Determinant of Fraud and Unethical Behavior as Intervening Variable on Local Government in Indonesia

Abstract

Among all sectors, the government sector is in second place by the number of frauds. According to the Global Corruption Barometer (2020), Indonesia ranks third in terms of corruption among Asian countries. The purpose of this study is to determine the factors influencing fraud with unethical behavior as intervening variable on local government in Indonesia. Palembang City was included in 14 cities that contributed State Civil Apparatus involved fraud case in Indonesia. Therefore the sample in this study was 165 State Civil Apparatus with a minimum position as financial management staff from 33 Palembang City Government Offices. Data for the study were collected by online questionnaire. For data processing and analysis the author used Smart PLS – software with graphical user interface for variance-based structural equation modeling using the partial least squares path modeling method. The study results show that internal control, compensation suitability, moral reasoning and religiosity had an effect on fraud with unethical behavior as an intervening variable. Internal control is very important to provide protection for agencies against human weakness and to minimize the possibility of errors and actions that are not in accordance with the rules. Proportional compensation can lead to satisfaction with the commission received. Thus, it reduces unethical behavior. An individual's moral reasoning is one of the factors leading to ethical and unethical behavior. Individuals who have a better moral understanding will obey all applicable rules and policies so as to avoid unethical behavior. The level of a person's religiosity can determine a person's behavior because individuals who have a high level of religiosity will obey the values or rules that have been established by their religion. Individuals who have better religious values will find it easier to avoid and overcome fraud.

Keywords

• fraud
• internal control
• appropriateness of compensation
• moral reasoning
• religiosity
• unethical behavior