IMPLEMENTATION OF CORPORATE GOVENANCE IN BPR TO ANTICIPATE FRAUD

Abstract

Good corporate governance is required for BPR (rural banks) to manage significant risks in order to meet their long-term goal of being a going concern. The present study was a qualitative research with the stakeholders as informants. Data were collected by such observation methods as staged interviews, observation, and participation. Results showed that the BPR have been implementing good corporate governance in terms of transparency, accountability, responsibility, independence, and fairness. Implementation of good corporate governance was indeed beneficial for BPR; however, it was only for administrative fulfillment, even capable of interfering with the main operational duties of the company. To prevent fraud, a teamwork of the internal audit and compliance division remained being required. When the auditors did not undertake an audit and were unable to provide recommendations with an impact on the operating division, fraud might remain occurring. Conversely, when the internal audit had a good capability, but the Compliance Division did not undertake the audit recommendations, fraud could also occur. With this study, we hope that the Government, in this case the Financial Services Authority (OJK), can simplify the reporting required for BPR in relation to corporate governance to make it a going concern since they are different from conventional banks.