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Article
Publication date: 1 January 2012

Mark Button, Jim Gee and Graham Brooks

The purpose of this paper is to provide evidence, from the analysis of 132 fraud risk measurement exercises, of the average costs and rates of fraud. It advocates greater…

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Abstract

Purpose

The purpose of this paper is to provide evidence, from the analysis of 132 fraud risk measurement exercises, of the average costs and rates of fraud. It advocates greater use of more accurate measurement which if monitored and repeated can secure reductions which could amount to a new competitive advantage.

Design/methodology/approach

This paper has analysed 132 fraud risk measurement exercises from nine countries in a range of different sectors. Only those which assess a statistically valid sample which have sought and examined information indicating the presence of fraud, error or correctness in each case within that sample; have been completed and reported; have been externally validated; have a measurable level of statistical confidence; and have a measurable level of accuracy were included. Each exercise has been assessed to determine the percentage loss rate (PLR) and the fraud frequency rate (FFR). These data were analysed using Excel to determine average rates and further comparable data.

Findings

Fraud and error losses in an organisation should currently be expected to be at least 3 per cent, probably more than 5 per cent and possibly more than 9 per cent. The PLR when first measured has been found to be 5.40 per cent and 4.61 per cent when last measured, representing an average reduction of just under 15 per cent. The paper shows fraud and error can be measured and if regularly this incentivizes action to reduce it reaping financial benefits to the organization.

Research limitations/implications

The vast majority of the data are drawn from fraud risk measurement exercises in the public sector in large organizations.

Practical implications

The paper advocates greater use of fraud risk measurement and counter fraud strategies tailored to reduce losses.

Originality/value

This is the first analysis of fraud risk measurement exercises across the globe.

Details

Journal of Financial Crime, vol. 19 no. 1
Type: Research Article
ISSN: 1359-0790

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Book part
Publication date: 10 February 2020

Hakan Ozcelik

Accounting-based financial scandals caused by fraudulent financial reports negatively affect the financial markets and cause loss of confidence in investors. Financial…

Abstract

Accounting-based financial scandals caused by fraudulent financial reports negatively affect the financial markets and cause loss of confidence in investors. Financial reporting quality needs to be improved in order to build and maintain trust in financial markets. To increase the quality of financial reports, fraudulent financial reporting risks should be defined. At this point, regulators, practitioners, and researchers are in constant search.

There are improved approaches to the detection of financial reporting frauds in the literature. Many studies have been conducted on the “Fraud Triangle Theory” and the “Fraud Diamond Theory” approaches. The Fraud Triangle Theory argues that while fraudulent action is taking place in defining the elements of press, rationalization, and opportunity, the Fraud Diamond Theory approach argues that in order to achieve these three elements, the capability to carry out a fraud in individuals must be improved.

In this study, it is aimed to investigate the effect of Fraud Diamond elements on fraudulent financial reports. For the scope of the research, data of 26 companies from Manufacturing Industry enterprises operating in BORSA ISTANBUL between 2013 and 2017 were used. Financial reports of the companies are divided into two groups: (1) Fraudulent Financial Reports and (2) Non-Fraud Financial Reports. The hypotheses developed within the scope of the research were tested using the Logistic Regression analysis in IBM SPSS Statistic 20 program.

As a result of the study, it has been determined that there is a negative correlation between borrowing level, asset profitability, independent audit firm, auditor exchanges and institutionalization level, and fraudulent financial reports. It was understood that the change in assets and the size of the audit committee did not have any effect on the fraudulent financial reports.

Details

Contemporary Issues in Audit Management and Forensic Accounting
Type: Book
ISBN: 978-1-83867-636-0

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Article
Publication date: 1 May 2020

Radiah Othman, Fawzi Laswad and Matthew Berkahn

The purpose of this paper is to examine the causes and consequences of financial crimes perpetrated against New Zealand small businesses.

Abstract

Purpose

The purpose of this paper is to examine the causes and consequences of financial crimes perpetrated against New Zealand small businesses.

Design/methodology/approach

A random sample of 200 court cases was selected from 2010 to 2017. A total of 12 cases involving 14 small businesses were analysed.

Findings

The results reveal that financial crime is a systemic problem and involves people with diverse demographics, and the victims are not restricted to any specific type of small business. The offenders are mostly middle-level managers. The length of offence varied from 1 year to 12.5 years. Most of them funnelled the stolen money into their personal accounts. The common motive is “keeping up appearance”. The management placed immense trust in their employees and did not vet candidates before employment. The losses suffered by small entities ranged from $6,000 to $590,000 and liquidated one business. The severity of the actual court cases indicates the necessity of an employee screening as the first line of defence in these businesses.

Research limitations/implications

The small sample of court cases is a limitation, but the study contributes to the fraud auditing literature by examining actual court cases involving small businesses. Small businesses as victims of employee fraud and their lack of internal controls are known but under-researched to promote thought about fraud risk severity in these businesses.

Originality/value

The C.R.I.M.E model has yet been tested on fraud cases involving small businesses.

Details

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

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Article
Publication date: 15 June 2018

Tom O’Brien

The purpose of this paper is to explore the experiences and responses of ten adult literacy organisers (ALOs) from Dublin, Wicklow and Kildare to the growing influence of…

Abstract

Purpose

The purpose of this paper is to explore the experiences and responses of ten adult literacy organisers (ALOs) from Dublin, Wicklow and Kildare to the growing influence of neoliberalism and the commodification of adult literacy as a skill and function of the economy. The research argues for a greater focus on literacy as a social practice concerned with equality and social justice, rooted in emancipatory and transformative adult education.

Design/methodology/approach

A qualitative research methodology using in-depth unstructured interviews, underpinned by critical realism.

Findings

While the ALOs sampled have developed strategies to resist the impact of neoliberalism, they are also struggling to sustain their resistance and nurture access to emancipatory and transformative adult literacy practices.

Research limitations/implications

The research is limited in size, being a small sample study of ten ALOs.

Practical implications

The research will inform policy discussions in advance of the new further education and training strategy, where adult literacy policy is situated.

Originality/value

The paper gives unique and independent access to the voices of ALOs in Ireland and provides a small example of empirical evidence of the commodification and marketisation of adult literacy under neoliberalism.

Details

Education + Training, vol. 60 no. 6
Type: Research Article
ISSN: 0040-0912

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Article
Publication date: 1 June 1997

Ashutosh Deshmukh, Jeff Romine and Philip H. Siegel

Statement on Auditing Standards (SAS) No. 53 requires that the audit be designed to provide a reasonable assurance of detecting management fraud. Traditionally auditors…

Abstract

Statement on Auditing Standards (SAS) No. 53 requires that the audit be designed to provide a reasonable assurance of detecting management fraud. Traditionally auditors have utilized personal, business, and economic red flags in risk analysis and audit planning. Touche Ross (1974), Coopers and Lybrand (1977), Price Waterhouse (1985), and SAS Nos. 6, 16, 17, and 53 discuss various red flags associated with management fraud. However, the authoritative literature does not provide any guidance on how to measure and combine red flags. The extant literature primarily measures red flags as “yes” or “no” type binary variables. However, red flags are fuzzy in nature and fuzzy set approach can be used to measure and combine red flags. The purpose of this paper is to provide a framework for the application of the theory of fuzzy sets to the problem of assessing the risk of management fraud using red flags. This approach can be used to capture the beliefs of one or several auditors concerning red flags and combine these beliefs to estimate the risk of management fraud. This approach can be extended to build fuzzy reasoning systems that assess the risk of management fraud.

Details

Managerial Finance, vol. 23 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 9 October 2009

Kayvan Miri‐Lavassani, Vinod Kumar, Bahar Movahedi and Uma Kumar

Though many studies and reports have been published about the scale of identity fraud (IDF), no work has been done on developing models to measure IDF. The purpose of this…

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1547

Abstract

Purpose

Though many studies and reports have been published about the scale of identity fraud (IDF), no work has been done on developing models to measure IDF. The purpose of this paper is to propose a measurement model for IDF and test the validity of that measurement model.

Design/methodology/approach

After providing a background on the concepts of IDF, the paper discusses the related term, identity theft. Next, a measurement model is developed, based on the current practice of measurement of IDF in four countries. Exploratory factor analysis (EFA) is used in identifying the indicators and factors of IDF. After the EFA is conducted, confirmatory factor analysis is employed to test the validity of the measurement model. These tests are conducted using the data collected from Canadian financial institutions.

Findings

The review of the current empirical studies suggests that IDF should be assessed using a measurement model with 33 indicators to measure five factors of IDF. However, the analysis of Canadian financial institutions suggests that a measurement model that includes 27 indicators and four factors is most appropriate for the data.

Research limitations/implications

The measurement model developed in the present paper is based on an examination of a sample of financial institutions in Canada. Hence, the results of this paper cannot be generalized to organizations in other sectors of the economy. Further studies in other sectors of the economy are required to identify industry‐specific measurement model.

Practical implications

This paper is the first approach toward developing a model for measuring IDF.

Originality/value

This paper is the first study that attempts to scientifically identify and validate a measurement system in the area of IDF.

Details

Journal of Financial Crime, vol. 16 no. 4
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 5 May 2015

Mark Button, Chris Lewis, David Shepherd and Graham Brooks

– The purpose of this paper is to explore the challenges of measuring fraud in overseas aid.

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2186

Abstract

Purpose

The purpose of this paper is to explore the challenges of measuring fraud in overseas aid.

Design/methodology/approach

The research is based on 21 semi-structured interviews with key persons working in the delivery of aid in both the public and voluntary sectors. It uses the UK Department for International Development as a case study to applying more accurate measures of fraud.

Findings

This paper shows there are significant challenges to using fraud loss measurement to gauge fraud in overseas aid. However, it argues that, along with other types of measures, it could be used in areas of expenditure in overseas governments and charities to measure aid. Given the high risk of such aid to fraud, it argues helping to develop capacity to reduce aid, of which measuring the size of the problem is an important part; this could be considered as aid in its own right.

Research limitations/implications

The researchers were not able to visit high-risk countries for fraud to examine in the local context views on the challenges of measuring fraud.

Practical implications

The paper offers insights on the challenges to accurately measuring fraud in an overseas context, which will be useful to policy-makers in this context.

Social implications

Given the importance of as much aid as possible reaching recipients, it offers an important contribution to helping to reduce losses in this important area.

Originality/value

There has been very little consideration of how to measure fraud in the overseas aid context, with most effort aimed at corruption, which poses some of the same challenges, as well as some very different challenges.

Details

Journal of Financial Crime, vol. 22 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 5 February 2021

Enrico Gianotti and Eduardo Damião da Silva

The purpose of this paper is to set a framework for strategic management of credit card fraud, by mapping its stakeholders within a card issuer and outlining its ideal strategies.

Abstract

Purpose

The purpose of this paper is to set a framework for strategic management of credit card fraud, by mapping its stakeholders within a card issuer and outlining its ideal strategies.

Design/methodology/approach

The objectives are attained via case study. Primary data was collected by interviewing two fraud risk managers at the card issuer, while secondary data was collected by gathering all investor reports released from 2015 to 2019 by the financial institution. All data were submitted to content analysis and further analyzed using Mendelow’s power/interest matrix.

Findings

Seven groups of stakeholders were identified, the expectations of each group uncovered and KPIs proposed to measure how well the financial institution meets those expectations. Strategies to deal with and prioritize groups were outlined, while highlighting the need for repositioning stakeholders identified as potential blockers or facilitators of strategic initiatives and pressure factors in times of low performance.

Practical implications

Strategic management of stakeholders is essential for fraud risk managers and researchers to understand what is relevant and what is not. This paper creates a framework for addressing managerial and academic efforts based on stakeholders mapping. Further initiatives in research and practice should consider the following question: “Which stakeholder expectation will be better satisfied?” In case the answer is “none”, it is advised that the initiative be reconsidered.

Originality/value

Previous literature focusses mostly on the technical challenges, leaving a gap in both literature and practice for using Strategic Management. For the first time in literature, this research combines theories and terminologies from fraud risk management and strategic management.

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Book part
Publication date: 28 November 2017

Francesco Bellandi

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial…

Abstract

Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial statements. This part also includes a detailed critical review of the recent Practice Statement on materiality, the FASB’s proposed ASU on the notes and the amendments to the Conceptual Framework proposed by the IASB and the FASB.

The part expands to issues that are typical of Management Commentary, including the SEC guidance on materiality in Management Discussion and Analysis.

It informs about the complexities and subtle differences between financial statements and bookkeeping and the different standards of reasonableness versus materiality.

A section moves from materiality to material misstatements and covers the application of materiality in auditing.

Another section goes in depth on internal control over financial reporting, showing the linkages between materiality and risk appetite and risk tolerance and the related application guidance.

Details

Materiality in Financial Reporting
Type: Book
ISBN: 978-1-78743-736-4

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Article
Publication date: 1 March 1999

K.H. Spencer Pickett

Using the backdrop of an (apparently) extended visit to the West Indies, analogies with key concerns of internal audit are drawn. An unusual and refreshing way of…

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30165

Abstract

Using the backdrop of an (apparently) extended visit to the West Indies, analogies with key concerns of internal audit are drawn. An unusual and refreshing way of exploring the main themes ‐ a discussion between Bill and Jack on tour in the islands ‐ forms the debate. Explores the concepts of control, necessary procedures, fraud and corruption, supporting systems, creativity and chaos, and building a corporate control facility.

Details

Management Decision, vol. 37 no. 2
Type: Research Article
ISSN: 0025-1747

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