When independence matters most internal audit effectiveness and fraud prevention in the Malaysian public sector

This study investigated how internal audit effectiveness directly influenced fraud prevention across Malaysian federal ministries. Grounded in the Agency Theory, this study systematically examined three core dimensions, namely resources (financial, human, technological), independence, and communication and collaboration. Based on 226 respondents, consisting of internal auditors, assistant auditors, and finance officers across federal ministries and agencies analysed, findings from multiple regression analysis showed that internal audit independence emerged as the most powerful positive predictor, followed closely by technological infrastructure and communication and collaboration. Surprisingly, financial resources displayed a significant negative effect, whereas human resources remained statistically insignificant. This study was among the first to examine all three internal audit dimensions simultaneously as predictors of fraud prevention in Malaysian federal ministries. These empirical findings revealed that audit reform in the Malaysian public sector should prioritise structural independence, digital audit infrastructure, and formalised communication pathways to effectively dismantle institutional fraud opportunities, ensuring accountability and ultimately restoring essential public sector integrity and profound societal trust across ministries. By extending foundational agency literature into a developing nation's dynamic public sector environment, this robust evidence strongly validated the Malaysian government's 2024–2025 reforms initiative under the National Anti-Corruption Strategy (NACS) and the Auditor General's Directive No. 3/2024.