The Relationship Between Internal Control and Fraud Detection in Organizations

The aim of the research is to investigate the reasons for organizational and digital financial governance failure. Using the critical realist approach, we analyze four case studies – Wirecard, FTX, Silicon Valley Bank, and Binance. The IDFGF (Integrated Digital Fraud Governance Framework) serves to understand how automation, executive control, and legislative subsystem operate in different organizations. Comparative analysis of the case studies illustrates how the boundaries of knowledge are exploited by the executives to create digital frauds. Backend code and even code parameters are adjusted to give false technical assurances (P_1). Executive management creates operational blind spots (P_2). Organizations take advantage of the holes in the regulators' patchwork and shadow regulation (P_3). From careful and painstaking analyses of what we have studied, we have discovered a process in which a system looks compliant to external regulatory oversight, but is actually transacting business using other, non-compliant algorithms. We then outline a number of possible changes in policy to put the needed ongoing regulatory oversight to audit or monitor activities in digital finance.