Bridging Ethics, Digital Transformation, and Control Systems: The Role of Ethical Climate in SME Fraud Prevention
DOI:
https://doi.org/10.12928/jreksa.v13i2.16501Keywords:
Ethical climate, fraud prevention, digital transformation, management control systems, moral philosophyAbstract
This study examines the mediating role of ethical climate in the relationship between ethical orientation, digital transformation, management control systems (MCS), and fraud prevention in small and medium-sized enterprises (SMEs). This study employs an explanatory quantitative design with primary data collected from SME owners and managers in the Special Region of Yogyakarta through purposive sampling. Data analysis used Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The results indicate that idealism, digital transformation, and MCS significantly influence the ethical climate, which in turn strengthens fraud prevention. An ethical climate fully mediated the effect of digital transformation and partially mediated the effects of idealism and SPM, while it did not mediate the effect of relativism. These findings indicate that the effectiveness of fraud prevention in SMEs depends not only on formal control systems and the adoption of digital technology but also on internalizing ethical values within the organizational climate. This study contributes by affirming the central role of ethical climate as a mediating mechanism linking individual ethics and organizational governance in mitigating fraud risk.
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