Strengthening Public Sector Audit Through Risk-Based Internal Control: A Conceptual Framework for Local Governments

Dito Aditia Darma Nasution; Rizen Cariswan Grace Hura; Septyani Br Bangun; Firdha Dwi Yudha Lubis

doi:10.55227/ijerfa.v4i2.448

Authors

Dito Aditia Darma Nasution Department of Accounting, Faculty of Social Sciences, Universitas Pembangunan Panca Budi, Indonesia
Rizen Cariswan Grace Hura Department of Accounting, Universitas Pembangunan Panca Budi
Septyani Br Bangun Department of Accounting, Universitas Pembangunan Panca Budi
Firdha Dwi Yudha Lubis Department of Accounting, Universitas Pembangunan Panca Budi

DOI:

https://doi.org/10.55227/ijerfa.v4i2.448

Abstract

This conceptual paper proposes an integrated framework for enhancing governance in local governments by combining public sector auditing, risk-based internal control, and accountability mechanisms. Drawing on Agency Theory, COSO Enterprise Risk Management, and Public Accountability principles, the framework addresses a critical gap in the literature: previous studies have examined these components separately, without demonstrating their synergistic impact on governance outcomes. The framework positions auditing as the initial monitoring mechanism, risk-based internal control as a tool for proactive mitigation, and accountability mechanisms as enablers of ethical and transparent implementation. The resulting governance outcomes include improved efficiency, strategic decision-making, and enhanced public trust, creating a continuous feedback loop that fosters adaptive, resilient, and evidence-based administration. This model provides both a theoretical contribution and a practical guide for local government practitioners and sets the foundation for future empirical testing.

References

Bendickson, J., Muldoon, J., Liguori, E., & Davis, P. E. (2016). Agency theory: the times, they are a-changin’. Management decision, 54(1), 174-193.

Bovens, M. A. P., Goodin, R. E., & Schillemans, T. (Eds.). (2014). The Oxford handbook public accountability. Oxford handbooks.

Busuioc, E. M., & Lodge, M. (2016). The reputational basis of public accountability. Governance, 29(2), 247-263.

Gaber, J. (2020). Qualitative analysis for planning & policy: Beyond the numbers. Routledge.

Hay, D., & Cordery, C. (2018). The value of public sector audit: Literature and history. Journal of Accounting Literature, 40(1), 1-15.

Järvinen, M., & Mik-Meyer, N. (2020). Qualitative analysis: Eight approaches for the social sciences. Sage.

Johnsen, Å. (2019). Public sector audit in contemporary society: A short review and introduction. Financial Accountability & Management, 35(2), 121-127.

Klijn, E. H. (2012). New public management and governance: A comparison. Oxford handbook of governance, 1, 201-214.

Lois, P., Drogalas, G., Nerantzidis, M., Georgiou, I., & Gkampeta, E. (2021). Risk-based internal audit: factors related to its implementation. Corporate Governance: The International Journal of Business in Society, 21(4), 645-662.

Mattei, G., Grossi, G., & Guthrie AM, J. (2021). Exploring past, present and future trends in public sector auditing research: a literature review. Meditari Accountancy Research, 29(7), 94-134.

Maxwell, J. A., & Chmiel, M. (2014). Generalization in and from qualitative analysis. The SAGE handbook of qualitative data analysis, 7(37), 540-553.

Moeller, R. R. (2007). COSO enterprise risk management: understanding the new integrated ERM framework. John Wiley & Sons.

Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory and evidence on problems and perspectives. Indian journal of corporate governance, 10(1), 74-95.

Tsvetkov, V. Y. (2014). Opposition variables as a tool of qualitative analysis. World Applied Sciences Journal, 30(11), 1703-1706.

Vitolla, F., Raimo, N., & Rubino, M. (2020). Board characteristics and integrated reporting quality: An agency theory perspective. Corporate Social Responsibility and Environmental Management, 27(2), 1152-1163.

Voronko, R., & Vovchyk, N. (2019). RISK MANAGEMENT AND THE CONCEPT OF RISK-BASED INTERNAL CONTROL. The Institute of Accounting, Control and Analysis in the Globalization Circumstances, (3-4), 49-58.