Fraudulent expense reporting: impact of manager responsiveness and social presence

Abstract

Purpose

The purpose of this paper is to explore the role of manager responsiveness and social presence in the decision to engage in fraudulent expense reporting. While research has focussed on the direct effect of information technology (IT) on user behaviors, there is a lack of research investigating possible mediating factors of this relationship. As such, the paper examines the impact of affect and its effect on users’ behavior when using ITs.

Design/methodology/approach

The authors conduct an experiment to investigate possible behavior differences due to affect formulated in the early phase of pre-travel approval and the use of IT in the expense reporting phase. Consistent with social presence theory, the experiment participants engage in the pre-travel approval and expense reporting phases using either face-to-face communication (high-social presence) or web-based communication (low-social presence). The authors manipulate conditions in which affect is formulated by varying the manager's responses to the pre-travel approval request between positive and negative. All participants in the experiment then file an expense report.

Findings

The authors find that negative managerial support for employees’ pre-travel requests and the resulting negative employee affect have a significant impact on expense reporting behavior. Social presence during the pre-travel approval and expense reporting phases itself is not a sufficient factor to explain variations in final expense reporting behavior. However, when considering manager responsiveness, employee affect, and social presence together, the authors find that social presence is not an isolated factor. If an employee forms negative feelings, a low-social presence as observed in web-based communication leads to more undesired expense reporting behavior.

Research limitations/implications

Results of this study contribute both to research and practice. This research is the first to investigate expense reporting fraud in a controlled experiment to isolate possible causes of the behavior using an experiment methodology. In addition, the paper investigates two very important factors identified in the prior literature as critical factors explaining the effect of using ITs on actual behaviors: manager responsiveness and social presence.

Practical implications

As companies seek help from ITs to process and manage expense reports in order to curb ever-rising operating costs, an important but unapparent assumption is consistently overlooked: do people act the same way when facing the less-human IT as when facing a real person? This study contributes to the literature by investigating this issue from two perspectives, the psychological factor due to manager responsiveness and the effect of social presence by using less-human IT to complete the expense report process.

Originality/value

Recent economic situations have put pressure on organizations to cut costs by implementing new technologies to streamline expense reporting processes. At the same time, deterring fraudulent behavior is also a top priority in many organizations. This study provides evidence that psychological factors cannot be overlooked when information systems are used to improve business processes and prevent fraud.

Citation

Peng, J. and O. Ford, C. (2014), "Fraudulent expense reporting: impact of manager responsiveness and social presence", Journal of Applied Accounting Research, Vol. 15 No. 2, pp. 158-174. https://doi.org/10.1108/JAAR-12-2011-0102