The Impact of Internal Control and Individual Morals on Fraud: An Experimental Study DOI: https://doi.org/10.24843/JIAB.2020.v15.i01.p11 INTRODUCTION Occupational fraud is cheating one or more people from within the company itself (Peng, 2013; Timofeev, 2017). The terms occupational fraud and internal fraud are often used interchangeably (Ross, 2015). Occupational fraud is very detrimental to the company (Timofeev, 2017), reaching thousands of dollars per year (Carroll, 2015). Even ACFE (2016) mentions fraudulent actions cost the company annually at an average of 5 percent of company revenue. ACFE (2018) groups occupational fraud into three groups, namely the illegal taking of company property, corruption and fraudulent financial statements. Fraudulent financial statements are presenting company assets or company revenues greater than they should or presenting company assets or company revenues smaller than they should (Tuanakotta, 2017). The behavior of cheating on financial statements is explained in agency theory. In agency theory, agents are more concerned with their own interests in making economic decisions. Differences in conflicts of ABSTRACT This study aims to obtain evidence to determine whether there are differences in the likelihood to commit fraud between individuals under the conditions of present and absent internal control and between individuals with high and low levels of individual morality. The study also aims to determine whether the interaction between individual morality and internal controls lead to fraud. Results show differences among individuals under the conditions of present or absent internal control to commit fraud. Moreover, there are differences among individuals who have high and low levels of individual morality to commit fraud. Finally, results reveal that the interaction between individual morality and internal controls lead to fraud. Keywords: Fraud, internal control, individuals moral. Efrizon 1 Rahmat Febrianto 2 Rayna Kartika 3 1,2,3 Faculty of Economics, Andalas University, Indonesia email: efrizon.dprns@gmail.com Received: 11 July 2019 Revised: 27 December 2019 Accepted: 15 January 2020 ARTICLE INFORMATION: Volume 15 Issue 1 January 2020 Page 119 - 126 p-ISSN 2302-514X e-ISSN 2303-1018 Jurnal Ilmiah Akuntansi dan Bisnis (JIAB) Efrizon, Febrianto and Kartika, The Impact of ... 119 interest results in the emergency of agency costs, namely residual loss, bonding costs and monitoring costs. Jensen & Meckling (1976) states that monitoring costs are the burden of company owners to monitor the behavior of managers. One example of monitoring is the company’s internal control system. Hery (2016) explains that internal control is a tool for company management to ensure the achievement of company goals and objectives through the design of policies and procedures. Talet (2014) suggests that individuals are important factors in the effectiveness of internal control systems. The influence of internal control in preventing accounting fraud has been investigated by Antarwiyati & Purnomo (2017); Junaidi & Ubaidillah (2018); Kusuma & Andreina (2017); Sumbayak (2017); Thoyibatun (2009); and Wilopo (2006). Their research findings prove that effective internal control is able to prevent opportunities for financial statement fraud.