The Influence of Internal Control, Financial Pressure, and Compensation Compatibility on the Tendency of Accounting Fraud

This research discusses the influence of internal control, financial pressure, and compensation compatibility on the tendency of accounting fraud. Two experiments were conducted to test the effect of these factors. Experiment 1 examined the influence of internal control and financial pressure on the tendency of accounting fraud. Experiment 2 scrutinized the effect of internal control and compensation compatibility on the tendency of accounting fraud. The samples in this study were 122 participants selected using a purposive sampling method. Analysis of Variance (ANOVA) was employed for the hypothesis built in this study. The test results in Experiment 1 revealed that individuals in conditions where there was no internal control tended to commit accounting fraud compared to those in conditions where there was an internal control. The test results also indicated that individuals in financial pressure conditions tended to commit accounting fraud compared to conditions with no internal control. This test’s results specified that there was no interaction between internal control and financial pressure on individual decisions in the tendency of accounting fraud. Besides, the test results in experiment 2 proved that individuals who received incompatible compensation were more likely to commit accounting fraud than those who received appropriate compensation. The test results also showed that individuals in the conditions of internal control absence and inappropriate compensation were more likely to commit accounting fraud than those in conditions with internal control. The further additional analysis results disclosed that internal control manipulation in experiment 2 has succeeded in replicating the experiment 1 results.