Search results
21 – 30 of over 1000Mastura 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.
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
Keywords
Financial criminals commit crimes with such disconcerting ease that economic and social stability is threatened. Armed with intangible knowledge and backed by legal, financial and…
Abstract
Purpose
Financial criminals commit crimes with such disconcerting ease that economic and social stability is threatened. Armed with intangible knowledge and backed by legal, financial and accounting expertise, criminals use their intellectual weapons to carry out their activities with impunity by operating in extra-territorial spaces such as tax havens. The purpose of this paper is based on interviews with key figures in the French judiciary and also French tax officials.
Design/methodology/approach
A survey in the form of semi-directive interviews was conducted from March to July 2012 with auditors, judicial magistrates and a representative of a large trade union of the French Ministry of Economy, Finance and Industry. Questioning this panel of persons from different but associated horizons enabled the collection of practical, technical and professional information on how they perceive acts of financial crime in the practice of their mission.
Findings
It was possible to observe that financial crime is motive-driven and develops in specific spaces and contexts, aided by informational weapons.
Research limitations/implications
By promoting both financial optimisation and tax minimisation, non-cooperative territories provide the perfect breeding ground for innovative minds to distort social norms which uphold equal tax treatment and a common effort. Financial information is the recurring theme throughout, allowing ever more cunning offenders to distort the value of words and the meaning of economic results.
Practical implications
The ease with which financial crimes are committed remains striking. Understanding the reasons why financial criminals appear to enjoy relative impunity requires questioning the magistrates and actors involved in the combat against financial crime. The interviews conducted with these key players show that financial crime develops and flourishes on the basis of a threefold specificity: a specific motive linked to absolute enrichment without economic foundation, diffuse and imprecise spaces where economic crimes proliferate with total impunity and an intangible weapon in the form of financial information.
Social implications
The private appropriation of financial information leads to the misappropriation of public goods and its capture by private operators, thereby depriving the community of a source of knowledge and expertise.
Originality/value
This paper is based on interviews with key figures in the French judiciary and also French tax officials. A survey in the form of semi-directive interviews was conducted from March to July 2012 with auditors, judicial magistrates and a representative of a large trade union of the French Ministry of Economy, Finance and Industry.
Details
Keywords
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 (FTT) as…
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
Keywords
Hafiza Aishah Hashim, Zalailah Salleh, Izzati Shuhaimi and Nurul Ain Najwa Ismail
A number of highly publicised scandals such as Enron, Lehman Brothers, Parmalat, Satyam, Toshiba and 1MDB (to name a few) have heightened the awareness of the effects of…
Abstract
Purpose
A number of highly publicised scandals such as Enron, Lehman Brothers, Parmalat, Satyam, Toshiba and 1MDB (to name a few) have heightened the awareness of the effects of fraudulent financial reporting. While enormous measures have been taken to curb the fraudulent activities among large and small businesses, the issues are still alarming worldwide. Thus, this study aims to explore the extent to which the prevalence of fraud risk in state-controlled companies and to enhance understanding of the underlying reasons of the fraudulent activities.
Design/methodology/approach
As this study is a descriptive and exploratory in nature, an exploratory case study method was used in four state-controlled companies. Using the fraud triangle theory to underpin this study, the qualitative face-to-face interviews were carried out with top management of the companies.
Findings
The study reveals a high risk of fraud occurrence at state-controlled companies that involve dealing with various suppliers, governments, customers and shareholders, even when standard operating procedures and rules and regulation are in place. The apparent reason for this phenomenon is attributed to not only opportunities but also incentives and rationalisations in engaging fraudulent activities.
Originality/value
As there are relatively few qualitative studies conducted in this area specifically among Malaysian state-controlled companies, this study extends the fraud literature by examining risk exposure and reasons underlying the fraudulent activities. The findings demonstrate that to a certain extent, the fraud triangle theory explains the motivations behind the fraudulent activities. The finding from this study is relevant to regulators, investors, companies and academicians in understanding, preventing and combating fraud.
Details
Keywords
Philmore Alleyne and Michael Howard
Recently, fraud has been brought to the forefront with the scandals of Enron and Worldcom. Fraudulent financial reporting and misappropriation of assets served to undermine…
Abstract
Purpose
Recently, fraud has been brought to the forefront with the scandals of Enron and Worldcom. Fraudulent financial reporting and misappropriation of assets served to undermine investors’ confidence in audited financial statements. This study investigates how auditors and users perceive the auditors’ responsibility for uncovering fraud, the nature and extent of fraud in Barbados, and audit procedures utilised in Barbados since Enron.
Design/methodology/approach
A total of 43 respondents (19 auditors and 24 users) were surveyed regarding their perceptions and experiences on fraud, using qualitative and quantitative approaches.
Findings
Indicates that the expectation gap is wide, as auditors felt that the detection of fraud is management's responsibility, while users and management disagreed. Also finds that fraud is not a major issue in Barbados and that companies who have internal auditors, sound internal controls and effective audit committees are better equipped to deal with fraud prevention and detection.
Research limitations/implications
The sample size is relatively small and it is not intended nor claimed that those interviewed comprise a representative sample.
Practical implications
This research fills a void in research in this area in a small country like Barbados. These findings have important implications for users of Barbadian accounts, especially investors, auditors and regulators.
Originality/value
This paper fulfils a resource need for academics and practitioners, and makes an interesting contribution to our understanding of fraud in Barbados.
This paper examines published data to develop a model for detecting factors associated with false financial statements (FFS). Most false financial statements in Greece can be…
Abstract
This paper examines published data to develop a model for detecting factors associated with false financial statements (FFS). Most false financial statements in Greece can be identified on the basis of the quantity and content of the qualifications in the reports filed by the auditors on the accounts. A sample of a total of 76 firms includes 38 with FFS and 38 non‐FFS. Ten financial variables are selected for examination as potential predictors of FFS. Univariate and multivariate statistical techniques such as logistic regression are used to develop a model to identify factors associated with FFS. The model is accurate in classifying the total sample correctly with accuracy rates exceeding 84 per cent. The results therefore demonstrate that the models function effectively in detecting FFS and could be of assistance to auditors, both internal and external, to taxation and other state authorities and to the banking system.
Details
Keywords
Kamil Omoteso and Musa Obalola
This chapter adopts Porter’s ‘audit trinity’ approach comprising internal audit, external audit and audit committee to discuss the role auditing can play in the management of…
Abstract
Purpose
This chapter adopts Porter’s ‘audit trinity’ approach comprising internal audit, external audit and audit committee to discuss the role auditing can play in the management of corporate fraud.
Design/methodology/approach
The chapter maps the historical background of and the developments in external audit as an assurance service, the internal audit function and the audit committee. Based on this, it explains the nature, types and possible causes of corporate fraud within the context of business risk with a view to establishing how auditing can help in managing such frauds.
Findings
The chapter highlights the relationships that should exist between the three audit types in order to support a sound internal control system as a tool for preventing and detecting corporate fraud.
Research limitations/implications
The chapter identifies cost, opportunity, connivance and managerial override as factors that could limit the ability of auditing to manage corporate fraud. It also suggests ways of addressing these limitations.
Practical implications
As the current upward trend in IT adoption for corporate operations continue to open new sets of corporate fraud windows, this chapter examines how an entity’s internal controls can be used to prevent and detect these growing fraud schemes.
Originality/value
The chapter’s unique strength is its adoption of a holistic approach to auditing to suggest ways of managing corporate fraud – a novelty in the corporate fraud literature. It is hoped that future research in the area will bring empirical insights to the issues raised and perspectives covered in the chapter.
Details
Keywords
The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing…
Abstract
The Foreign Corrupt Practices Act (FCPA) of 1977 and its amendment – the Trade and Competitive Act of 1988 – are unique not only in the history of the accounting and auditing profession, but also in international law. The Acts raised awareness of the need for efficient and adequate internal control systems to prevent illegal acts such as the bribery of foreign officials, political parties and governments to secure or maintain contracts overseas. Its uniqueness is also due to the fact that the USA is the first country to pioneer such a legislation that impacted foreign trade, international law and codes of ethics. The research traces the history of the FCPA before and after its enactment, the role played by the various branches of the United States Government – Congress, Department of Justice, Securities Exchange commission (SEC), Central Intelligence Agency (CIA) and the Internal Revenue Service (IRS); the contributions made by professional associations such as the American Institute of Certified Public Accountants (AICFA), the Institute of Internal Auditors (IIA), the American Bar Association (ABA); and, finally, the role played by various international organizations such as the United Nations (UN), the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the International Federation of Accountants (IFAC). A cultural, ethical and legalistic background will give a better understanding of the FCPA as wll as the rationale for its controversy.
Details
Keywords
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…
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
Keywords
Purpose – This study investigates the nature, types, and methods of fraudulent financial reporting committed by Chinese listed companies with a view to understanding corporate…
Abstract
Purpose – This study investigates the nature, types, and methods of fraudulent financial reporting committed by Chinese listed companies with a view to understanding corporate behavior relating to management fraud in China. Such an understanding is important for preventing frauds and achieving better financial reporting compliance.
Design/Methodology/Approach – This study adopts a descriptive research approach using the data based on 182 punishment bulletins issued by the China Securities Regulatory Commission from 2002 to 2006. The study considers three categories of frauds (i.e., false income statements, false balance sheets, and insufficient or false disclosure) and uses these categories to describe and analyze the fraud cases.
Research findings/Insights – Based on the sample of 83 cases over the 5-year period from 2002 to 2006, this study finds that all the frauds in the sample involved the manipulation, alteration, and falsification of reported financial information. Fraud schemes often contained more than one technique to misstate financial statements, typically through overstating revenues and assets, and understating liabilities and expenses. Most of the sample companies committed several frauds simultaneously. This study also reveals that most of the frauds committed by Chinese listed companies lasted more than 2 years, with the longest being 9 years, and common intervals between the initial fraud year and the announcement year of punishment were more than 3 years, with the longest being 11 years.
Theoretical/Academic implications – This study provides an empirical analysis of fraudulent financial reporting cases committed by Chinese listed companies. These cases were rarely studied in the Western literature. This study contributes to the extant literature by providing an insight into management fraud in China. Research into fraudulent financial reporting in the largest developing economy is certainly of interest as prior research into this area is mostly based on developed economies.
Practitioner/Policy implications – The implications drawn from this study could be useful for a better understanding of the management behavior of companies in developing and transitional economies. This study has a potential to assist regulators and accounting professional bodies to set guidelines facilitating corporate compliance of regulated financial reporting.
Details