Internal Control System in Cooperative Society

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Author(s): Norfaizah Manjah (Akademi Suruhanjaya Koperasi Malaysia (MCSC), Malaysia), Radiah Othman (Massey University, New Zealand)and Haslinda Yusoff (Universiti Teknologi MARA, Malaysia)
Copyright: 2019
Pages: 26
Source title: Organizational Auditing and Assurance in the Digital Age
Source Author(s)/Editor(s): Rui Pedro Marques (University of Aveiro, Portugal), Carlos Santos (University of Aveiro, Portugal)and Helena Inácio (University of Aveiro, Portugal)
DOI: 10.4018/978-1-5225-7356-2.ch014

Keywords: Accounting & Finance / Accounting and Finance / Business & Management / Business Science Reference

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Abstract

The increasing number of recent fraud cases involving the board of directors and top management in cooperative societies has raised concerns about the effectiveness of internal control systems (ICS) in these organizations. This chapter aims to examine the relationship between the effectiveness of the ICS and the likelihood of fraud occurrence by focusing on the control environment, risk assessment, and monitoring activities of cooperative societies in Malaysia. The results showed that the effectiveness of the control environment, risk assessment, and monitoring had no significant relationship with the likelihood of fraud occurrence in these organizations. However, this does not necessarily mean that the fraud risk is not an emerging issue. The study proposes that the internal auditors and audit committee oversee a pro-active fraud prevention check-up, as suggested by the Association of Certified Fraud Examiners (ACFE), which is to be implemented in co-operative societies to assess how vulnerable the organizations are to fraud.

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