a further resource for carrying out control environment

studies, "Interaction and assessment of moral and ethical norms" (Lamboglia & Mancini, 2021)

can be consulted for access to the system theory auditors.

But the contingency theorist, who believes that internal as well as external influences can affect a

company's performance and efficacy, is linked with the concepts of control environment

and prevention of fraud, (Safari & Saleh, 2020). Internal and external factors contribute to a

company's control environment, fraud prevention, and operational risk. According to research

by S. Smith et al. (2019), the control environment and prevention of fraud that occur within a

company can have a major effect on the success of the business as a whole, either positively

or negatively.

Henry (2016) cited the aforementioned works to make the case that a strong control environment

can significantly reduce the occurrence of fraud. But fraud has a positive and substantial effect

on business results, according to research by (Herawaty & Hernando, 2021). And because of

their role in preventing fraud, internal control and risk management also boost business results

(Dharmawati, Kamal, Cakranegara, & Revinzky, 2022). However, even if the current internal

control is adequate, it should be fortified by a more thorough evaluation of all potential threats

(Dharmawati et al., 2022). Putri, Putra, Wirakusuma, and Suputra (2022) provides support for

this claim by recommending improvements to standard processes for managing systems in order

to lessen the likelihood of system distortion and ensure audit findings are acted upon.

H1. Control environment has a significant influence on fraud prevention.

20
2.4.2 Control activities and fraud prevention
Control activities are defined as "the regulations or procedures that ensure management

directives are carried out" (Ogwiji & Lasisi, 2022). This encompass a wide range of activities,

including allocations, distributions, confirmations, consolidation, evaluations of efficiency,

protections of assets, and allocations of responsibilities. system theory, which proposes that a

system needs to operate effectively and smoothly for the company to attain its desired purpose

(Mauroy et al., 2020), is linked to control tasks and preventing fraudulent activity, . Fraud which

disrupts the seamless running of a business can be avoided with the help of efficient control

activities. Internal and external systems might be equally successful in reducing theft controls are

functioning properly.

However, the concept of contingencies suggests that external circumstances can also affect

the success of a business efficacy, while control actions can help reduce deception (Safari &

Saleh, 2020). In light of the fact that both internal and external factors can contribute to

the occurrence of theft, it becomes imperative for businesses to implement foolproof methods of

preventing theft.

According to research supported by the existing literature, internal control procedures like

a company's control environment, evaluation and monitoring, assessing risks, and control tasks

all have a negative effect on detecting and preventing theft. While risk assessment, ongoing

surveillance, and collecting intelligence were found to have a highly significant impact on

reducing theft, studies found that control environments and control procedures have no such

effect (Barr-Pulliam, Brown-Liburd, & Sanderson, 2022). The implications of this finding for the

prevention of fraud were not clear (Lartey et al., 2020). it is thus a matter of some contention

(Barr-Pulliam et al., 2022) to the extent that control operations have any bearing on the incidence

21
of theft. Some researchers see a favorable relationship among surveillance activities as an

indicator of internal controls and preventing theft (Vu & Nga, 2022); whereas, others see

a negative relationship (Maulidi & Ansell, 2022).

H2. Control activities have a significant influence on fraud prevention.

2.4.3 Information and communication

Communication is another critical aspect of fraud prevention. Effective communication is

necessary for identifying potential fraud risks, sharing information about fraudulent activity, and

taking appropriate action to prevent fraud. Effective communication can also help to promote a

culture of transparency and accountability, which can deter fraudulent activity. A study by

(Laszlo, 2021) found that effective communication is essential for preventing fraud in

organizations. The study found that organizations that promote a culture of transparency and

accountability, and that provide employees with clear guidance on fraud prevention, are more

effective at preventing fraud.

2.4.3 Monitoring and evaluation

By measuring and analyzing internal processes, businesses can learn how to run most efficiently

so that they provide customers with the level of quality service they need. As a complex

system comprised of numerous components all working together toward a common goal,

organizations are amenable to oversight and assessment as well as avoiding theft in light of

the system theory's tenet that "systems in business control units and divisions, etc." (Laszlo,

2021). Firms with efficient monitoring and assessment systems are better able to prevent theft,

and other undesirable outcomes (Maulidi & Ansell, 2022). Measuring and evaluating

a business achievement is crucial to its performance in the competitive external environment. It

22
is less expensive to measure and evaluate system when they are running smoothly (Maulidi &

Ansell, 2022).

A case was made, backed up by previous research, that when management of projects teams treat

oversight and assessment as extraneous, it will eventually lead to the project's demise (Amin,

Scheepers, & Malik, 2022). Enhanced oversight and assessment of the project also has

a favorable effect on the planning procedure as a whole, from the outset through the end of the

project and onward (Gashe, 2022). Thus, the ability to work across systems, nations, dialects,

geographic facets, and heightened rivalry and collaboration as a result of increasing

globalization is essential for a project manager (Turyasingura, Moses, Meza, Zombeire, &

Kyabarongo, 2022). The development and application of management science, the advent

and growing popularity of personal computers and related software, and the persistent influence

and execution of modern software in all programs within the organization have all contributed

substantially to the improvement of monitoring and assessing over time (Amin et al., 2022).

Resilience must be integrated into all parts of the project's management because lifespan

concerns are the primary drivers driving the oversight and assessment of operations and

initiatives these days.

H5. Monitoring and evaluation has a significant influence on fraud prevention.

2.4.4 Risk assessment and fraud prevention

Managers must take into account the potential impact of risks on their operations when making

their assessments. The question of whether or not risk evaluation influences preventing

theft is thus relevant. The contingency theory, which states that internal and external

23
circumstances may affect an organization's success and efficacy, is related to risk evaluation and

preventing theft (Safari & Saleh, 2020). Internal and external factors ought to be taken into

account when doing a risk evaluation, a theft reduction strategy for a business. This may have

to do with the unknowns surrounding the way in which the risk will manifest itself in

the company. if this is the case, then the return on the risk has been positively connected with

the existence of the event (Luo, 2022). In contrast, a negative finding indicates a

negative association between the return and the likelihood of the risk (Akomea-Frimpong, Jin, &

Osei-Kyei, 2022). Risk assessment had a major impact on preventing fraud, as reported by Altaf,

Ayub, Shabbir, and Usman (2022); so, they should be reinforced to completely eliminate theft in

the financial sector.

H5. Risk assessment has a significant influence on fraud prevention.

Table 2.1 Dimensions of the COSO IC Component

Components Dimensions

Control Environment Integrity and ethical values

Assignment of duties

Formation of strategies

Human resource management

Risk Assessment Specifying goals, risks recognition and

classification, change management and risk

construes.

24
 Information and Communication Interior communication

Exterior communication

Control Activities Preventive, detective as strategies and

procedures, selections and expansion of

control activities.

Monitoring Continuous and divided evaluations, reporting

of errors and applying corrective steps

2.5 Conceptual framework

In order to better understand the relationship between internal control measures and fraud

prevention, the investigator used a model notion from the prior literature to inform the present

research. In research, both independent and dependent constructs are linked by the conceptual

structure. Measurement and evaluation procedures; risk assessments; control activities; and the

overall control environment are the research's independent constructs. And the outcome

measures are fraud avoidance and operational mistakes. Figure 2.1 depicts a proposed framework

for this research's conceptualization, based on the study's constructs used.

25
Figure 2.1 Conceptual Framework

The H1 hypothesis looks at the connection among the control environment and the prevention of

fraud, using the theoretical framework shown in Figure 2.1. H2 proposes a link among such

watchful procedures and reduced instances of fraud. In H3, we probe the link between open lines

of communication and thwarting fraudulent activities. Research in H4's fourth premise looks into

the link between surveillance and avoiding fraud. The fifth and final hypothesis H5 examines the

connection between fraud prevention and risk assessment.

26
 CHAPTER THREE

RESEARCH METHODOLOGY
3.1 Introduction
Research methodology is the study of the conceptual and procedural foundations of the research

endeavor. Research methodology examines the norms, standards, and procedures that guide

academic inquiry in a given discipline. Included are a theoretical framework, a series of stages,

and both quantitative and qualitative approaches. Methodology offers little to aid in

the resolution of issues. Instead, it gives you the theoretical underpinnings to figure out

which technique, array of procedures, or guidelines are applicable to your situation, such

as when you must arrive at a specific result.

In this section, we'll go over the specific approaches, techniques, and plans which will be utilized

for interviewing participants about the issue at hand. To analyze the data presented in

this section, we will use research technique.

3.2 Research design

A research design is an approach to data collection and analysis that improves the quality

and relevance of the findings to the research questions being asked. The research design is

the blueprint for a study, outlining in detail the procedures that will be used to collect

and analyze data. A research design is the overall approach you take to coordinating all

the different parts of your research.

To achieve this level of clarity, the method of investigation should be flexible enough to take

into account all of the many aspects of the topic (Khan, Yu, Golpira, Sharif, & Mardani, 2021).

In most cases, the quality of a study's design may be judged by whether or not it improves

27
the dependability of the data or decreases the possibility of bias. The ideal research design

is often the one that minimizes the effects of experimental mistake. A well-designed scientific

research strategy will have every one of the characteristics of objectivity, reliability, validity, and

generalizability, among others.

Methods of study can be qualitative, quantitative, or mixed (Alhassan, 2020). During

qualitative studies, researchers zero down on occurrences that lend themselves to quantitative

evaluations of quality or variety. According to (Alhassan, 2020), the goal of qualitative study

is to discover how different individuals and communities value a certain social problem.

Fresh questions and approaches naturally emerge as the research develops. Investigations

of this type are typically descriptive, which makes them difficult to quantify. Quantitative studies

often overlook the importance of in-depth investigation of qualitative data. The philosophy of

nature or anthropology is more at home with this point of view.

In contrast, the goals of quantitative studies center on scale and size. (Mulisa, 2022) states that

the goal of performing quantitative studies is to "examine the validity of theories by examining

the connections among these factors." Statistical analysis is made possible when these factors are

measured mathematically. This type of study comprises the systematic, experimental analysis

of apparent phenomena using statistical, numerical, or computational methods, and results are

often presented numerically in the form of percentages and means.

In order to have a greater understanding of the problem being examined scholars that

employ mixed approaches draw from both types of data. Many other conceptualizations

have been proposed by scholars. There are supplementary qualitative and quantitative elements

to a study plan, as stated by (Khaldi, 2017). The main qualitative or quantitative element directs

28
the theoretical motivation. These components of the research can be conducted in any sequence,

and all contribute to better description and understanding. Therefore, mixed studies are rigorous

based on scientific standards and takes benefit of the strengths of qualitative and quantitative

methods.

3.2.1 Research paradigm

Researchers' interpretations and conclusions are shaped by their prevailing paradigms, which are

defined as "ways of thinking, schools of thought, or consensus of accepted ideas" (Kumatongo &

Muzata, 2021). On the other hand, as Kivunja and Kuyini (2017) point out, the researcher's

perspective and goals end up being represented in the study paradigm. The investigator's core

beliefs about the world and how it should be understood and engaged with make up their

worldview. Researchers' abstract perspectives and principles determine how they perceive,

interpret, and engage with the world; this is what we mean when we say that a researcher's

paradigm shapes their worldview. The researcher's perspective is reflected here. By viewing their

study issue through this theoretical lens, researchers can make more informed decisions about the

methods they use and the analysis they do. According to Kankam (2019), a paradigm is "an

underlying series of ideas or viewpoint that guides research activity ."

A paradigm includes an epistemology, ontology, methodology, and axiology, as described by

the research of (Kivunja & Kuyini, 2017). Recognizing these elements is vital since they

constitute the paradigm's underlying assumptions, customs, and norms.

3.3 Population and sampling

3.3.1 Population
A population is the set of all possible values (measurements or counts) for a given trait of interest

for a given set of items or persons. In scientific terms, a "population" can refer to anything under

29
investigation. it comes to reason that the highest possible level of accuracy

in such an examination can be obtained if every avenue is considered.

The study focuses only on financial enterprises in Ghana. Business fraud in Ghana has hampered

the country's ability to generate revenue and slow the economy. A reliable data set is

a prerequisite for every reliable research investigation.

3.3.2 Sampling method

Sampling is the process of selecting a selection of individuals within a specific population for

the purpose of estimating characteristics of the entire population. Sampling is widely used across

academic disciplines to acquire data from big populations. A sample design is a methodical plan

for choosing a subset of a population to study. The procedure by which study participants are

selected for examination is described. As a component of the sample design process, the desired

sample size, or the total number of objects from which a representative subset will be drawn, can

be determined.

The research population consists of non-financial companies trading on the Ghana Stock

Exchange (GSE). As of January 31st, 2023, the GSE is home to forty (40) companies. The GSE's

list of publicly traded companies includes 26 non-financial companies and 14 financial

institutions. Firms in the sectors of production, processing, exploration, stationary, printing, and

technology make up the non-financial sector. Banks, investment houses, and insurers are all part

of the financial sector.

Parameter estimates, model fit, and the statistical power of Structural Equation Modeling (SEM)

can all be impacted by the size of the sample used.

30
3.3.2.1 Sampling selection criterion
For a PLS-SEM test to have enough statistical power, the number of samples required depends

on the magnitude of the impact related to the route coefficient in consideration (Ringle, Sarstedt,

Mitchell, & Gudergan, 2020). When using Partial Least Square, the most popular piece of advice

for choosing a sufficient sample size is to compare the sample size to the model's most complex

relationship.

The '10-times rule' is a common minimum sample size estimation strategy in Partial Least

Square-Structural Equation Modeling (PLS-SEM), as stated by (Sarstedt, Ringle, & Hair, 2021).

This method assumes that the sample size should be greater than 10 times the maximum number

of inner or outer model links pointing at any latent variable in the model. The "10 times" rule of

thumb is applied to determine a sufficient sample size for this study.

Since 5 x 10 is equal to 50, the "10-times rule" argues that at least 50 participants are needed to

draw any conclusions from the study. After determining the minimal sample size, we had to

decide on a sampling strategy that would make it simple to gather the information we needed.

Because of this, convenience sampling was used instead of a more methodical methodology.

Convenience sampling was utilized since it was more practical in terms of time and money

(Alhassan, 2020).

3.4 Data and Data Gathering Methods

3.4.1 Forms of Data
When picking between primary and secondary sources of information, the investigator ought

to maintain both types of data in mind. Primary data is information that is first collected and has

never been collected before. In contrast, secondary data consists of facts and figures that have

already been collected and analyzed. Primary data, as opposed to secondary data, are a

31
researcher's personal observations rather than information that has previously been collected

and recorded for the purpose of exploring the same subject.

Given the specifics of the research in question, the investigator must decide between two distinct

methods of data collection. The method of collecting primary data is distinct from that of

collecting secondary data, which consists solely of compiling existing information.

Lacking knowledge of the study's variables precludes any meaningful empirical analysis. This

analysis relied heavily on primary sources of information. Data about operating mistakes,

preventing fraud, and control processes can often be found here.

3.4.2 Data Gathering Method

Particularly relevant to survey and descriptive studies is the versatility of primary data collection

methods. Primary data may be collected using a variety of methods, involving focus groups,

interviews, and even just plain old observing.

Information was gathered through in-person visits to the study sites. In this investigation,

we used a combined quantitative and qualitative methodology. Creating a questionnaires,

executing polls, selecting a representative sample all fall under this heading. Surveys were used

to gather information for the purpose of this research's main assumption. This was done to ensure

that the primary goal of the research could be met.

3.4.2.1 Questionnaire Developing

This study draws on first-hand accounts by collecting data from participants through a survey.

A survey is a set of forms, or a single form with a series of queries in it.

32
We used a Google form to send out a survey and gather replies from the appropriate people. The

survey was mailed out to participants, and it is anticipated that they will read it, understand it,

and fill in the spaces with their answers. Distributed surveys were used for data collection.

This action was taken to guarantee the reliability of the data gathering tool. The survey

was designed by reviewing published works on internal auditing and fraud detection.

A pilot test was conducted to verify the reliability of the survey before it was sent to people

in general (Alhassan, 2020). The survey had a preliminary test, with input from experts used

to refine the final version. Their suggestions for improving the survey's contest were invaluable.

This procedure was put in place to ensure that the data is genuine. Expert feedback prompted

a smaller-scale test using a selected portion of the overall sample.

3.4.2.2 Survey Design

A "survey design" is a methodical plan for gathering information from everyone or a selected

portion of the target population about a certain phenomenon of interest. A survey is an

examination of events that occur outside of the control of the investigator.

The questionnaire developed for this research project was split into two sections. The focus of

the first section of the survey was on the respondents' own personal characteristics. we inquired

about your position, work experience, and industry. Part B mainly focused on internal controls,

preventing fraud, and reducing operational errors. Using items that directly assess constructs was

once thought to lend credibility to the multivariate analysis's outcomes (Joseph F Hair, Risher,

33
Sarstedt, & Ringle, 2019). For multivariate analysis, the Likert scale with a score of five has

been found to be quite accurate as well as reliable (Alhassan, 2020).

3.5 Summary of study constructs

The dependent variable is preventing fraud; the four (5) independent variables (that is, internal

control measures) are the control environment; the control activities; the risk assessment,

information and communication and the monitoring and evaluation.

3.5.1 Definitions and Measurement of Constructs

Internal control procedures serve as the independent variable. To determine whether or not the

organization met the internal control criteria set forth by the Committee of Sponsoring

Organization (COSO, 2013), the organization's control environment, control activities, risk

assessment, and monitoring were analyzed. The efficiency of the anti-fraud regulations,

standardized preventive processes, a company, control methods, and susceptibility to fraud as

a means of preventing fraud serves as the dependent variable in a study of the fraud prevention

approach.

The data is gathered using a scale based on intervals. In order to put a number on the things

that the researchers saw as parameters, they employed a Likert scale. Responses for the survey

can be crafted when the indications have been identified. A Likert scale can be used to evaluate

an individual's or a group's attitude, opinion, or perception of a social issue. The answers on a

Likert scale might be anywhere from totally positive to totally negative. The exam has five levels

for the independent variables (each of which is scored from one to five):

34
The "Strongly Disagree" (SD) rating is 1.

You got a "Disagree" (D) score of 2.

We give "Neutral" (N) a score of 3.

Give a "Agree" (A) score of 4 points.

A "Strongly Agree" (SA) rating of 5 means that you totally agree.

3.1 List of the study constructs and number of items

Constructs Number of Variable type Measurement scale

items
Control environment 4 Independent variable Likert scale
Control activities 4 Independent variable Likert scale
Information and communication 3 Independent variable Likert scale
Monitoring and evaluation 4 Independent variable Likert scale
Risks assessment 4 Independent variable Likert scale
Fraud prevention 3 Independent variable Likert scale

3.6 Data Processing

The questionnaire data was analyzed using descriptive statistics, tests of data quality and

assumptions, and hypothesis testing. Descriptive statistics provide an overview of the data using

averages, standard deviations, and variances. To ensure the construct validity and reliability of

the survey instrument, data quality testing is performed. The standard assumption test was

performed to eliminate the likelihood that a violation of the underlying assumptions of the

estimation process was responsible for the inaccuracy of the results. Partial Least Square was

35
employed in this study to check for non-normality, multicollinearity, and the significance of

paths.

3.6.1 Descriptive Data Analysis Techniques

Descriptive data was analyzed using frequency and percentage distributions. Many people find it

helpful to describe occurrences using frequency and percentage (Alhassan, 2020). This research

profiles and makes meaning of firm variables such as geography, age, experience, etc. through

the use of frequency and percentage analysis. In addition, it paints a detailed picture of the

sample, which makes it possible to report the results in less words.

3.6.2 Multivariate Data Analysis

In this study, we employed structural equation modeling (SEM) to test our hypotheses and assign

relative value to our predictor variables. As stated by (Alhassan, 2020), structural equation

modeling (SEM) is appropriate for this study because it can combine both observable (measured)

and unmeasured variables (latent constructs), while conventional methods can only evaluate the

former. Control environment, Control Activities, Risk assessment, Fraud Prevention, and

Operations Errors were the five latent variables used to develop hypotheses in this study.

A common method for testing parts and explaining how they relate in research is structural

equation modeling (S. Chin et al., 2020). By definition, SEM is "a collection of methods that

seek to describe hypotheses regarding the means, variances, and covariance of observed

information in terms of a fewer number of structural features required by a postulated

underpinning model" (Sarstedt et al., 2021). There are primarily two SEM approaches. Partial

least squares structural equation modeling (PLS-SEM) uses software like Smart-PLS and

ADANCO to focus on variance analysis, while covariance-based structural equation modeling

(CB-SEM) uses software such Mplus, AMOS, LISREL, and more (Joseph F Hair, Risher, et al.,

36
2019). PLS-SEM was used as an analytical method in this study. This was mostly the case since,

unlike CB-SEM, PLS-SEM does not require a normal distribution in order to function (Sarstedt

et al., 2021). When there aren't many subjects or a clear pattern in the data, PLS-SEM can be

useful (Benitez, Henseler, Castillo, & Schuberth, 2020).

CB-SEM was not used since the researchers wanted to look at the relationship between

dependent and independent variables from the perspectives of effect size and predictive

importance. Thus, PLS-SEM was the method of choice for this study. If you want to examine or

appraise PLS-SEM results, you need to look at the measurement models used to get such results.

By assessing or estimating the measurement model, the investigator is better able to assess both

the theoretical framework of the research and the data acquired from the investigation. Formative

thoughts are evaluated using a different set of criteria than reflective ones. The reliability and

validity of the measuring model was examined, and reflecting constructs were employed, before

the structural model was analyzed in this work. Standard decision-making techniques were

verified through examination of indicator reliability, internal consistency for reliability,

convergent validity, and discriminant validity (Joe F Hair Jr, Matthews, Matthews, & Sarstedt,

2017). To evaluate the structural model, it was necessary to first ensure the accuracy of the

measurement model (Ringle et al., 2020). The structural model given by (Joseph F Hair, Risher,

et al., 2019) was analyzed using critical methods from. Assessments of the model's collinearity,

effect size (f-square), and predictive usefulness (q-square) are made, as are assessments of the

relevance and applicability of the connections within the model.

In this research, we examined the link between the dependent and independent variables by first

evaluating the structural and measurement models.

37
 CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION

4.1 Introduction
This chapter describes the process of putting the suggested research model through its paces

using PLS-SEM. Four sections make up the whole. The first portion of the report consists of the

research subjects' demographic data. The second part assesses the measurement model's indicator

reliability, internal consistency for reliability, convergent validity, and discriminant validity by

making sure the agreed-upon choice criteria are put into practice. Topics covered in detail in the

third portion included an analysis of the structural model's multicollinearity issues, goodness of

fit, and path coefficient significance. The last part provides empirical documentation of the

study's objectives.

4.2 Demographic characteristics

Information about respondents is provided in Table 4.1 which consists of gender, age, salary and

working experience. In total 90 respondents participated in this study. The data collected showed

that every respondent accepted to be part of the survey.

Concerning the gender distribution of respondents of the selected financial institution in the

study, more than half of the respondents, 77% (69 out of 90) were males and the remaining, 23%

(21 out 90) represents females.

Regarding the age distribution of the respondents, more than half of the respondents, 54.44% (49

out of 90) were between the ages of 30 – 39 years, 11.11% (10 out of 90) were within the age

group of 30 years and below but no less than 20 years, 22.23% (20out of 90) were between 40 –

49 years and the remaining respondents, 12.22% (11 out of 90) were 50 years and above.

38
Moreover, 32.22% (29 out of 90) of the respondents with regards to salary receives GH¢ 1,999

and below, 54.54% (49 out of 90) receives between GH¢ 2000 - GH¢ 2,999 and the remaining of

the respondents, 13.33% (12 out 90) receive GH¢ 3,000 and above.

Concerning the working experience of respondents, 16.66% (15 out of 90) have less than 10

years working experience, 55.55% (50 out of 90) represents employees who have work

experience between 10 – 20 years and the remaining 25 out 90 representing 27.7% have 21 years

and above working experience.

Table 4.1 shows the respondents’ demographic distribution

Demographics Characteristics Number Percentage

Gender Male 69 77%

Female 21 23%

Age Less than 30 years 10 11.11%

30 – 39 years 49 54.44%

40 – 49 years 20 22.23%

50 years and above 11 12.22%

Salary GH¢ 1999 and below 29 32.22%

GH¢ 2000 - GH¢ 2,999 49 54.45%

GH¢ 3,000 and above 12 13.33%

Working Experience Less than 10 years 15 16.66%

10 – 20 years 50 55.55%

21 years and above 25 27.78%

39
4.3. Measurement model assessment
As a subset of the overarching model, the measurement model specifies latent constructs. In

PLS-SEM, the assessment of results is impossible without first analyzing the measurement

models. "empirical measurements of the relationships between the constructs (structural model)

and the indicators (measurement models)" is what model estimate "delivers" (Sarstedt et al.,

2021). Practically speaking, the assessment or evaluation of the measurement model helps the

researcher compare the theory selected for the study with the actual data actually acquired for the

inquiry. Whether the buildings in question are reflecting or formative, the criteria by which their

measurement models should be evaluated will be different (Henseler, 2018). Since the

components in this research were all reflective in character, it was vital to evaluate the validity

and reliability of the measurement model before moving on to the structural model. This research

examined the indicator's reliability, internal consistency for reliability, convergent validity, and

discriminating validity to ensure that established criteria are adhered to (Urbach & Ahlemann,

2010).

4.3.1 Indicator reliability loadings

Examining the indicator loadings is the first step in evaluating a reflective measurement model.

"A variable or group of variables is consistent regarding what it intends to measure" is how

indicator reliability is defined (Urbach & Ahlemann, 2010). Loadings above 0.708 are preferred

since they show that the construct is sufficiently reliable to explain more than half of the variance

in the indicator (Joseph F Hair, Risher, et al., 2019). On the other hand, not all indicators

strongly weighted on their underlying latent factors. Therefore, they have to be taken out of the

model (Gefen & Straub, 2005). That is to say, some indicator below the minimum threshold

when measurement model is run. But in this study, all the indicators were above the minimum

threshold. Indicators therefore met the stringent prerequisite threshold. What this signifies is that

40
they accurately measured the latent variables. The data was then extracted for analysis and

evaluation of the measurement and structural model. After the model was run using the PLS

technique, the indicator loadings are displayed in Figure 4.1.

Figure 4.1 Results of PLS Analysis

41
4.3.2 Internal consistency reliability
One measure of dependability known as "internal consistency" looks at how well different

metrics used to evaluate the same construct corroborate with one another. (Jöreskog, 1971)

composite dependability rhoc is a common statistic used in PLS-SEM. Values closer to one

another imply more consistency. For instance, "acceptable in exploratory research" refers to

reliability values between 0.60 and 0.70, while "satisfying to excellent" refers to values between

0.70 and 0.90. Construct validity suffers as values rise over 0.90 (and especially beyond 0.95).

This is because redundant indicators undermine reliability (Diamantopoulos, Sarstedt, Fuchs,

Wilczynski, & Kaiser, 2012). If the reliability is over 0.95, then there is a chance that the

indicators may exhibit undesired response patterns (such straight-lining), which will cause

exaggerated correlations between the error components.

Another measure of internal consistency dependability is Cronbach's alpha, which uses the same

cutoffs as the composite reliability (rhoC). Cronbach's alpha has a number of drawbacks, one of

the most significant being that it presumes that indicator loadings are all equal throughout the

population (also referred to as tau-equivalence). Inconsistent results for dependability when this

assumption is broken may be seen in the rho reliability index. In spite of this, studies have

demonstrated that Cronbach's alpha is a reliable lower-bound estimate of internal consistency

even when tau- equivalence is absent (Trizano-Hermosilla & Alvarado, 2016).

Reliability is often thought of as falling somewhere in the middle between Cronbach's alpha

(which tends to be conservative) and the composite reliability rhoc (which may be overly

liberal). The precise (or consistent) reliability coefficient rhoA has instead been suggested by

further study; this builds on the work of (Dijkstra & Henseler, 2015a). The rhoA reliability

coefficient is often accepted as a middle ground between the more conservative Cronbach's alpha

and the more flexible composite reliability.

42
Table 4.2 displays the findings' composite dependability values, which range from excellent

(0.869) to good (0.929). One method of measuring consistent dependability is Rho A, which is

often preferred over composite reliability (Dijkstra & Henseler, 2015b). Values of Rho A around

0.70 are recommended. Table 4.2 shows that the Rho_ A values of all latent variables are higher

than 0.70.

Table 4.2 Results of Internal consistency reliability.

Cronbach's alpha Composite Composite

reliability reliability

(rho_a) (rho_c)

Control Environment 0.844 0.848 0.896

Control activities 0.930 0.933 0.950

Fraud Prevention 0.783 0.791 0.874

Information and 0.879 0.893 0.925

Communication

Monitoring and Evaluation 0.859 0.870 0.903

Risk Assessment 0.891 0.901 0.925

4.3.3 Convergent validity

Convergent validity is used to evaluate the reliability of the concept. Typically, the average

variance extrated is used to demonstrate convergent validity at the concept level (AVE). The

level of convergent validity refers to how well the concept explains the variation in its indicators.

The AVE of all indicators on a concept is the standard for measuring convergent validity. Grand

mean of the squared loadings of indicators related to the construct is the AVE (i.e., the sum of

43
the squared loadings divided by the number of indicators). This means that the AVE is analogous

to a structure's shared nature. An AVE of 0.50 or greater shows that the construct accounts for at

least 50% of the variation in the indicators used to create the construct (J. Hair & Alamer, 2022).

Table 4.3 displays AVE values that are more than the threshold value of 0.50, proving that

enough convergence validity has been achieved.

Table 4.3 Results of convergent validity

Average

variance

extracted

(AVE)

Control Environment 0.683

Control activities 0.827

Fraud Prevention 0.699

Information and 0.806

Communication

Monitoring and Evaluation 0.700

Risk Assessment 0.755

4.3.4 Discriminant validity

Discriminant validity refers to the degree to which one concept may be reliably differentiated

from another in terms of relevant empirical factors. Discriminant validity is crucial in reflective

measurement models (Farrell, 2010) because it guarantees that each construct is empirically

distinct and represents a phenomena that no other constructs in the PLS path model do (Franke &

44
Sarstedt, 2019). Examining the indicators' cross loadings provides information on their

discriminant validity. It is important that an indicator's outer loading on its related construct be

larger than any of its other loadings (i.e., construct reliability). PLS-SEM typically uses indicator

cross loading and fornell and locker to establish or evaluate discriminant validity.

For the purpose of this study fornell and larcker criterion will be used to assess discriminant

validity. A construct's discriminant validity is evaluated by comparing it to the other constructs

in the same structural model and determining the degree to which they differ empirically.

According to the conventional metric, which was proposed by (Fornell & Larcker, 1981), the

shared variance between all model constructs should not be larger than their AVEs (adjusted

variance estimates), and the AVEs of each construct should be compared to the squared inter-

construct correlation (as a measure of shared variance between constructs) of that construct and

all other reflectively measured constructs in the structural model.

If a latent variable is to be considered discriminatively valid, as stated by (Fornell & Larcker,

1981), it must share more variation with the indicators associated with it than with any other

latent variable. In a nutshell, each latent variable should have an AVE that is higher than the

highest square correlation it has with any other latent variables. In Table 4.4, we can see that

each latent variable is more closely related to its assigned indicators than to any other latent

variable. The figures are highlighted in bold in the table to emphasize this point. Maximum

values in each row and column are highlighted in bold for easy viewing. As a result, we know

that the condition of discriminant validity has been met.

Table 4.4 Fornell and Larker results

Control Control Fraud Information Monitorin Risk

45
 Environme activities Preventio and g and Assessment

nt n Communicatio Evaluatio

n n

Control 0.827

Environment

Control activities 0.743 0.910

Fraud Prevention 0.710 0.847 0.836

Information and 0.470 0.495 0.685 0.898

Communication

Monitoring and 0.847 0.731 0.752 0.565 0.837

Evaluation

Risk Assessment 0.734 0.764 0.762 0.520 0.755 0.869

4.4 Structural model assessment

After establishing the constructs' trustworthiness and validity, we turn to the model's structural

component, the structural or inner model. Researchers need to evaluate the structural model

based on its predictive abilities rather than the variance-covariance matrix, since the PLS-SEM

technique is not reliant on it (s). The following are the actions that should be taken to evaluate

the structural model, according to recent standards (Joe F Hair Jr, Howard, & Nitzl, 2020): First,

we check for collinearity in the model. Next, we measure the length and importance of the

relationships between variables. Finally, we calculate R 2 and test the model's ability to predict

outside of the training set via the PLSpredict technique.

46
4.4.1 Multicollinearity
Estimating a set of regression equations yields the structural model coefficients that characterize

the associations between constructs. Strong correlations between each set of predictor constructs

may introduce bias into the point estimates and standard errors, hence collinearity concerns must

be investigated in structural model regressions (Sarstedt, Mooi, Sarstedt, & Mooi, 2019). It's

similar to evaluating formative measurement models, only the VIF values are derived from the

predictor construct scores in each regression of the structural model. VIF values over 5 indicate

possible collinearity difficulties across predictor constructs (Becker, Ringle, Sarstedt, &

Völckner, 2015). In Table 4.5, all of the VIF values are less than 5, indicating that collinearity is

not an issue for this research.

Table 4.5 Multicollonearity results (inner VIF)

Control Control Fraud Informatio Monitor Risk

Environmen activities Preventio n and ing and Assess

t n Communic Evaluati ment

ation on

Control 4.120

Environment

Control activities 2.978

Fraud Prevention

Information and 1.534

Communication

Monitoring and 4.506

47
 Evaluation

Risk Assessment 3.104

4.4.2. Path significance

Next, the path coefficient between the model's latent variables needs to be evaluated for

significance once collinearity has been checked (Urbach & Ahlemann, 2010). This is

accomplished by generating 5000 independent samples from the main sample in SmartPLS and

applying the bootstrapping procedure with a two-tailed significance level of 0.1 (10%). The term

"bootstrapping" refers to a "non-parametric resampling process that analyzes the variability of a

statistic by assessing the variability of the sample data, rather than employing parametric

assumptions to measure the precision of the estimates" (Streukens & Leroi-Werelds, 2016).

Since PLS-SEM does not confirm normality, a non-parametric test with Smart-PLS is required

(Joseph F Hair, Risher, et al., 2019). T-statistics for analyzing direct and indirect effects are

generated via the bootstrapping approach. Table 4.8 displays the results.

Researchers can also utilize bootstrap confidence intervals to see if the construct reliability is

above the minimal acceptable level (e.g. the lower bound of the 95 per cent confidence interval

of the construct reliability is higher than 0.70). In a similar vein, they can determine if the level

of construct reliability is far below the maximum threshold (e.g. the upper bound of the 95 per

cent confidence interval of the construct reliability is lower than 0.95).

Given the anticipated 95% Confidence Interval (CI), a critical value of 1.65 is recommended for

a 10% (two-tailed) level of significance (Joseph F Hair Jr, Hult, Ringle, & Sarstedt, 2021). Table

5.8 shows that four of the five hypotheses tested have crucial t-values of 1.65 or above,

indicating that they are supported.

Table 4.6 Direct relationship for hypothesis testing

48
 Path T statistics (| P values 95% CL 95% CL Decision
UL LL
coefficients O/STDEV|)

Control -0.007 0.162 0.871 -0.083 0.062 Not

supported
Environment ->

Fraud

Prevention

Control 0.529 12.183 0.000 0.462 0.604 Supporte

d
activities ->

Fraud

Prevention

Information and 0.301 10.938 0.000 0.255 0.345 Supporte

d
Communication

-> Fraud

Prevention

Monitoring and 0.107 2.208 0.027 0.025 0.185 Supporte

d
Evaluation ->

Fraud

Prevention

Risk 0.126 3.590 0.000 0.069 0.183 Supporte

d
Assessment ->

Fraud

Prevention

49
4.4.3 Goodness of fit
After evaluating the importance of the path coefficient in the structural model, the model's

goodness of fit was determined (GOF). This assessment identifies if the model is well- or poorly-

fitted (Joe F Hair, Ringle, & Sarstedt, 2011). Finding measurement and structural model

misspecifications is made easier by the GOF test (Dijkstra & Henseler, 2015b). The R square

determination coefficient is the most often used criteria (R 2). (Joseph F Hair, Sarstedt, &

Ringle, 2019) R 2 measures the explanatory power of the model. It shows the cumulative effects

of the external latent variables on the endogenous latent variable (F. Hair Jr, Sarstedt, Hopkins,

& G. Kuppelwieser, 2014). R 2 has a range of 0 to 1 and rises with increasing explanatory

power. In general, R2 values of 0.25, 0.50, and 0.75 are regarded as weak, moderate, and

significant, respectively (Joe F Hair et al., 2011). According to (W. W. Chin, 1998), R2 values in

IS research fall into three categories: average (0.333), weak (0.190), and approximately big

(0.670). Table 4.7 shows that the model's R2 is 0.825. (Which IS research regards as excellent)

Table 4.7 R-square results

R-square R-square adjusted

Fraud Prevention 0.825 0.823

4.5 Discussion of results

The research is expected to yield multiple results. The first conceivable consequence might be to

illustrate that there is strong positive association between internal control measures and fraud

prevention and operational errors. This implies that an organization's performance will improve

50
if its internal controls are strong. Also, if a lot of typical frauds have happened in the past, the

board is likely to be worried about it. As a result, if board is particularly worried about certain

types of fraud, they are more likely to take precautions against them.

This finding accords with the status quo at the international organization. All parties have

properly implemented internal controls. The study's findings are supported by the fact that, out of

five hypotheses developed, four were significant in fraud prevention and operation errors as

shown in Table 4.6. On a scale from 1 to 5, with 1 representing strongly disagree and 5

representing strongly agree, the majority of respondents tend to respond between 3 and 4 for

their questions pertaining to the control environment, control activities, information and

communication, risk assessment, and monitoring. Given their answers, it seems that most people

were either undecided or agreed with the statement about internal control variables.

From the analysis in Table 4.6 showing the direct relationship for hypothesis testing, the

following findings were revealed

First, Table 4.6 results reveal that the value of the control environment' coefficient is -0.007, and

that the t-value is 0.162, with a corresponding p-value of 0.871, which is not significant at the

5% level of significance. These results show that the presence of a strong control environment

does not significantly prevent fraud. This data reveals that in the financial services industry, a

1% increase in the control environment will lead to an insignificant increased in fraud

prevention. This indicates that the firm's board of directors and competent, ethical employees

play a little role in preventing fraud, which in turn may increase the firm's potential risk.This

study's results are consistent with that of (Ogwiji & Lasisi, 2022).

51
Second, the t-value of 12.183 and the accompanying p-value of 0.000 indicated that the control

environment had a coefficient value (γ) of 0.529. These results show that the presence of a strong

control activities significantly prevent fraud. This data reveals that in the financial services

industry, a 53% increase in fraud prevention would result from a 1% increase in the control

activit1es. This means that strict adherence to established standards and procedures, vigilant

oversight from upper management, and a defined sense of accountability among employees can

all help to reduce the likelihood of fraud occurring. This goes against what was found by (Thuan,

Thuy, Quyen, Truc, & Hien, 2020) and (Wanjala & Riitho, 2020)

In addition, the information and communication coefficient value was found to be 0.301, with a

matching t-value of 10.938 and a significance level of 0.000 which is the p value. This means

that there will be a 30% decrease in fraud with just a 1% increase in information and

communication. This is a reflection of the success of the non-financial services firms use of

information and communication, which can be traced back to the success of the company's

efforts to disseminate important company information from upper management to lower

management and to its use of robust cyber security measures to curb fraud. Studies by

(Nyakarimi, Kariuki, & Kariuki, 2020) corroborate our findings, while those by (Wanjala &

Riitho, 2020) do not.

Table 4.6 also reveals that monitoring and evaluation is significant at the 1% level, with a

coefficient value of 0.107, a t-value of 2.208, and a p-value of 0.025. This means that a 11%

improvement in fraud prevention can be expected from a one percent increase in firm monitoring

operations. This indicates the non-financial services company has an efficient internal audit

system that can help with efficient supervision and high-level inventory management. This

52
finding agrees with (Ogwiji & Lasisi, 2022) but disagrees with (Smaili, Le Maux, & Ben Amar,

2020).

Last but not least, table 4.6 reveals that the value of the risk assessment coefficient is 0.126, with

a corresponding t-value of 3.590 and a p-value of 0.000, both of which are not significant at the

5% level of significance. This means that a 13% increase in fraud prevention can be expected for

every 1% increase in risk assessment. This means the research business should keep up with the

system to prevent fraud and operational errors and make enhancements as necessary. Consistent

with the research by (Ogwiji & Lasisi, 2022).

In general, it was found that internal controls play a major role in reducing instances of fraud and

operation errors. This finding is in line with research by (Yelvionita, Utami, & Mappanyuki,

2020) that found internal control implementation had a positive and significant effect on fraud

prevention, whether implemented sequentially or all at once. This lends credence to the theory

put forth by (Yuniarti & Ariandi, 2017), which states that enforcing good internal control

procedures can cut down on rampant fraud. In order to prevent financial losses, it is essential to

have effective internal controls, as stated by (Jalil, 2018).

Management and internal auditors collaborated to evaluate and assess the state of internal

control. They plan to enforce all of the established internal controls and make sure that

everything runs smoothly.

53
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction
In the prior chapter, the focus was on discussing the analysis of empirical findings and dealing

with the research questions in connection to the literature studied. Consequently, this chapter

aims to wrap up the study by summarizing the important findings based on the objectives and

discussing the implications of the research findings on future research, policy, and practice.

The impact of internal control measures on fraud prevention was investigated. Below are the five

objectives of this study that were given more attention:

1. To examine the relationship between control environment and fraud prevention.

2. To identify the link between control activities and fraud prevention.

3. To examine the association between information and communication, and fraud

prevention.

4. To investigate the relationship between monitoring and fraud prevention.

5. To examine the association between assessment procedure and fraud prevention.

These goals were met by conducting an empirical study of financial services in Ghana.

This final chapter presents the most important findings and their implications for the primary

problems, the study's limitations, and recommendations for future investigation. The study's

contribution to future research and policies that are critical for non-financial services operations

54
in emerging is discussed, as are the theoretical and practical ramifications of the findings. The

study's limitation are also highlighted, and suggestions for future research are made that are

directly related to the internal controls and fraud prevention.

5.2 General Conclusion

This study investigated the impact of internal control measures on the prevention of fraud in

Ghana. In order to address the objectives of this study in section 1.3, the study focuses on the

foundation of fraud theories to identify functional and non-functional benefits in prevention of

fraud. Fraud theories such as fraud triangle, fraud diamond was chosen because it helped the

researcher to understand how and why fraud and errors occurs in organizations. The study used a

questionnaire for collection of data from participants or individuals in Ghana. The study used

constructs which were validated by evaluating indicator loadings while hypotheses were tested

by assessing direct relationship using path coefficient for significance (Joseph F Hair, Risher, et

al., 2019).

5.3 Research Findings

The analysis and results of this study are presented on the basis of the objectives of the research.

Four of the five hypotheses used in this study were supported and one was not supported. In

achieving the first objective, the researcher hypothesized that control environment has a positive

and significant effect on fraud prevention and operational errors. Based on the results from the

analysis, the study concludes that control environment has no significant effect on fraud

prevention.

55
This study also examined the critical role that control activities plays in fraud prevention. The

data analyzed indicates that control activities have a significant impact on fraud prevention.

Finding that control activities was relevant in fraud prevention, firms must continue improve

their control activities to prevent fraud.

Furthermore, it has been suggested that information and communication has a positive and

considerable effect on fraud prevention. Using structural equation modeling's standardized

estimate and crucial t-value, we determined how much of an impact information and

communication has on fraud prevention. The findings revealed a significant t-value higher than

the minimum threshold indicating a highly significant impact. While the study's findings suggest

that information and effective communication in the firms might be encouraged to prevent fraud,

it is also clear from the discussion of those findings that firms must communicate effectively and

disseminate accurate information.

In addition, it was hypothesized that monitoring has a positive and significant effect on fraud

prevention and operational errors. After analyzing the data, the results of the study concludes that

control environment has a significant effect on fraud prevention.

Finally, the hypothesis that states risk assessment has significant impact on fraud prevention was

not achieved. The result from the analysis indicates a t – value lower than the minimum

threshold making it insignificant. Finding that assessment was not particularly relevant in this

study raises the possibility that there are more features present that were overlooked.

In summary, internal control measures and fraud prevention and operational errors are significant

and have the potential to affect the success of an organization.

56
5.4 Research Contribution and Implications
Organizations are the backbone of Ghana’s industrial development, and the government,

regulators, policy-makers, academics, and stakeholders should take note of fraud which hinders

economic growth. As a result, they need to give more thought to the organization's long-term

viability and the value it adds to the economy as a whole. Yet, organizations in Ghana must be

ready to handle the very demanding and globalized environment, which includes issues such a

fraud eradication.

5.4.1 Implications for Practice and Policy

The study identified internal control measures to prevent fraud. Thus, it is necessary to indicate

the implications of the results of this study. Findings revealed internal control measures influence

fraud prevention. Hence, it is recommended that management of the research organizations

(financial services) keep their existing monitoring strategy, which includes things like strong

oversight role over operations and an effective internal audit system to reduce fraud, as this is in

keeping with the findings of the study.

The financial firms should check their performance assessment system; make sure their financial

transaction authorization system is in good working order since it is deemed to have a very good

method to avoid fraud since it has been in operation. The management would benefit immensely

from having a system in place for recording and documenting financial transactions.

Financial firms’ fraud prevention activities could also benefit from anti-fraud awareness

recommendations. For instance, the company could provide employees a chance at direct

promotion by re-evaluating its promotion structure. They should constantly make it possible for

workers to better themselves by engaging in activities like training, workshops, seminars, and

other such events. Their job is to help the internal auditor do their job, which is to aid

57
management in preventing fraud and operational errors. In addition, they need to keep up

positive cooperation synergy with the audit committee, particularly in establishing policy

measures to curb fraud.

In addition, the firms under review should reorganize and rebuild its information and

communication technology facilities to reduce the likelihood of fraud.

With regards to policy, financial services organizations need a solid internal control system and

policy from regulatory bodies including Economic for Organized Crimes (EOCO) and

Independent Corrupt Practices Commission (ICPC). The analysis is useful for policymakers. It

calls attention to the progress in understanding made possible by new forms of controlled

disclosure, which policymakers should take into account. In particular, evidence-based appraisals

of audit committees' contribution to enhanced Internal Control quality. Reduced information

opacity about the quality of reporting as a result of disclosures will lead to improved decision

making. Policymakers looking to improve the reliability of reporting should be demanding board

and auditor monitoring of Internal Control systems.

5.4.2 Research Implications

Previous studies have discussed internal control systems and its effect on fraud. As such they

have called for future studies to be carried out in order to explore new findings that add to

literature. With this advocacy, this study was carried out to identify the impact of internal control

measures on fraud prevention and operational errors in financial firms, particularly Ghana. This

has been ignored by prior studies. Most prior studies looked at internal control systems on fraud

58
prevention in the financial sector. Therefore, this study adds to the existing literature in internal

control systems research area.

This study is helpful resource for academics studying internal audit. Researchers should read up

on the philosophical stance, data collection technology, and sampling selection involved in

gathering information from non-financial firms.

The results of this study, which was undertaken in Ghana which focused on non-financial firms,

have helped to clarify the role internal control measures play in fraud prevention and operational

errors in this sector. This study has revealed a stronger connection of elements internal control

measures of non-financial firms compared to other studies undertaken in financial firms’

population in Ghana. Other scholars have suggested that each distinct population has distinctive

characteristics that influence the decision of its members; this study expands the methodological

implications of this idea in terms of unique populations of non-financial firms in Ghana.

Previous studies have used regression analysis methodologies to study more about internal

control systems. Most researchers believe that regression data analysis can only extrapolate from

a small sample to the entire population. Correlation analysis has been utilized in other studies

before; this inferential statistic does not disclose a cause and effect link and hence cannot be used

to predict the significance level. This study used Structural Equation Modeling to run the

analysis. The direction of internal control measures is influenced by a variety of factors. As a

result, the research has contributed to the development of more sophisticated techniques for data

analysis that can account for multiple dependent variables in a multivariate model. Arguably, this

analysis is one of its kind in the research of internal control systems and fraud prevention in

59
Ghana. This adds to data analysis literature on internal control measures in fraud prevention and

operational errors.

5.5 Limitations and Recommendations

There are caveats to this study. First, participants of this study are mainly based in Wa, Ghana.

Future studies should be conducted in different regions to provide light on internal control

measures in fraud prevention and operational errors. Second, prospectus research carry out

comparisons between two or more nations to see if internal control systems differ among

countries. Furthermore, future studies may use qualitative approach so as to unearth the impact

internal control measures has on fraud prevention and operational errors. Finally, the findings in

this study cannot be generalized to other regions of the world, but have similarities with other

countries.

Myoung (2009) argues that it is difficult to fit models with categorical dependent variables and

understand the findings because of the models' nonlinearity. This means that the study relied

solely on a dependent variable measured along an interval scale. As a result, future studies

should account for this limitation and permit the use of binary dependent variables to predict a

set of predictor factors using methods like logistic regression. One may also argue that the study

ignored what might have been a crucial mediating component. This was done because the time

period in which the study was conducted can have an impact on the dependent construct.

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Appendix

Appendix A: QUESTIONAIRE

TITLE: THE IMPACT OF INTERNAL CONTROLS IN FRAUD PREVENTION USING THE

COSO FRAMEWORK: EVIDENCE FROM THE FINANCIAL SECTOR IN WA

Dear Sir / Madam

We are student at SDD-university of business and integrated development studies. In partial

fulfillment for our undergraduate degree, we are conducting a study the impact of internal
controls in fraud prevention using the COSO framework: evidence from the financial sector in
Wa. With this study's unique goals needing to be addressed, questionnaire administration has
become highly pertinent. The information is being requested from your prestigious financial
institution. if you bank has the time, I'd appreciate a response to this questionnaire about
internal control system and key performance metrics. We promise to keep your answers private
and use them only for this scholarly project. Thank you

Part A

Tick Appropriately

1. Gender (A).Male (b). Female

2. Age (A). Less than 30 years (b). 30 – 39 years (C). 40 – 49 years (D). 50 years and above

66
3. Monthly salary (A).GH¢ 1999 and below (b).GH¢ 2000 - GH¢ 2,999 (C). GH¢ 3,000 and

above

4. Work experience (A) Less than 10 years (B) 10 – 20 years (C) 21 years and above

Part B

Tick Appropriately

S D N A SA
D
Control environment
1 Staff members uphold ethical standards in line with
management's and the board of directors' expectations.
2 Top management supports for integrity and ethical
values .
3 Dedication to integrity and ethical values being
demonstrated by management effectively.
4 There are regulations in place that enable members
to query and examine management.
Control activities
1 The bank's management takes different levels of
control activity into consideration.
2 When required, management separates mismatched tasks
and develops control measures when necessary.
3 The bank maintains archives of day to day operations
and regulates the functionality of files to avoid the loss of
all data in the event of a natural disaster.
4 The bank has hired security officers at its branches across
the nation.

67
Information and communication
1 The bank carries out accounting activities in accordance
with applicable regulations.
2 The bank’s accounting system provides for separate
identification of each transaction.
3 All staff understand their role in the central system and
how their activities relate to others
Risk assessment
1 Specification of goals is done by the bank and risk that
may course hindrance identified
2 Management has established concrete basis for the
allocation of resources
3 Management put down measures to ensure that
recognized risks would not end in material errors.
4 The management of the bank properly implements risk
management activities.
Monitoring and evaluation
1 Periodically, the bank evaluates business operations such
as cash management.
2 Management receives periodic feedback on monitoring
activities and risk.
3 There are measures in place that facilitate the reporting
of actual or suspected fraud.
4 The bank undergoes frequent audits to determine if
policies and procedures are being applied as intended.
Fraud prevention
1 The implementation of control activities has help reduce
the incident of fraud in the organization
2 Monitoring and evaluation has increase the detection of
fraud leading to prevention of fraudulent activities
3 Fraud in the organization has reduced due to the adoption

68
and practice of internal controls.

69