INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH VOLUME 9, ISSUE 02, FEBRUARY 2020 ISSN 2277-8616 2856 IJSTR©2020 www.ijstr.org Control Effectiveness And Fraud: Evidence In Indonesia Cooperative Nanik Sri Utaminingsih, Anis Chariri, Indira Januarti Abstract: This study investigated the factors that influence employee fraud in economic entities in the form of cooperatives. The uniqueness of the cooperative is oriented to the welfare of members and management is dominated by members, so it is possible to give different results from previous research. The research sample of 97 cooperative employees in the city area of Semarang, Indonesia. Partial least square (PLS) is used as an analysis tool. The results showed that the effectiveness of control, organizational commitment and compensation sufficient significantly influence employee fraud. While unethical behavior does not affect fraud. The indirect effect showed that control effectiveness can mediate on relationship between organization commitment to fraud. Index Terms: Fraud, Control Effectiveness, Organization Commitment, Unethic behavior, Compensation sufficient. ——————————  —————————— 1. INTRODUCTION Referring to Statement on Auditing Standards (PSA) No. 70 (SA Section 316), Fraud is (1) Misstatements arising from fraud in financial reporting are misstatements or deliberate disappearance of amounts or disclosures in the financial statements to deceive the users of the financial statements. (2) Misstatements arising from improper treatment of assets (often referred to as misuse or embezzlement) relating to theft of assets of an entity resulting in financial statements are not presented in accordance with generally accepted accounting principles in Indonesia. Fraud in the company can be done by management or employees. Both have a negative impact on decision-making and are detrimental to the company and the public. Fraud can occur in all economic entities, including cooperatives. In Indonesia, the form of cooperative business is one of the backers of the country's economy. In accordance with the Law of the Republic of Indonesia No 25 of 1992 cooperatives have the function of building and developing the economic potential and capabilities of members and society. Cooperatives have the characteristics of management and supervisory cooperatives are members who make capital deposits to cooperatives. The management of cooperatives involving members has the aim of reducing fraud and financial management mistakes. However, cases of fraud in cooperatives still occur. In 2019 the fraudulent case in the Pandawa cooperative was responded to by the Financial Authority Service (OJK) and costing around 600 customers with billions ("www.republlika.co.id," 2019). Fraud prevention has been carried out through regulations such as the application of the Sarbanes-Oxley Act in 2002. On the organizational side according to Free, Macintosh, & Stein (2007) an effective management control system is needed to deal with fraud. However, it has not been able to deal with fraud cases. According to Roden, Cox, & Kim (2016) individual ethics and integrity cannot be overcome through regulation, but the prevention and detection of fraud must focus on how to deal with interpersonal dynamics and behavior that underlies the psychology of fraud perpetrators and the psychology of those responsible for governance, including auditors, and their interactions. Manurung, Rinta, & Saefudin (2015) argues that individual behavior factors influence employee fraud, he assumption developed is that an organization with a good control system cannot run without the support of organizational actors. Good individual behavior in the organization together with a good control system tends to reduce fraud. The Fraud Triangle developed by Cressey provides guidance that fraud is caused by pressure, opportunity and rationality. Pressure refers to motivation that arises from individual employees. Opportunity refers to the effectiveness or control of the organization. Whereas rationalization refers to the condition of ethical values possessed by individuals and their environment (Dorminey, Fleming, Kranacher, & Riley, 2012). Cooperatives as economic entities have the principle of cooperation and family relation among members. It has the threat of fraud. The potential for fraud in cooperatives can be greater than for public companies, because the closed nature of cooperatives is only oriented towards the welfare of cooperative members, so that external parties in the form of investors or other stakeholders difficult to enter the managerial area of cooperatives. Based on these thoughts, it is necessary to investigate the influence of pressures, opportunities and rationality on cooperative employee fraud. This research contributed to the reference in preventing fraud in Indonesian cooperatives. For methodology will be discussed in section 3, the results of the research and empirical findings will be discussed in section 4, and concludes with a conclusion.. 2. LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT 2.1 Unethical Behavior and Fraud Unethical behavior is behavior that is contrary to ethics. Unethical behavior as a proxy for rationalization from the Fraud Triangle. When employees behave unethically, it will hamper the achievement of company goals. This form of unethical behavior can be an abuse of position and power or abuse of organizational resources. The impact of unethical behavior normatively will reduce the effectiveness of internal ————————————————  Nanik Sri Utaniningsih is currently PHd student in Diponegoro University, Indonesia. E-mail:nie.pasadena@gmail.com  Anis Chariri is currently Professor in Diponegoro University, Indonesia,  Indira Januarti is currently associate Professor in Diponegoro University, Indonesia. E-mail: ienjanuarti@gmail.com.