The Role of Internal Controls Systems in Preventing Fraud in Public Finance: A Case Study of Ministry of Finance Afghanistan

This study examines the role of internal control systems in preventing fraud in public finance, using the Ministry of Finance (MoF) of Afghanistan as a case study. It aims to assess how the five components of internal control such Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities influence fraud prevention within public sector financial management. The research adopted a case study design and a deductive approach. A stratified random sampling technique was used to select 354 employees from various departments within the Afghanistan Ministry of Finance. Primary data was collected through structured questionnaires, and the data was analyzed using descriptive statistics and multiple regression analysis to test the relationship between internal control components and fraud prevention. The findings reveal that internal control systems collectively have a significant effect on fraud prevention in public finance. Among the five components, Control Activities demonstrated the strongest influence (t = 5.516), indicating that well-defined policies, approval hierarchies, and segregation of duties are the most critical factors in reducing fraudulent practices. The other components—Control Environment, Risk Assessment, Information and Communication, and Monitoring Activities—also showed positive but comparatively lower effects. The regression model was significant (F = 9.602, p < 0.05), with an adjusted R² of 0.621, indicating that 62% of the variation in fraud prevention is explained by the five internal control components. Descriptive analysis further revealed that while employees acknowledged the importance of internal controls, a significant proportion expressed uncertainty about their practical effectiveness, highlighting gaps between formal policies and actual implementation. The study underscores the need for the Ministry of Finance to strengthen the practical implementation of internal controls, particularly by reinforcing segregation of duties, enhancing internal audit functions, institutionalizing structured risk assessment processes, and improving communication and training on fraud awareness. Management commitment and a transparent organizational culture are essential to translating formal controls into effective fraud prevention.