The effectiveness of internal control in tackling corruption

Historically, there has been a great deal of theoretical debate on anti-corruption mechanisms, but little in the way of detailed empirical research, especially at the organisational level (Monteduro, Hinna, & Moi, 2016). Research on accounting internal controls, understood as a set of management tools that are designed to provide reasonable assurance regarding the accomplishments of an organisation’s objectives, including prevention and detection of corruption, is no exception to this as their usefulness and efficiency have been disputed (e.g. Neu, Everett, & Rahaman, 2015; Sikka & Lehman, 2015). As there has been very limited research in this area, this study systematically and empirically examines the effectiveness of internal control in tackling corruption in government organisations. The thesis adopts a qualitative approach using two government funds as cases. The ‘most similar systems’ design approach is employed. The research concludes that the extent to which internal control is effective in tackling corruption depends on how the internal controls are initiated and enforced. As shown in the first case study, establishing an institution with a culture which implies that ethical behaviour is the norm increases the likelihood that particular types of anti-corruption controls will be effective. However, the second case shows that if the culture of the organisation appears to tolerate corruption, then the same mechanisms are unlikely to be as effective, leading to higher levels of corruption than in an organisation in which such practices are considered less acceptable. In terms of theory, the thesis makes a distinctive contribution to the corruption literature by showing that the degree of successful implementation of anti-corruption measures guided by the principal-agent model depends on the quality of a clean, active, and powerful principal. Furthermore, the research demonstrates how theoretical triangulation can be a very powerful tool in understanding the nature of corruption, as alterative corruption theories can be complementary to each other and offer not only different diagnostics of corruption, but also different solutions.