Investigating the mediating role of fraud prevention in the relationship between internal control and financial reporting quality of enterprises
Abstract
The intensification of global competition, coupled with rapid advancements in science and technology, has exerted significant pressure on enterprises to establish and implement internal control systems. These systems are essential for minimizing fraud, enhancing operational efficiency, and delivering reliable information to stakeholders, particularly in improving the quality of financial statements. This study examines the mediating effect of fraud prevention on the relationship between internal control and the quality of financial reporting among enterprises in Binh Dinh Province. A quantitative research approach was employed, utilizing primary data collected through structured questionnaires distributed to 280 enterprises in Binh Dinh province during June 2025 (from July 2025 is Gia Lai province). The empirical findings underscore that an effective internal control system exerts a significant positive influence on organizational fraud prevention mechanisms, thereby contributing to the enhancement of financial reporting quality. In addition, fraud prevention is found to exert not only a positive effect on the quality of financial statements but also to serve as a critical mediating construct that strengthens the causal linkage between internal control effectiveness and the overall reliability and transparency of enterprises’ financial reports. Based on the findings, several practical recommendations are proposed for enterprises in Binh Dinh. These include strengthening internal control policies and procedures, increasing employee awareness of fraud risks, and investing in monitoring mechanisms. Such measures are expected to improve the integrity of financial reporting and build greater trust among stakeholders.