Internal audit supervision, legislative monitoring and corruption: evidence from Indonesian local governments

Our study aims to examine the determinants of local government corruption from the internal audit and legislative monitoring. We use unbalanced panel data from 508 Indonesian local governments in 2010-2018 with 4,530 observations. Our findings conclude that there is no significant improvement in corruption eradication in the Indonesian local government as the average number of cases has not experienced a significant decrease. We find that local government internal audit function capability, expertise and size negatively affect fraud. However, legislative political coalition and size are evidenced to influence local government corruption positively. Our study contributes to the development of literature, especially in Indonesia, by providing one of the earliest comprehensive studies investigating corruption determinants from monitoring factors. We also offer suggestions to Indonesia financial and development supervisory agency (BPKP) regarding local government internal auditor development and the public to be wise in selecting their representatives in the legislative board.