Ahmad Ibrahim Abd Rahim¹, Sharifah Nazatul Faiza Syed Mustapha Nazri² and Salwa Zolkaflil^3* 

¹Jabatan Audit Negara, Putrajaya, Malaysia
²Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor, Malaysia
³Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia

ABSTRACT

This study investigates how internal audit effectiveness directly influences fraud prevention across Malaysian federal ministries. Grounded in Agency Theory, this study systematically examined three core dimensions, namely resources (financial, human, technological), independence, and communication and collaboration. Based on 226 respondents, consist of internal auditors, assistant auditors, and finance officers across federal ministries and agencies analysed, findings from multiple regression analysis shows that internal audit independence emerges as the most powerful positive predictor, followed closely by technological infrastructure and communication and collaboration. Surprisingly, financial resources display a significant negative effect, whereas human resources remain statistically insignificant. This study is among the first to examine all three internal audit dimensions simultaneously as predictors of fraud prevention in Malaysian federal ministries. These empirical findings reveal that audit reform in the Malaysian public sector should prioritise structural independence, digital audit infrastructure, and formalised communication pathways to effectively dismantle institutional fraud opportunities, ensuring accountability and ultimately restoring essential public sector integrity and profound societal trust across ministries. By extending foundational agency literature into a developing nation's dynamic public sector environment, this robust evidence strongly validates the Malaysian government's 2024–2025 reforms initiative under the National Anti-Corruption Strategy (NACS) and the Auditor General's Directive No. 3/2024.

Keywords:
Internal Audit Effectiveness
Fraud Prevention
Agency Theory
Audit Independence
Digital Audit