The Intervening Effects of Whistleblowing in Reducing the  

Risk of Asset Misappropriation

Mohamad Afzhan Khan Bin Mohamad Khalil¹, Anuar Bin Nawawi², Nurmazilah Dato’ Mahzan³
(1. Open University Malaysia, Malaysia; 2. Universiti Teknologi MARA, Malaysia; 3. University of Malaya, Malaysia)

Abstract: The main objective of this study is to examine the intervening role of whistleblowing in preventing and detecting fraud in order to reduce the risk of asset misappropriation. A review of the literature was undertaken with the aim of crafting the research instrument based on the fraud triangle theory. Qualitative pretesting and quantitative pilot testing were conducted prior to the final data collection exercise. Out of the 553 questionnaires distributed in the final data collection regime, 334 were usable replies and this merits a structural equation modelling to be performed. A confirmatory factor analysis was undertaken on the independent, dependent and mediating variables prior to the assessment of the final model. The results of the structural equation model (Chi square = 2.17; RMSEA = 0.06; CFI = 0.85; TLI = 0.84; NFI = 0.76; PGFI = 0.64) were convincing based on the suggestions from previous studies. This study found that whistleblowing has a partial mediating effect on the relationship between the independent variables (internal control system and professional scepticism) and the risk asset misappropriation. Moreover, it was discovered that there is a full mediation effect of whistleblowing on the relationship between code of ethics and the risk of asset misappropriation.

Key words: asset; fraud; whistleblowing

JEL codes: G3, G5, M42