ENHANCING REGULATORY COMPLIANCE AND EARLY WARNING SYSTEMS THROUGH COSO-BASED DIGITAL INTERNAL CONTROL AND RISK-BASED INTERNAL AUDIT: A STRUCTURAL MODEL APPROACH IN INDONESIAN COOPERATIVES

Governance and digital transformation in Indonesian cooperatives demand robust internal controls and audits to manage risks and ensure compliance with evolving regulations. Integrating COSO-based digital internal control and Risk-Based Internal Audit (RBIA) enhances cooperatives’ capacity to anticipate, assess, and respond to both regulatory and operational risks, which is vital for sustaining trust and organizational resilience. This study examines the influence of COSO-based digital internal control and RBIA on regulatory compliance and the effectiveness of early warning systems (EWS), emphasizing the mediating role of compliance. Using SEM-PLS analysis on survey data from cooperative auditors and managers, the results demonstrate strong reliability (Cronbach’s alpha > 0.7) and validity (AVE 0.694–0.793). COSO-based controls (β = 0.301) and RBIA (β = 0.531) significantly affect EWS, with compliance mediating these effects (β = 0.108 and β = 0.189). These findings underscore the strategic role of digital governance tools and audit mechanisms in enhancing proactive risk management and regulatory adherence. Regulatory compliance serves as a critical pathway linking internal controls and audits to early risk detection. The research offers practical insights for cooperative leaders and regulators aiming to improve governance through digital integration. Future studies should explore emerging technologies such as AI and blockchain to strengthen internal audit and compliance frameworks in cooperatives.