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Article
Publication date: 20 September 2022

Paul Kojo Ametepe, Adeleke Oladapo Banwo and Mustapha Sina Arilesere

Combating and detecting fraud is a daunting task, especially in the Nigerian banking sector, because it necessitates a thorough understanding of the nature of fraud, as…

Abstract

Purpose

Combating and detecting fraud is a daunting task, especially in the Nigerian banking sector, because it necessitates a thorough understanding of the nature of fraud, as well as how it can be performed and concealed by fraudsters. Therefore, the purpose of this study is to empirically examine the relationship and the predictive ability between amoral behavior, control climate and perceived job insecurity on fraudulent intentions among bank employees in Lagos Metropolis.

Design/methodology/approach

Descriptive and cross-sectional designs were used to select employees from 12 banks using predetermined scales. In total, 1,080 questionnaires were distributed, but 950 were retrieved and analyzed. The study used multistage sampling by applying cluster, purposive and simple random sampling techniques. Correlation and hierarchical regression analyses were used to analyze the data.

Findings

A significant positive relationship and predictive abilities were established between employee’s amoral behavior and fraudulent intentions on the one hand, and employee’s job insecurity and fraudulent intention on the other, going by the additional variance identified when each variable was added in each step, implying that employees who exhibit amoral behavior are likely to engage in fraudulent intentions. In the same manner, employees who feel insecure are likely to engage in fraudulent acts because they would want to secure their future. However, there was a significant negative relationship and predictive ability between control climate and fraudulent intention; implying that inculcating a strict control climate minimizes or totally eradicates employees’ intentions to commit fraud.

Research limitations/implications

This paper is limited to amoral behavior, control climate, perceived job insecurity and fraudulent intentions; it is limited to employees in the banking sector, with a special focus on emerging economies, Nigeria, West Africa. The implication of this is that the result may not be generalized to other sectors and other countries.

Practical implications

The practical implication of the study is that managers should be aware that employees who are in danger of losing their jobs are more likely to engage in the fraudulent act, and this should be looked into. Training and retraining, workshops, conferences and seminars on employee morale behaviors as well as strict adherence to ethical codes of conduct are vital to enlighten the employees on the dangers of perpetrating fraud and the impact on themselves and the economy at large. Control climate is a very vital tool in curtailing the incidences of fraud in the organization.

Originality/value

This paper contributes to the knowledge by filling the gaps left by a lack of empirical examination into the combined influence of amoral behavior, control climate and perceived job insecurity on fraudulent intentions, especially among bankers in Lagos Metropolis. It provides management with guides on how to drastically reduce the menace of fraudulent intentions in the banking sector and by extension in other non-banking organizations.

Details

International Journal of Ethics and Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2514-9369

Keywords

Article
Publication date: 16 July 2021

Godfred Matthew Yaw Owusu, Theodora Aba Abekah Koomson, Stanley Agbenya Alipoe and Yusuf Ahmed Kani

This paper aims to investigate the views of employees on the motives behind frequently reported fraudulent activities at the workplace. Using the fraud triangle theory…

Abstract

Purpose

This paper aims to investigate the views of employees on the motives behind frequently reported fraudulent activities at the workplace. Using the fraud triangle theory (FTT) as the theoretical lens, the study examines the effect of pressure, opportunity and rationalization on fraudulent acts by employees at the workplace.

Design/methodology/approach

The study follows a correlational quantitative approach using questionnaires as the main data collection tool. A total of 243 valid responses from employees working in different state-owned enterprises in Ghana were used in the empirical analysis. The hypothesized relationships of the study were tested using the partial least square-structural equation modelling technique.

Findings

The results from the structural analysis showed that pressure, rationalization and opportunity are important in explaining why employees engage in fraudulent activities at the workplace.

Originality/value

The findings do not only provide empirical support for the applicability of the FTT in the Ghanaian context but most importantly offer some useful insights into the fraud discourse from the public sector workers’ perspective.

Details

Journal of Money Laundering Control, vol. 25 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 3 October 2016

Mastura Omar, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this paper is to investigate the causes and impact of employee fraud, focusing on one particular industry, namely, the automotive industry.

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Abstract

Purpose

The purpose of this paper is to investigate the causes and impact of employee fraud, focusing on one particular industry, namely, the automotive industry.

Design/methodology/approach

One company was selected as a case for the study. Qualitative data analysis was used for the study, with two techniques for data collection. First was the content or document analysis on various reports, such as employee fraud reports and records of disciplinary action, and second was a series of interviews with employees from different levels and various departments of the company.

Findings

This study found that the most popular type of fraud is misappropriation of assets, including theft of cash and inventories. No significant differences were seen in terms of fraudster position, as they can come from both the lower and the executive level. However, majority of the fraudsters come from the operational and sales department. This study also found that majority of the fraudsters in the case study were male, new employees and young adults. Their motivations to commit fraud include lack of understanding about fraud behavior, opportunity to commit fraud and lifestyle and financial pressure.

Research limitations/implications

The results provide further confirmation of the Fraud Triangle Theory and Fraud Diamond Theory on the causes of the fraud. They are also consistent with much prior research and surveys conducted by global professional firms on fraud and its related causes and implications. This study, however, was conducted on only one company with several series of interviews and three years of document analysis. Future research should collect and analyze data from a higher number of companies with more respondents for interviews and longer period for document analysis to get more accurate results.

Practical implications

This study provides some recommendations for fraud prevention in the future based on real fraud cases and those that involved managing cases up to and including disciplinary decision. These include closed supervision, fraud awareness training, clearer job descriptions, cultivation of a pleasant working environment and improved security control.

Social implications

This study found that some of the causes of fraud include social factors like lifestyle and financial pressure due to low income. Policy adjustments, such as an effort to push people beyond the poverty line with higher minimum wages, need to be made to prevent low-income workers from seeing their company as another source of illegal income.

Originality/value

This study is original, as it focuses on a company that operates in the automotive industry, which is rare in fraud literature, particularly in developing markets. In addition, the company is new, so analysis can be conducted on how the company evolved and learned from the fraud analysis for prevention in the future. Furthermore, this study used two techniques of data collection, so that verification of the findings may be made for better reliability.

Details

Journal of Financial Crime, vol. 23 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Book part
Publication date: 20 May 2011

Jeffrey S. Zanzig and Dale L. Flesher

The purpose of this chapter is to investigate what internal auditors see as a need for improvement regarding current business risk practices for controlling employee fraud

Abstract

The purpose of this chapter is to investigate what internal auditors see as a need for improvement regarding current business risk practices for controlling employee fraud. A survey of internal auditors compares perceptions of current versus desired situations in regard to six common practices of employee fraud risk management: training in fraud risk management, understanding how job procedures are designed to manage fraud risks, recognizing basic indicators of fraud, providing appropriate employee compensation incentives, reporting suspicions of fraud, and background verification of job applicants. Comparisons for each practice are made between the United States and Canada.The main finding is that the largest weakness in the employee fraud risk management practices relates to providing employees with training in their risk management programs. Seemingly related deficiencies are also indicated in both employee understanding of how their job procedures are designed to manage fraud risks and the ability of employees to recognize basic indicators of fraud. No measure of fraud prevention is more important than those involving the employees who actually conduct the affairs of an organization. The identification and ranking of gaps in employee fraud risk management practices can be used to make a case to deal with areas needing improvement.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78052-005-6

Keywords

Article
Publication date: 22 November 2019

Andrea M. Scheetz and Timothy J. Fogarty

Based on exchange theory and the generalized norm of reciprocity, psychological contracts perceived by employees are believed to have dysfunctional consequences for…

Abstract

Purpose

Based on exchange theory and the generalized norm of reciprocity, psychological contracts perceived by employees are believed to have dysfunctional consequences for organizations if breached. This paper aims to study the willingness of employees to report fraud, as such is an important aspect of internal control for organizations.

Design/methodology/approach

A 2 × 2 between-subjects experiment was conducted in which 99 participants with diverse accounting backgrounds were first asked questions about their preconceived beliefs (psychological contract) regarding how reports of unethical conduct would be managed, and their reaction if these beliefs were broken (psychological contract violation). Participants were given a hypothetical situation of fraud and then asked to indicate their likelihood of reporting fraud to a supervisor.

Findings

The main hypotheses are that employees will be less likely to report fraud when the organization fails to signal the presence of a positive ethical environment or when management reacts weakly to previous reports of unethical activity. The data and findings support these hypotheses. Additional testing also reveals that a psychological contract violation mediates the relationship between the outcome of previous reports and the intention to report fraud.

Research limitations/implications

As with any experimental study, this study’s results come with limitations. Reading an overly simplistic scenario that omits real world details and providing intention to report is very different from actually reporting fraud in one’s own place of employment. Therefore, reporting intentions may vary from actual reporting behavior. Further, reporting motivation (self-defense, altruism, etc.) and concern over retaliation are not measured.

Practical implications

Employees have expectations surrounding ethical corporate environments. Psychological contract violations occur as a result of broken expectations and are common in the workforce. In this study, a breakdown in the internal control environment because of a poor ethical culture, caused an even greater breakdown in internal controls because of employees’ decreased reporting intentions.

Social implications

Psychological contract violations impact employees’ intention to report fraud. These violations need to be understood so that additional measures and safeguards can be instituted when employees are not acting as a fraud defense or detection mechanism. During such times when there is a breakdown in this type of internal control (that is, when employees might be hesitant to report fraud), extra safeguards against fraud, additional procedures to detect fraud, and enhanced employee training encouraging reporting of suspected unethical conduct, become even more important.

Originality/value

Strong experimental methods provide a rigorous way to evaluate a problem of our day: job insecurity caused by rampant organizational turbulence. The hidden cost is expressed in terms of how less can be expected of employees as a first line of defense against fraud.

Details

Journal of Accounting & Organizational Change, vol. 15 no. 4
Type: Research Article
ISSN: 1832-5912

Keywords

Article
Publication date: 12 March 2018

Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this study is to examine whether policies and procedures, one of the fundamental elements in the internal control environment, are adequate and effective in…

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Abstract

Purpose

The purpose of this study is to examine whether policies and procedures, one of the fundamental elements in the internal control environment, are adequate and effective in preventing fraud and unethical practices committed by employees of a company. In addition, this study attempts to assess the awareness and understanding of employees on the existence of relevant company policies and standard operating procedures for internal fraud and misconduct deterrence.

Design/methodology/approach

Five cases from one Malaysian telecommunication company were randomly selected as a case study. Content analyses were conducted on actual cases of internal fraud and wrongdoings that were investigated and the enforcement that was discharged by the company.

Findings

This study found that the company has sufficient policies and standard operating procedures to curb internal fraud and wrongdoing. However, they are ineffective and malfunction when responsible personnel violate or override the policies and procedures, irrespective of whether this is caused by carelessness, poor knowledge or clear intention to act dishonestly.

Research limitations implications

This study was conducted on only one company with a limited number of investigated fraud cases. Access to higher number of fraud cases, particularly those that involved large amount of losses and considered as high-profile cases, were denied because of confidentiality.

Practical implications

The study found that weak compliance to internal controls provides opportunities for fraud to occur, consistent with the fraud triangle theory. Fraud, committed both outside and inside an organization, can be considered as a worrying problem in the organization because of its severe impact on the reputation and bottom line figures of the company. The study provides important information to management to strengthen their compliance with the internal control system generally and policies and procedures particularly.

Originality/value

This study is original, as it focuses on the actual fraud cases that occur in the telecommunication industry, which is under-researched in fraud literature, particularly in developing markets such as Malaysia. Prior empirical research on fraud and unethical practices has concentrated on factors that contribute to fraud and the financial and non-financial impacts of fraud in an organization.

Details

Information & Computer Security, vol. 26 no. 1
Type: Research Article
ISSN: 2056-4961

Keywords

Article
Publication date: 1 February 1998

Rocco R. Vanasco

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and…

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Abstract

This paper examines the role of professional associations, governmental agencies, and international accounting and auditing bodies in promulgating standards to deter and detect fraud, domestically and abroad. Specifically, it focuses on the role played by the US Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the Institute of Internal Auditors (IIA), the Institute of Management Accountants (IMA), the Association of Certified Fraud Examiners (ACFE), the US Government Accounting Office (GAO), and other national and foreign professional associations, in promulgating auditing standards and procedures to prevent fraud in financial statements and other white‐collar crimes. It also examines several fraud cases and the impact of management and employee fraud on the various business sectors such as insurance, banking, health care, and manufacturing, as well as the role of management, the boards of directors, the audit committees, auditors, and fraud examiners and their liability in the fraud prevention and investigation.

Details

Managerial Auditing Journal, vol. 13 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 4 January 2008

Kirsty Rae and Nava Subramaniam

This study aims to bring together theoretical concepts from the organizational justice, internal control and fraud literature to develop two distinct models relating to…

10155

Abstract

Purpose

This study aims to bring together theoretical concepts from the organizational justice, internal control and fraud literature to develop two distinct models relating to employee fraud and the quality of internal control procedures (ICP), respectively.

Design/methodology/approach

Survey data from 64 Australian firms were used to develop the two models. The first model was tested using a logistic regression analysis, and the second model was tested using a multiple regression analysis.

Findings

The first model reveals that the quality of ICP has a moderating effect on the relationship between perceptions of organizational justice and employee fraud. The second model indicates that ICP quality is significantly and positively related to three key organizational factors: the corporate ethical environment, the extent of risk management training of staff, and the internal audit (IA) activity level.

Practical implications

Risk management strategies relating to employee fraud will need to pay greater attention to organizational factors that affect both perceptions of justice at the workplace and ICP quality, including fostering a more ethical and equitable work environment, increasing IA activities and staff training in risk management.

Originality/value

Using the fraud triangle framework, this study extends previous literature by providing empirical evidence on the role of organizational justice and ICP regarding employee fraud.

Details

Managerial Auditing Journal, vol. 23 no. 2
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 2 July 2018

Jamaliah Said, Normah Omar, Marhamah Rafidi and Sharifah Norzehan Syed Yusof

This paper aims to examine whether individual factors (religiosity and ethical values) and organizational factors (ethical leadership and whistleblowing practices…

Abstract

Purpose

This paper aims to examine whether individual factors (religiosity and ethical values) and organizational factors (ethical leadership and whistleblowing practices) contribute to employee fraud mitigation.

Design/methodology/approach

Guided by Corporate Integrity System Malaysia, this study developed and collected 101-questionnaire survey from Royal Custom officers.

Findings

The findings revealed that individual factors (religiosity and ethical values) significantly contribute to fraud reduction, and organizational factors (both ethical leadership and whistle blowing practices) do not significantly contribute to employee fraud mitigation.

Originality/value

This study serves as a useful guide to alert and educate employers, professionals, law enforcement officers and policymakers of the importance of individual and organizational factors in mitigating employee fraud. There is very little empirical research conducted on employee fraud in Malaysia. This research helps bring that to light.

Details

Journal of Financial Crime, vol. 25 no. 3
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 8 May 2018

Jay P. Kennedy

This paper aims to increase the understanding of the types of insider financial frauds that occur within small businesses by focusing on a sample of businesses that have…

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Abstract

Purpose

This paper aims to increase the understanding of the types of insider financial frauds that occur within small businesses by focusing on a sample of businesses that have not employed a certified fraud examiner (CFE) in response to employee theft.

Design/methodology/approach

The survey data analyzed come from 102 small businesses (100 employees or fewer) in a midsized Midwestern city in the USA, and reflect 125 reported employee thefts.

Findings

The study results indicate that small businesses that do not hire a CFE report certain thefts with greater and lower frequencies as compared to small businesses that do hire a CFE. For particular types of frauds, CFEs may be no more useful than the efforts of business owners or managers, and other employees.

Practical implications

There may be important organizational differences between businesses that hire CFEs and those that do not, differences related to the ways in which business finances are maintained, the ways in which specific controls are used and the ability of employees to access business resources. These factors may create business-based opportunity structures that make particular types of insider financial frauds more or less likely to occur within a particular business.

Originality/value

Existing research on insider financial frauds may not appropriately account for small businesses that cannot afford, or are unwilling, to hire a CFE. The findings discussed in this paper contribute to a more complete picture of the types of frauds that small businesses experience, as well as how these businesses deal with insider theft.

Details

Journal of Financial Crime, vol. 25 no. 2
Type: Research Article
ISSN: 1359-0790

Keywords

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