Modeling the Impact of Internal Auditors’ Role Conflict on Responses to Money Laundering Red Flags and the Effectiveness of Anti-Financial Crime Measures
Keywords:
Internal audit, role conflict, money laundering, red flags, system dynamics modeling, structural equation modeling (SEM)Abstract
This study aimed to examine the impact of internal auditors’ role conflict on their responses to money laundering red flags and the mediating role of these responses in enhancing anti-financial crime effectiveness. A mixed-methods design was applied. In the qualitative phase, semi-structured interviews were conducted with purposively selected internal auditors and audit committee members. Interview data were analyzed using MAXQDA through open, axial, and selective coding. In the quantitative phase, a structured questionnaire was developed based on qualitative findings and distributed to 150 participants (80 internal auditors and 70 audit committee members). Content validity was confirmed by experts and reliability by Cronbach's alpha (>0.85). Data were analyzed using SPSS and Structural Equation Modeling, with System dynamics modeling used to simulate variable interactions. Findings indicated that role conflict had a significant negative effect on auditors’ responses to red flags, while these responses had a positive effect on anti-financial crime effectiveness. Organizational pressures positively predicted role conflict, whereas professional independence negatively predicted it. System dynamics simulations showed that reducing role conflict and enhancing organizational support could nonlinearly improve AML effectiveness. Reducing role conflict through enhanced professional independence, organizational support, and ethical culture can significantly improve auditors’ responsiveness to red flags and the overall effectiveness of AML systems. Furthermore, integrating human support with technological tools can strengthen the detection and reporting of suspicious activities.
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Copyright (c) 2025 Kimia Akrami (Author); Habibollah Nakhaei (Corresponding author); Mahmoud Lari Dashtbayaz (Author)
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