A Case Study of Korea Train eXpress’ Internal Control System Related to Fare Evasion

[Purpose]This study aims to examine and the resolve the weaknesses in Korea Train eXpress’ (KTX) internal control system and improve Korea Railroad Corporation’s (KORAIL) sustainability by investigating cases related to fare evasion, which greatly impact on KTX’s sales. Korea’s demand for passenger transport by railway has exploded since the 2000s due to the increase in leisure activities, decentralization of urban, and the relocation of state－owned enterprises. [Methodology]This study is a case study. Specifically, it helps to improve the weaknesses of the internal control system by analyzing the illegal riding and cost structure of KTX. [Findings]KTX’s revenue consists mainly of passenger transport fares, and fixed costs account for a large portion of this. Thus, the motivation for preventing and detecting illegal rides is small. This study also examined the establishment and operation of the internal control system for KTX fare evasion. KORAIL was operating internal control activities such as approval, division of work, documentation, and internal verification to prevent illegal riders on KTX. However, there are a number of bypass routes that allow people to take advantage of the vulnerabilities within the internal control system. [Implications]Our study points out the weak points of internal control and further improvement factors in order to prevent and detect illegal riding of KTX. This study will be helpful in alleviating free rides in Korea Railroad Corporation, and ensure a more efficient and effective freight system.