Implementation of Effective Internal Control in Higher Education
Ikin Solikin, Memen Kustiawan, Asep Kurniawan and Indah Fitriani
Accounting Study Programme, Faculty of Economic and Business Education, Universitas Pendidikan Indonesia
Keywords: Internal Control, Higher Education.
Abstract: The purpose of this research is to produce an internal control model that can be implemented in order to
prevent the fraud that occurs in many universities. So, with the proposed model can realize good university
governance. The direction of this research is to identify, analyze and design an applicable internal control
model. This research uses Research and Development approach which describes facts in the field
exploratively. This research is not designed to test the hypothesis, but to describe the data, facts and trends
that occur, then analyzed and recommended the model assessed in accordance with the needs in the field.
The proposed control model refers to internal controls based on modified COSO (Committees of
Sponsoring Organizations of Tradway Commission) to be implemented in a higher education environment.
The results of this study indicate that the internal control model adapted from COSO has been implemented
in state universities of PTN-Bh both from the structures, resources, and programs implemented. This
research has implications on the choice of universities to apply the results of this study on the pattern of
internal control.
1 INTRODUCTION
Government alignments in the education sector are
reflected in the location of the education budget of
20% of the total state budget. It is a very
encouraging thing for education. The amount of
funds provided shows that the government is very
concerned with the development and improvement
of human resource quality for the progress of the
nation. Quality human resources will create
competitive advantage, so that human resources of
Indonesia are expected to compete with other
nations, especially now that the implementation of
MEA (Asean Economic Community) started on
January 1, 2016. With the enactment of MEA, the
products of goods and services from ASEAN
countries plus China, South Korea and Japan will be
freer to enter Indonesia. Surely this thing we cannot
avoid but must be faced (Rahayu and Suhayati,
2015).
Referring to the vision of the national education
system as a strong and authoritative social institution
suggests that the management and administration of
education both organized by the government or
society should be synergies in all the pathways and
levels of education. The vision of the national
education system is intended to empower all
Indonesian citizens to develop into qualified human
beings so as to be able and proactively to respond to
the challenges of the ever-changing era (General
Explanation, PP No. 17 of 2010).
Many expert state about the implementation of
internal control still ineffective in its
implementation, such as: internal control evaluation
and disclosure have significant influence on
operating decisions within the firms (Yan, 2015).
Employee benefit plans require strong internal
controls to operate effectively and efficiently (Carlo,
2015). The policy initiative was administered and
carried out by a small team of fraud control officials,
including the author of this article, in the
Department. The policy context represents a large,
devolved and fragmented governance and
accountability system. This case highlights the
complexity of the policy initiative, the contextual
constraints that challenged the implementation, and
the pragmatic approach taken by the Department.
While there are no easy solutions for fraud and
corruption control or proven models to follow, this
case presents helpful lessons for the professionals
working in large and devolved education systems.
(Bandaranayake, 2014.)
A substantial allocation of funds from the APBN
is one of those allocated to the Ministry of
370
Solikin, I., Kustiawan, M., Kurniawan, A. and Fitriani, I.
Implementation of Effective Internal Control in Higher Education.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 370-374
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

Technology Research and Higher Education. Large
funds must be in line with the ministry program that
must be able to answer the challenges faced by
learners so that it can compete with other countries.
In practice it is not easy, at the level of higher
education the complexity of financial management
has a higher level compared with other educational
levels. Of course, the dynamics that occur should be
addressed wisely, the development of units in higher
education (universities) in addition to developing
and advancing the university, but on the other hand
will bring new complexities in its management. In
line with the increasingly complex university
management, risk points including fraud risk will be
more and more. Inadequate internal control will
open up the width of these points. For that it is
necessary to design an effective control model in
order to suppress fraud so as to achieve university
governance (Fattah and Sumarto, 2013).
Sofianingsih (2012) in his research concluded
that after understanding the types of fraud, auditors
need to understand precisely the structure of good
internal control in order to make efforts to prevent
and detect cheating. According to COSO, the
internal control structure consists of five
components, namely control environment, risk
assessment, control activities and control activities.
If the internal control structure is already in place
and running well, opportunities for undetected
cheating will be much reduced.
For a university that has a rational complexity
must create a pattern of control that can prevent the
occurrence of fraud, so that the ideals to achieve
Good University Governance can be achieved.
2 LITERATURE REVIEW
According to the Committee of Sponsoring
Organization (COSO), internal control is a system,
structure or process implemented by board of
commissioners, management and employees within
a company that aims to provide adequate assurance
that the objectives of such control are achieved,
including the effectiveness and efficiency of
operations, financial reporting reliability, and
compliance with laws and regulations can be
achieved. The definition of internal control
according to Arens (2007) is as follows: "An
understanding of internal control, especially those
controls to the reliability of financial reporting, are
important to the auditor's purposes". Put Romney
and Steinbart (2009) defines internal control as
follows:
Internal Control is an organizational plan and
business method used to maintain assets, provide
accurate and reliable information that encourages
and improves the efficiency of the organization's
road, and promotes compliance with established
policies.
Agoes Sukrisno (2012), internal control is a
process undertaken by board of commissioners,
management and other personnel entities designed to
provide reasonable assurance about the achievement
of three classes of objectives, such as reliability of
financial statements, effectiveness and efficiency of
operations, and compliance with law and
regulations.
If divided into several concepts then:
1. Control is a process in the form of a series of
actions are pervasive and an integral part of the
organization. Internal control is a process to
achieve organizational goals
2. Control is exercised by internal controls not
only composed of policy guidelines and forms,
but run by people from every level of the
organization, which covers the board of
commissioners, management and other
personnel.
3. Internal can be expected to provide reasonable
assurance, not absolute confidence, for entity
management and commissioners.
4. Control is directed to reach interrelated goals:
reporting, finance, betting and operations.
According to Arens and Loebbecke (2009)
Management in designing the structure of internal
control has the following interests:
1. Reliability of Financial Statements
Company management is responsible for
preparing financial statements for investors,
creditors and other users. Management has
legal and professional obligations to ensure that
information has been prepared in accordance
with reporting standards, i.e. generally
accepted accounting principles.
2. Encourage operational effectiveness and
efficiency
Control in an organization is a tool to prevent
unnecessary activities and waste in all aspects
of the business, and to reduce the use of
ineffective and efficient resources.
3. Obedience to laws and regulations.
Good internal control not only provides a
complete set of rules and sanctions. But good
internal control, will be able to encourage
every personal to be able to comply with rules
that have been established and closely related
Implementation of Effective Internal Control in Higher Education
371

to the accounting example is the Tax Law and
Limited Liability Company Law.
Arens (2007) defined audits as collecting and
evaluating evidence of information to determine and
report the degree of conformity between the
information and the predefined criteria. Audits
should be conducted by a competent and
independent person. Meanwhile, according to
Sukrisno Agoes, (2012) audit is an examination
conducted critically and systematically, by an
independent party, to the financial statements that
have been prepared by the management, along with
the bookkeeping records and supporting evidence, in
order to be able to give opinions about the fairness
of the report.
Based on the above two definitions, it can be
concluded that the audit is the process of collecting
and evaluating evidence critically and systematically
with the aim to determine the degree of conformity
between the information available with the
provisions that have been established and provide
opinions on the fairness of financial statements.
Definition of fraud according to The Institute of
Internal Auditor (2009) is: Any illegal act
characterized by deceit, concealment, or violation of
trust. These acts are not dependent upon the threat of
violence or physical force. Fraud are perpetrated by
parties and organization to obtain money, property,
or services to avoid payment or loss of services or to
secure personal or business advantage. According to
Albrecht et al. (2011), Fraud is a generic term, and
embraces all the multifarious means which human
ingenuity can devise, which is the resorted to by one
individual, to get an advantage over another by false
representations. No definite and invariable rule can
be laid down as a general proposition in defining
Fraud, as it includes surprise, trickery, cunning and
unfair ways by which another is cheated. The only
boundaries defining it are those which limit human
knavery.
Referring to the above definition, it can be
interpreted that Fraud is an unfair way that benefits
individuals or organizations regardless of the
adverse effects of individual / organizational
benefits on others. So, this deception is morally
destructive: Deception means different things to
different people in different situations. For example,
cheating can be considered a fraud. It is good to be
reminded of the possibility of cheating to avoid the
"it-cannot happen here" syndrome "(Singleton and
Aaron, 2010).
3 METHODOLOGIES
The research method that writer uses in general use
descriptive-analytic method, that is problem which is
discussed by exposing, interpreting, writing object
that is researched by through activity collecting data
and arranging data, processing data then analyzed
and taken general conclusion from problem
discussed.
The use of this qualitative approach is based on
the concept of natural setting, grounded theory,
descriptive, more important than the outcome
process, temporary design, and research results are
negotiated and agreed upon (Bogdan and Biklen
1982; Lincoln and Guba, 1985).
Therefore, in order to provide flexibility to adapt
to the things that are dual, and more sensitive to the
existence of the sharpening of values encountered,
the method of Evaluation and control Internally
Analysis with post-control techniques Internally
analysis (McMillan and Schumacher, 2001), or in
terminology research and development is often
referred to as research methods qualitative and
future oriented Internally control.
Data collected from the sample of research
which amounted to 6 state universities. Techniques
performed using questionnaires and interviews to
internal supervisory unit members at each college.
4 RESULTS AND DISCUSSION
4.1 Effectiveness of Internal Control
System
This study aims to obtain an overview of the
effectiveness of the internal control system in the
university consisting of three dimensions: 1)
financial statement reliability, 2) efficiency and
effectiveness of operations, and 3) obedience to the
law and regulations, with five criteria of answers
that are fully implemented / very good, mostly
implemented / well, some is implemented / good
enough, some small is done / not good, and not
implemented / not good.
1. The overall financial statement reliability
scores 175% with 2 indicators which if
averaged are on the percentage score of 87.5%
and include very good criteria. That is, based
on the results of answers from respondents
indicate that the financial statement
information presented by the college has a very
good quality because the presentation is
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
372

reasonable in all material things, then the
financial statements have been in accordance
with the principles generally accepted and
accompanied by already have evidence
adequate.
2. Efficiency and effectiveness of the overall
operation got a score of 169.17% with 2
indicators which if averaged are on the
percentage score of 84.58% and includes very
good criteria. That is, based on the answers
from the respondents shows that the efficiency
and effectiveness of operations at universities
have been implemented very well related to the
implementation of internal control system,
budget cost, accuracy of financial statement
information, and resource management.
3. Dimension of obedience to law and regulation
as a whole got score 156,67% with 2 indicator
which if averaged is in percentage score
78,33% and including good category. That is,
based on the results of answers from
respondents indicate that universities have been
obedient to the laws and regulations that apply
properly.
4.2 The Prevention of Fraud
The purpose of this study is to obtain a description
of the prevention of fraud in a university consisting
of two dimensions: 1) organizational culture (work
culture), and 2) eliminate fraud opportunities, with
five criteria answers that are implemented very
good, mostly implemented / good, partially
implemented / good enough, a small portion is
implemented / not good, and not implemented / not
good.
1. Organizational Culture's overall dimensions
score 256.67% with 4 indicators which if
averaged are on the percentage score of
64.17% and include criteria quite well. That is,
based on the answers from the respondents
indicate that the leadership of the college has
compiled, communicated and implemented the
code of ethics well enough to be applied then
the leadership has also selected the honest
employees and the leadership help related to
some financial, psychological and social
problems of its employees. In addition,
university leaders try to create a conducive and
comfortable working environment quite well.
2. Dimensions Eliminate Fraud Opportunities
overall score 330% with 5 indicators which if
averaged are at the percentage score of 66%
and include criteria quite well. This means that
based on the results of the responses from
respondents indicates that universities have
implemented internal controls well enough to
prevent collusion, monitor and recognize
employees, complaints of fraud and proactive
assessment.
4.3 Good University Governance
The purpose of this research is to get a picture of
good university governance at university which
consists of five dimensions, namely: 1)
transparency, 2) independence, 3) accountability, 4)
accountability, and 5) fairness, with five criteria of
answers that are fully / good, mostly implemented /
good, some is implemented / good enough, a small
part is implemented / not good, and not implemented
/ not good.
1. Transparent dimension as a whole gets score
174,1% with 2 indicator which if averaged is
on score percentage 87,05% and belongs very
good category. That is, based on answers from
respondents indicates that universities have
disseminated the whole process of public
service, university leaders have revealed all
information related to vision and mission of
college very well. Then the college leadership
has submitted all the decisions he made.
Related to the financial statements and annual
reports, the leadership of the college has
delivered the whole to the interested parties in
a timely manner.
2. Dimension of independence as a whole got
score 84.17% with 1 indicator and including
very good category. That is, based on the
results of answers from respondents indicate
that the management of universities has been
implemented very well independently and in
accordance with the rules and legislation. Then
the college leadership in making the decision is
not fully influenced by others because it has a
very good independence.
3. The overall accountability dimension scored
77.5% with 1 indicator and included either
category. That is, based on the results of
answers from respondents indicate that college
leaders have prepared a job description well for
each section. Then the employees / lecturers
who work in universities are always doing
good work in accordance with job description
where job description is designed largely in
accordance with the functions and tasks of
Implementation of Effective Internal Control in Higher Education
373

each. Each section in the college, has a good
ability or expertise in accordance with the field
of work.
4. The overall accountability dimension scored
88.67% with 1 indicator and was categorized as
excellent. That is, based on the answers from
the respondents indicated that the high
leadership leaders have done the job very well
in accordance with the rules that apply, always
manage the universities that are fully in
accordance with the established policy, always
fully accountable for the job very well in
accordance with the rules applicable and
submit it to interested parties and timely in
reporting the responsibility.
5. The overall fairness dimension scored 81.67%
with 1 indicator and included either category.
That is, based on the answers from the
respondents indicates that the leadership of the
college provides equal opportunities and rights
with both parties who have an interest in
issuing opinions and protect the party well in
carrying out operational activities.
5 CONSLUSIONS
Internal Control in Higher Education who become
respondents have been implemented but not yet
optimal. The lack of optimal internal control is
caused not all universities have been able to
maximize. And there are universities that have not
implemented internal supervision, because the new
structure is formed.
Prevention of fraud indirectly has been
implemented but the position has not been optimal,
especially in the reporting system of fraud.
Universities have not created adequate channels and
have not been able to create systems that can
guarantee the information giver.
Good University governance has been done well,
although in fact there is still something to be
optimized related to transparency and accountability.
REFERENCES
Agoes Sukrisno. 2012. Auditing Petunjuk Praktis
Pemeriksaan Akuntan Oleh Akuntan Publik. Jakarta:
Salemba Empat.
Albrect, W. S., Albrect, C. C., Albrecht, C. O.,
Zimbelman, M. F., 2011. Fraud Examination, South-
Western Cengage Learning. USA.
Arens, A., 2007. Alih bahasa Tim Dejacarta. Auditing dan
Pelayanan Verifikasi, PT. Intermasa. Jakarta.
Arens, A. A., Loebbecke, J. K., 2008. Auditing dan Jasa
Assurance (Edisi Keduabelas). USA, Prentice Hall
International Editions Inc.
Bandaranayake, B., 2014. Fraud and Corruption Control at
Education System Level A Case Study of the
Victorian Department of Education and Early
Childhood Development in Australia. Journal of
Cases in Educational Leadership, 17, 4, 34-53.
Bogdan, R., Biklen. S. 1982. Qualitative research for
education: An introduction to theory and methods.
Boston: Allyn & Bacon.
Carlo, B., 2015. Employee Benefit Plans Require Strong
Internal Controls Compensation and Benefits Review,
47, 3, 134-139.
Fattah, N., Sumarto, S., 2013. Policy Studies of
Educational Finance for Teacher Education Indonesia,
Proceeding of International Conference on Teacher
Education, 66-73.
Lincoln, Y., Guba. E. 1985. Naturalistic inquiry. Beverly
Hills. CA: Sage.
McMillan, J. H., Schumacher, S. 2001. Research in
Education. A Conceptual Introduction (5th ed.). New
York: Longman.
Rahayu, S. K., Suhayati, E., 2015. Auditing Konsep Dasar
dan Pedoman Pemeriksaan, Graha Ilmu. Akuntan
Publik. Yogyakarta.
Romney, M. B., P. J. Steinbart, 2009. Accounting
Information System. 11th Edn., Pearson Prentice Hall,
New York, USA.
Singleton, T. W., Aaron J. S., 2010. Fraud Auditing dan
Forensic Accounting, John Wiley and Sons, Inc. New
York, Fourth edition.
Sofianingsih, D. 2012. Pengaruh Komponen Struktur
Pengendalian Internal Untuk Mencegah Kecurangan
Pada Perusahaan. Artikel: Universitas Negeri
Surabaya.
The Institute of Internal Auditor. 2009. Internal Auditing
Fraud.
Yan, S., 2015. Internal Control Weakness Disclosure and
Firm Investment. Journal of Accounting, Auditing and
Finance, 31, 2, 277-307.
ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy
374