Available online at www.icas.my __________ * Corresponding author. E-mail: raybaz00@gmail.com © 2016 The Authors International Conference on Accounting Studies (ICAS) 2016 15-18 August 2016, Langkawi, Kedah, Malaysia The Moderating role of Capability Element of fraud on Internal Industry Factors and Fraud Prevention in Saudi Arabian Banking Sector Baz Rayaan*, Rose Shamsiah Samsudin, Ayoib Che-Ahmad, Oluwatoyin Muse Johnson Popoola Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia Abstract Fraud described as an unlawful act that portrays a violation of trust, deceit, or concealment and which does not essentially rely on applying it, or physical force threatening or violence. The Internal factors inspire and dishearten fraud in the sense of outcome deliverables. This paper discusses the impact of internal industry factors such as insider involvement, internal controls, and information sharing on fraud prevention in the Saudi Arabian banking sector. Precisely, this study investigates the moderating role of capability element of fraud on internal industry factors and fraud prevention in the Saudi Arabian banking sector. The findings of this study will help the banking sector in Saudi Arabia especially and Middle East banks in general to improve the fraud prevention system, and for other stakeholders, it will help them uncover critical areas in fraud schemes that deserve immediate and prompt attention. Keywords: Internal industry factors, capability element of fraud, moderator, fraud prevention, Saudi Arabian banking sector 1. INTRODUCTION In the worldwide economy, banking sector represents financial institutions that strengthen the national economy through fiscal and monetary policy formulation, credit facility and interest rate frameworks. The Saudi Arabian banks and their governing institutions are not lagging in this responsibility. In particular, the Saudi banking sector on the global balance has been experiencing profound changes in the areas of globalization, deregulation, automation and financial innovation for the past two decades (Mohammad, 2010). According to the Encarta Dictionary (2013), fraud is described as a crime of cheating somebody by someone. It can be used to define somebody who deceives or intends to deceive. However, in its legal definition, what is described as fraud, most especially as it relates to financial and economic activities is subjective to the country under consideration. Silverstone et al. (2012) in their study summarized fraud into the acts of cheating, lying and stealing. The practice of fraud prevention in the banking sector globally cannot be underestimated. As Khanna and Arora (2009) observed, bank frauds are practically in existence and of great danger if not prevented. The scholars