Mitigating Procurement Fraud through Strengthening Internal Control Systems and Risk-Based Audits

Abstract

This conceptualization paper proposes an integrated framework to mitigate fraud in government procurement by strengthening the Internal Control System and Risk-Based Audit. This framework is built on the Fraud Triangle Theory, which emphasizes that fraud can occur due to pressure, opportunity, and rationalization, with a primary focus on reducing the opportunity factor through effective control and oversight mechanisms. This contextual framework was developed to address gaps in the literature that generally discuss Fraud, Internal Control Systems, and Risk-Based Audits separately without explaining the synergistic relationship between the three in the context of government procurement. In the proposed framework, the Internal Control System is positioned as a preventive control mechanism aimed at reducing the opportunity for Fraud to occur, while Risk-Based Audit functions as a detection and corrective control mechanism that ensures the effectiveness of controls and the organization's ability to respond to emerging risks. The synergy between these two mechanisms is expected to strengthen procurement fraud mitigation, increase transparency, accountability, integrity, effectiveness, and efficiency in public resource management. This conceptual framework provides a theoretical contribution by integrating the Fraud Triangle Theory with public sector control and oversight practices, while offering practical insights for Government Internal Supervisory Apparatus (APIP), internal auditors, procurement managers, and policymakers in designing more proactive and sustainable fraud prevention strategies. Furthermore, the proposed framework can serve as a basis for future empirical research.