The Moderating Role of Business Ethics in Strengthening the Effect of Internal Control on Fraud Prevention in the Manufacturing Sector

Abstract

Fraud in financial management is a significant risk in the manufacturing sector that can undermine the integrity of financial statements and stakeholder trust. This study aims to analyze the moderating role of business ethics in strengthening the effect of internal control on fraud prevention at PT Wahana Interfood Nusantara Tbk. Using a quantitative approach with Structural Equation Modeling Partial Least Square (SEM-PLS) method, data were collected through questionnaires from 50 respondents involved in finance, accounting, and operational functions. The results show that internal control and business ethics have a positive and significant effect on fraud prevention. The main finding proves that business ethics moderates the effect of internal control on fraud prevention with t-statistic value of 2.201 and p-value of 0.028. This suggests that the effectiveness of internal control is not only determined by formal systems but also depends on the ethical values and integrity of employees. This research contributes to the development of agency theory and fraud prevention practices in the manufacturing sector.