Purpose While corporate governance stands as a primary guardian of organisational integrity, the substantive implementation of fraud prevention and detection associated corporate governance mechanisms (FPDCGMs) in emerging economies often remains an underexplored empirical domain. Addressing this gap, this study examines the perceived level of fraud occurrence and the perceived implementation of FPDCGMs in Sri Lankan listed companies, while assessing whether such perceptions differ between listed company employees and external auditors. These perceptual differences are interpreted through institutional decoupling, perceptual decoupling and the Security Paradox. By providing profession-based comparative insights into key governance mechanisms, the study aims to offer new empirical evidence on whether formal governance implementation is evaluated differently by internal and external governance actors in an emerging economy context. Design/methodology/approach Grounded in a postpositivist paradigm, the study used a quantitative survey, collecting data from 170 listed company (LC) employees and 160 external auditors operating at the top and middle management levels. The Fraud Prevention and Detection associated Corporate Governance Mechanisms Index (FPDCGMI) was developed and applied to capture the perceived implementation of six fraud-associated governance mechanisms as an integrated governance architecture. Findings Both LC employees and external auditors perceive the prevalence of fraud in LCs with no statistically significant difference between the two groups. Both groups also perceive FPDCGMs as being implemented in LCs; however, significant differences exist in their assessments of the level of governance implementation. LC employees report higher perceived implementation of FPDCGMs, whereas external auditors provide more cautious assessments. This perceptual gap is evident across five of the six governance mechanisms, while external audit represents an area of perceptual convergence. These findings suggest a mechanism-specific, role-based perceptual gap, consistent with the Security Paradox, in which formal governance arrangements may generate stronger internal assurance while external evaluators remain more sceptical. Originality/value The study contributes to the corporate governance and fraud deterrence literature by making both theory-based and methodological contributions. First, it develops and applies the FPDCGMI to assess six fraud-associated governance mechanisms as an integrated governance architecture rather than as isolated controls. Second, it extends institutional decoupling literature by conceptualising perceptual decoupling as a role-based divergence in the evaluation of the same formal governance architecture by internal organisational actors and external auditors. Third, drawing on Role Theory and Professional Scepticism Theory, the study uses the Security Paradox as an integrative lens to explain how formal governance implementation may be perceived as generating stronger internal assurance while external auditors maintain a more sceptical assessment in an emerging economy. Accordingly, the findings offer practical implications for boards, senior management, auditors, regulators and professional bodies in strengthening substantive, rather than merely symbolic, governance implementation.
Silva et al. (Wed,) studied this question.